Growth push a nod to German pragmatism

Sat, Nov 10, 2012, 00:00

Is François Hollande having a “Schröder moment”? That’s a question circulating in Paris after the government confounded speculation by adopting the main recommendations in the keenly awaited Gallois report on French competitiveness.

Faced with a “historic situation”, prime minister Jean-Marc Ayrault called for “collective effort” to reform France’s social model and public services along Scandinavian lines. He did not mention Germany’s last social democratic chancellor, but Gerhard Schröder’s name was on many observers’ lips.

‘Working poor’

Like Hollande, Schröder took office in the late 1990s with factory closures piling up and unemployment on the rise. The German economy, struggling to cope with the cost of unification, was moribund by the time his second term began, with industry struggling and one major economics institute branding the country “the sick man of Europe”.

The deep labour market reforms initiated by Schröder were not cheered by everyone – critics say his creation of a new low-wage sector led to a generation of “working poor” – but others credit them with laying the foundation for Germany’s economic strength.

In a nod to the “Agenda 2010” label that Schröder gave to his reform drive, Hollande has christened his own push “Agenda 2014” – the ambitious deadline he has set to restore jobs and growth.

He has tasked trade unions and employers with negotiating a “historic” overhaul of the French labour market and hopes that, like Schröder, he can persuade unions to moderate wage claims in return for future job security. Germany is France’s benchmark and Gallois contained plenty of reminders of how the two economies’ fortunes have diverged in the past 20 years.

France’s trade deficit last year was €70 billion, against a surplus of €158 billion for Germany. Unemployment in France is at 10.2 per cent and rising; across the Rhine, the figure is 6.9 per cent.