Written by Hilary Barnes
The policies of the government since the Socialist Party’s Francois Hollande became president of France in May do not make business leaders “feel that France is the place you want to be,” the head of GE’s European operations, Nani Beccalli (pictured) told the right-leaning Paris newspaper Le Figaro (October 22).
GE has 11,000 employees in France, including 5,700 at eight factories. Mr Beccalli said GE is not about to reconsider these investments, but would be “very cautious” about making new investments in France.
Beccalli said (translated from the French):
“If I were to give some advice it would be that France pays great attention to the messages that it is sending and the feeling in general that it is creating…..Investors, whether financial or industrial, look for a positive environment, otherwise capital will leave.”
Since coming into office the new government has implemented or plans to implement new taxes on large companies , including a tax on dividends that is supposed to encourage companies to invest rather than reward shareholders, and a special surtax on corporate income.
It has also introduced a new 75 % rate of income tax on incomes over €1 million ($1.3 million), and angered French business by a proposal to bring taxes on capital in line with taxes on labour income, affecting more especially capital gains arising from the sale of a company.
Mr Beccalli does not mention these measures in particular, but refers to the need for reforms of the retirement pension system and the labour market. One of Presdent Hollande’s first measures was to lower the retirement age for a section of the labour force from 62 to 60, thus partially reversing a reform introduced by his predecessor.
The need for reforms of the pension system were also underlined by a statement earlier this month by the pension fund that pays a supplementary pension to the great majority of private sector employees that it would run of money to meet its commitments in 2020, a few years
earlier than expected.
Higher unemployment was the explanation given for the new date. The French pension system is based on those who are at work now paying the pensions of those who are retired now. The increase in the ratio of the retired to the working population in future means that this system will not be viable for much longer.
When it comes to the labour market, labour law makes it extremely difficult and very costly for firms to lay off labour. This in turn makes them reluctant to hire when business is booming.
As the country is in semi-slump currently, with no increase in real GDP expected this year or in 2013, when measures to cut the budget deficit from 4.5 % this year to 3% next will kick in, many firms are trying to trim back the labour force.
The minister for industrial redressement, Arnaud Montebourg, a lawyer by trade, is stumping the country dissuading, apparently with some success, firms from carrying out their plans. He is not a believer in allowing companies to adjust employment in the light of market
conditions if he has any say in the matter.
On the positive side, Mr Beccali said that he was cautiously optimistic that the European Union was tackling the problems caused by the flaws in Europe’s single currency system, the euro, with moves to establish a European banking union and a single bank supervisory authority and other measures.
L’avertissement ge General Electric a la France (Bertille Bayart, Le Figaro, 22October 2012)