The Country-specific Recommendations are documents prepared by the European Commission for each country, analysing its economic situation and providing recommendations on measures it should adopt over the coming 18 months. They are tailored to the particular issues the Member State is facing and cover a broad range of topics: the state of public finances, reforms of pension systems, measures to create jobs and to fight unemployment, education and innovation challenges, etc. The final adoption of Country-specific Recommendations prepared by the Commission is done at the highest level by national leaders in the European Council.
France's competitiveness losses over the last decade warrants close scrutiny, and slackening economic growth has weighed on employment and public finances. The country has also been identified as experiencing macroeconomic imbalances. Overall, the circumstances not only make reforms more difficult, they also call for more decisive action.
In the past year, France made some progress in addressing its structural weaknesses. Measures were taken to combat rising unemployment, particularly among young people and older workers, and a law on securing employment was adopted following a national inter-professional agreement with social partners. Meanwhile, the government introduced a pact on growth, competitiveness and employment to support companies, for example, by reducing labour taxation.
However, while a number of reforms have been initiated, France continues to face challenges related to the budgetary situation, the functioning of the labour market and external competitiveness. Measures are needed to avoid large deficits in the pension system and that rising unemployment becomes long-term. The competitiveness of French businesses remains a challenge, with both cost and non-cost aspects playing a role in the deterioration of export market shares. Furthermore, there is room to increase competition, particularly in the regulated professions, the retail sector and network industries.
2013 European Commission's recommendations for France in brief
The Commission has issued six country specific recommendations (CSRs) to France to help it improve its economic performance. These are in the areas of:
- Sustainable public finances
While the general government deficit has decreased from its peak of 7.5 % of GDP in 2009, it remains one of the highest in the EU. France should pursue its commitment to budgetary discipline by bringing its deficit below the excessive deficit threshold of 3% by 2015 in order to ensure the return of market confidence and lay the foundations for sustainable growth and job creation. France also needs to further improve the efficiency of its public expenditure, for instance, by improving cooperation and synergies between the different layers of administration (central, local and regional). Longer term pressures on public finances could be eased if France accelerates its planned pension reform and increases cost-effectiveness in the healthcare sector.
- Competitiveness of French economy (costs aspects)
French companies have experienced a worrying loss in market share in the last decade due to both cost and non-cost factors. The “crédit d’impôt pour la compétitivité et l’emploi — CICE” is a significant step which should contribute to lower labour costs in France, however there is room for further action, for example by lowering employers' social security contributions. The increase in the minimum wage in July 2012 went against the 2012 Council recommendation and France should use more efficient alternative instruments to address in-work poverty.
- Competitiveness of French economy (non-costs aspects)
As regards non-price competitiveness, France should support the development of export-oriented networks and partnerships to promote the internationalisation of SMEs, simplify the business environment and improve the framework conditions that encourage innovation and entrepreneurship.
- Competition in the services sector and certain networks
The poor performance of the services’ market in France is holding back its export performance. France should take action to enhance competition in services and remove unjustified restrictions in the access to and exercise of professional services, such as restrictions on the legal form of companies or capital ownership. France should also take steps to increase competition in certain network industries. The French electricity market remains one of the most concentrated in the EU. Regulated tariffs for gas and electricity non-household customers should be removed and more interconnections with neighbouring countries established to foster competition. In the railway sector, the rail-freight market is less dynamic than in other Member States, while domestic passenger transport is not open to competition.
The French tax system remains complex and lacks efficiency due to the wide range of exemptions, special allowances and frequent changes in legislation. France should pursue its efforts to simplify its tax system and improve its efficiency, while ensuring continuity of tax rules over time. There is further scope to increase revenues from VAT, shift the tax burden away from labour, rebalance the share of environmental taxation and remove incentives to indebtedness in corporate taxation.
- Labour market
France should take decisive action in view of the expected further increase in unemployment, including by fully and swiftly implementing the inter-professional agreement (ANI) on securing jobs concluded between the social partners. France should take further action to combat labour-market segmentation and undertake a reform of the unemployment benefit system to ensure adequate incentives to work. The employment rate of older workers should be enhanced and the public employment services (“Pôle emploi”) should effectively deliver individualised support to the unemployed and target active labour market policies on the most disadvantaged. The alignment of national schemes to the Youth Guarantee Council recommendation should also play a role in responding to these challenges.
See how France compares with other EU Member States in key areas
European Semester Documents