| CLERMONT-FERRAND, France, March 11
CLERMONT-FERRAND, France, March 11 France
launched a 20 billion euro ($26 billion) business tax credit
scheme on Monday to boost waning competitiveness in the euro
zone's second biggest economy.
Finance Minister Pierre Moscovici urged small- and
medium-sized firms, which are struggling the most in the current
downturn, to quickly take advantage of the programme as the
first companies officially signed up in his presence in the
central city of Clermont-Ferrand.
The scheme aims to help companies reduce their labour costs
by giving them a tax credit equal to six percent of their wage
bill on salaries going up to 2.5 times the minimum wage.
Although the programme does not take full effect until 2014,
it is being made available to small and mid-sized companies
through state-backed advances signed with the public investment
bank and traditional commercial banks. For this year, tax
credits can only reach up to 4 percent of a firm's wage bill.
With many small companies feeling their cashflows pinched,
Moscovici said: "It's a very simple, quick and efficient
instrument that was designed to meet firms' needs."
The programme aims to reduce the cost of employing people in
order to help regain lost competitiveness on international
markets, which has left France with a yawning trade deficit and
France's 2-trillion-euro economy is on the brink of its
third recession since the 2008-2009 financial crisis after
having contracted 0.3 percent in the final quarter of 2012.
President Francois Hollande has seen his approval ratings
drop to record lows after only 10 months in office with voters
growing increasingly frustrated that his promises to turn around
the economy are falling flat.
The jobless rate hit its highest rate since 1999 in the
fourth quarter of last year at 10.6 percent and jobless claims
are likely to soon make a new record high amid waves of plant
closures and industrial layoffs.
"Reducing our welfare contributions is vital. The last
months have not been good," said Gregoire Guiraud, head of
textile firm Cheynet, one of the first two firms to sign up for
Officially up and running only since Feb. 22, the public
investment bank has so far received 350 requests.
The cost of the tax credits to the state coffers is to be
financed in part by an increase in the value added sales tax
starting next January and by 10 billion euros in extra savings
that the government has yet to detail. ($1 = 0.7684 euros)
(Writing by Leigh Thomas; editing by Ron Askew)