PARIS (Reuters) - President Francois Hollande should abandon an EU-mandated deficit target and instead rapidly accelerate the pace of economic reform, a top economist who has advised past French leaders said in an interview.
Jacques Attali, who advised Socialist Francois Mitterrand in the 1980s, the conservative Nicolas Sarkozy in the 2000s and is still an influential voice in France, said past failures to put in place reform meant Hollande had a near impossible task.
“The delays accumulated are huge and the equation has become nearly impossible, because cutting deficits would throw the country into depression and not cutting them would throw the country into over-indebtedness,” Attali, former head of the European Bank for Reconstruction and Development, told Reuters.
Paris was granted a two-year deadline to reach a deficit target of three percent of output in 2015 but has now said it will not meet it before 2017. The European Commission has set it a March deadline to launch a new wave of reforms or face sanctions because of the deficit breach.
“If we try to reach the three percent in 2017, the country will fall into depression. Even if we push this to 2020, growth will only be 0.5 percent. There is no solution within this equation,” he said.
Reforms by Hollande’s Socialist government since 2012 - such as modest re-workings of labour and pension arrangements - go in the right direction but barely cover 10 percent of what needs to be done, he estimated.
“To my mind, serious structural reform has yet to begin,” added Attali, who does not have a formal role advising Hollande but is known to have frequent informal contacts with him.
Efforts must go beyond the deregulation of a few closed professions and easing of labour rules which Economy Minister Emmanuel Macron plans in a bill to be unveiled next week, he said, urging a complete overhaul of pension and labour rules and scrapping of one layer of France’s complex local government.
Acknowledging how difficult that would be, he said such a programme would require six to 10 years of concerted reform extending beyond the normal electoral cycle of five years.
“Nothing is possible without will. That’s why I call for a national salvation government,” he said, using a term last employed to denote the government led by General Charles de Gaulle to head off a potential political crisis after a putsch in the then-French colony Algeria in 1958.
Writing by Ingrid Melander; editing by Mark John