Gov't-commissioned report in France urges to boost competitiveness

A report on competitiveness commissioned by French President Francois Hollande presented on Monday a grim diagnosis of domestic industrial sector which has been handicapped for decades by weak competitiveness, but could be saved by tough efforts, including cutting labor costs. In the report, author Louis Gallois, former chief of aerospace group EADS, rang the alarming bell of French industry that "has now reached a critical threshold, beyond which it is threatened with disintegration." "The industrial tragedies reported daily by the press disturb rightly public opinion and give it the impression ... that it is irremediable," Gallois said. According to the report, industry sector accounts 12.5 percent of the gross domestic product (GDP), down from 18 percent in 2000 with more that 2 million jobs were lost in industrial businesses over the past three decades. "To regain its competitiveness, France has to make efforts and shows a perseverance in action. It will take time even if initial results can be obtained fairly quickly," ex-EADS chairman noted in his report. As part of the proposed roadmap to overturn decade-sliding competitiveness, Gallois presented "tough" and "necessary" 22 measures with the main proposal recommended to cut 30 billion euros (38.35 billion U.S. dollars) in payroll taxes over next two years to inject a dynamism in the country's competitiveness. An expected 20 billion euros would come off charges paid by employers and 10 billion off those paid in by employees. The cuts would only apply to wages up to 3.5 times the minimum wage, currently set at 9.4 euros an hour before tax, or 1,425 euros per month. The proposal came after French business leaders have long called for a decrease in payroll taxes, which they considered among the highest in the world. "With these conditions, 35 percent of the benefit would go directly to the industry and services with high added value," Gallois said. Adding to that, Gallois called on the government "to simplify, clarify and reduce delays in firms", hoping that the Socialists would maintain over the coming five years research tax credit, the social incentives for young innovative enterprises and devices for investment in small and medium-seized companies. "Innovating and boosting quality, taking risks, breaking down barriers and working together, developing skills, opening new spaces for dialogue and stimulating collective intelligence," represented the necessary tools to increase the country's competitiveness, according to the report. "We need a real mobilization, ... a true patriotism. It is necessary that the French work interdependently," the ex-EADS head stressed. Handing in his report to the prime minister, Gallois told reporters that jointly efforts are needed for French people to "win back our industry." Grappling with record unemployment and stagnating economy, French President Hollande vowed to propose a "competitiveness pact" to revive the country's industry while meeting with five major international economic organizations a week ago. He admitted that "because of high unemployment, our productive capacity cannot be entirely efficient" while seeing competitiveness as a prerequisite for economic growth. On the sideline of the Asia-Europe summit held in Laos on Monday, the French head of state pledged to take "tough decision" as the government-commissioned report suggested 22 measures to boost the competitiveness, local media reported. "The government has noted the 22 proposals contained in this report and I noticed that nine of them have been either in the execution stage or in active preparation (to be implemented)," Industry Minister Arnaud Montebourg was quoted as saying by BFMTV news channel. "This is a report that is unpleasant for our predecessors and is engaging for today government," he added. On Tuesday, the government will announce a "competitiveness pact" containing measure to bolster the country's industry taking into account Gallois report's recommendations. (1 euro = 1.278 U.S. dollar)