Hollande pledges 2bn euros to face ‘economic and social state of emergency’

French President François Hollande announced on Monday the state will spend more than two billion euros over the coming year to fight unemployment. In an address to business leaders peppered with much of the same language used in the government’s fight against terrorism, Hollande laid out an economic plan that offers a mix of old and new ideas.

French President Francois Hollande delivers his speech as he presents his New Year greetings to Employment and Unions forces at the Economic, Social and Environemental Council in Paris, France, January 18, 2016. Reuters/Yoan Valat/Pool

Nearly four years into a presidential term premised on pledges to create jobs, unemployment has steadily climbed about a full percentage point to hover just over 10 percent, affecting more than three million people.

For Hollande, who previously vowed not to stand for re-election in 2017 if he fails to reverse the trend of growing unemployment, the proposals announced on Monday may be his last attempt to do so.

Francesco Saraceno of the French Economic Observatory

The most concrete announcement was one billion euros of funding for training programmes that the president indicated in a previous address would benefit 500,000 job seekers.

“It’s the recognition that employment has become a long-term drag on the capacity of the economy to grow,” said Francesco Saraceno, deputy director of the innovation and competitiveness program at the French Economic Observatory.

“The idea is that if people stay unemployed for too long, they become less employable because they lose skills, they use the capacity to produce, and so on.”

Labour market reforms

Hollande also promised new fiscal models for entrepreneurs and artisans looking to create business and work independently, as well as modifying the criteria for practicing certain professions.

Other pledges include fine-tunings of ongoing efforts to liberalise the country’s labour market, including one pledge to offer companies with fewer than 250 employees a 2,000-euro hiring bonus for the creation of every new contract lasting more than six months, under certain conditions.

“What I find disappointing is that the emphasis is mostly on the labour market: the idea that if there is no job creation, it’s because of too many costs, too high costs of hiring, excessive minimum wage, and so on,” Saraceno says.

“I think Hollande loses sight that unemployment needs growth, and I don’t see anything in what he proposed that will boost growth in the next two years.”

Analogy to fight against terrorism

Hollande opened his address to French business leaders with a reference to the government’s counter-terrorist measures and an analogy to the economic situation.

“The terrorist threat led me, along with the Prime Minister, to declare a state of emergency to protect our citizens,” Hollande said, in reference to exceptional measures decreed and voted by MPs in the wake of the 13 November attacks in Paris.

“I believe that, confronted with facing the disorder of the world, an uncertain economic outlook and persistent unemployment, we must also declare an economic and social state of emergency.”

From his perspective as an economist, Saraceno has a mixed view of the analogy.

“On one hand, I see very well the attempt to gather the same consensus he managed to gather on national security issues,” he said. “It’s a political move, and I think it’s propaganda, to use a strong term.

“But on the other hand, I see the recognition of the current situation as a very serious situation,” Saraceno says. “The fact the president of the second-largest economy in Europe says we are in a state of emergency is welcome news. An emergency situation means we should take extraordinary measures to get out of the crisis.”