Chapter

Chapter 5. France: Imbalances and Declining Competitiveness

Author(s):
Hamid Faruqee, and Krishna Srinivasan
Published Date:
August 2013
Share
  • ShareShare
Show Summary Details
Author(s)
Joong Shik Kang1

France’s external balances over the past decade have gradually deteriorated from surplus to moderate deficit, reflecting worsening competitiveness on the back of declining trend growth. Rising public debt prior to the crisisreflecting budgetary pressures from local governments and social security administrationsincreased significantly due to crisis-related costs. Going forward, France needs to improve its competitiveness in order to keep external deficits in check and reduce its public debt to ensure fiscal sustainability. A comprehensive strategy to boost growth and productive potential includes strengthening incentives for work as well as competition in product and services markets.

France’s current account balance has deteriorated gradually since the late 1990s. The current account went from a surplus of 3.1 percent of GDP in 1999 to a deficit of 2.2 percent in 2011 (Figure 5.1). This was led by a worsening of the trade balance in goods and services, which moved from surplus (2.5 percent of GDP in 1999) to deficit (2.8 percent in 2011). Income and transfer balances have been relatively stable.

Figure 5.1France: Current Account Balance Components

(Percent of GDP)

Source: IMF staff calculations.

The deterioration of the current account during the first half of the 2000s was cyclical, as stronger domestic demand in France relative to its key trading partners, notably Germany, resulted in worsening net exports. However, since the mid-2000s the deterioration has been largely due to a worsening performance of exports, with France’s export growth lagging behind its key competitors.

From a saving-investment perspective, the current account deterioration between 1999 and 2007 (by 4.2 percentage points of GDP) was driven largely by a narrowing of the private saving–investment balance on account of higher investment in construction and services (2.8 percentage points of GDP) (Figure 5.2). After 2007, notwithstanding a significant improvement in the private saving–investment balance, the current account deficit widened further as a result of a sizable deterioration of the public sector saving–investment balance (by 3.8 percentage points of GDP by 2010) (Figure 5.3).

Figure 5.2France: Private Saving and Investment

(Percent of GDP)

Source: IMF staff calculations.

Note: (S-I)p refers to saving–investment balances in the private sector.

Figure 5.3France: Private and Public Saving–Investment Balances

(Percent of GDP)

Source: IMF staff calculations.

Note: CAB refers to current account balance; (S-I)p refers to saving–investment balance in the private sector; and (S-I)g refers to the saving–investment balance in the government sector.

The current account is projected to improve only gradually over the medium term on account of sluggish demand from the rest of Europe and continuing competitiveness issues.

Fiscal balances improved significantly in the run-up to the Economic and Monetary Union (EMU), were generally weak during the EMU, and deteriorated significantly following the recent crisis.2 To meet the Maastricht criteria, France introduced a medium-term consolidation plan in 1994. The general government deficit was reduced significantly to 1.5 percent of GDP in 2000 (from over 6 percent in 1993), while public debt declined to about 57 percent as a share of GDP in 2001 after peaking near 60 percent in 1998.

In the early 2000s, rising expenditures by local governments and social security administrations pushed up, through transfers, the general government fiscal deficit. Overruns in social security spending continued in the early 2000s, partly undoing the gains from the previous consolidation. The deficit exceeded 4 percent of GDP by 2003. Under the European Union’s rules, France entered the Excessive Deficit Procedures (EDP) of the Stability and Growth Pact (SGP). The significant consolidation package in response to the EDP, helped by the global economic boom, reduced the deficit to below 3 percent of GDP by 2005.

Most recently, public finances deteriorated significantly in the context of the global crisis. Crisis-related costs, including fiscal stimulus, on the back of declining trend growth, resulted in sizable general government deficits (over 7 percent of GDP in 2009–10), while public debt exceeded 80 percent of GDP in 2010 and is projected to increase further in the near term (Figure 5.4). Thus, France entered the EDP again in 2009.

Figure 5.4France: General Government Accounts

(Percent of GDP)

Source: IMF staff calculations.

Going forward, fiscal balances are projected to improve. The authorities have committed to ambitious fiscal deficit targets to bring down the deficit significantly (to the SGP target of 3 percent of GDP by 2013 and further to 2.2 percent by 2014) and put the public debt on a declining path as of 2014. The implementation of pension reform enacted in late 2010—which includes a gradual increase of the legal retirement age from 60 to 62 years of age,3 an increase in the full pension age from 65 to 67, and an extension of the contributory period to 41.5 years for people born after 1955 (to be adjusted in line with gains in life expectancy)—will also help lower the deficits over the long term. These changes will help achieve financial equilibrium in the pension system by 2018 from a current deficit of almost 1.5 percent of GDP.

Root Causes of Imbalances

Reflecting structural factors and the weakness of fiscal institutions, public finances in France were weak prior to the crisis, despite relatively strong growth, and have since deteriorated significantly owing to crisis-related costs and countercyclical discretionary policies. The external current account gradually deteriorated from a surplus in the early 2000s to a deficit by the end of the decade, driven by strong domestic demand and a loss in competitiveness.

Fiscal Imbalances

The deterioration of French public finances over the past decade reflects structural factors and the costs associated with the global financial crisis. In the context of some weakness in fiscal institutions, the fiscal position worsened in the run-up to the crisis, largely due to rising social security spending. Crisis-related costs have only added to the fiscal burden since.

Specifically, structural factors, including aging-related social security expenditure, have contributed to the gradual deterioration of the fiscal balance. While cyclical factors and corresponding consolidation efforts have accounted for large fluctuations in the fiscal balance, the structural balance has remained weak, mainly due to rising social security spending, including on pension and health care. Despite several efforts to increase the efficiency of the pension and health care systems, expenditure overruns on social security have persisted, contributing to the weakening of the fiscal position.

Weaknesses in fiscal institutions have hampered efforts to restore fiscal sustainability. Strong growth in the mid-2000s did not lead to a much-needed fiscal consolidation (Figure 5.5). The significant decentralization efforts in the early 2000s resulted in a rapid growth of local government spending (5 percent annually on average during 2001–10). While the favorable global economic boom contributed to the end of the first EDP in the mid-2000s, the deficit targets set in the country’s successive stability programs were frequently missed, mainly due to spending overruns by local governments and the social security system—which accounted for about 21½ percent and 46¼ percent of total expenditures, respectively, as of 2009—but also by the central government in the second half of the 2000s (Figure 5.6).

Figure 5.5France: Fiscal Indicators

(Percent of nominal GDP)

Source: IMF staff calculations.

1Maastricht definition. Estimate for 2010 includes one-off transfer to Organismes Divers d’Administration Centrale for future-oriented investments, which amounts to about 0.6 percent of GDP.

2In percent of potential GDP.

Figure 5.6France: Overruns in Real Spending Growth

(Percent)

Source: Martin, Tytell, and Yakadina (2011).

Note: SP = Stability Program.

Finally, public finances deteriorated significantly in the context of the recent crisis, with both the deficit and the debt rising sharply. In addition to the full operation of automatic stabilizers, the government provided discretionary fiscal stimulus in the amount of 2¼ percent of GDP over 2009–10 to cushion the downturn.4 Combined with declining trend growth, these measures have pushed the general government deficit to above 7 percent of GDP, and public debt has increased to over 80 percent of GDP.

External Imbalances

The current account has deteriorated largely due to the declining competitiveness of French exports as well as strong domestic demand.5 The deterioration of the trade balance in the early 2000s was mainly due to cyclically lower foreign demand. While France faced consistently lower foreign demand than its large euro-area neighbors, France’s strong domestic demand growth—exceeding that of its largest trading partner Germany by 3 percent a year on average over 2001–05—resulted in strong French imports and worsening net exports, which turned negative in 2005 (Figure 5.7).

Figure 5.7Domestic Demand Growth

(Annual percent change)

Source: IMF staff calculations.

Since 2005, export growth in France has fallen significantly below the euro-area average, pulling down French export market shares both worldwide and within the euro area (Figure 5.8). Combined with strong domestic demand, trade and current account balances continued to deteriorate, raising concerns about the competitiveness of French exports. The current account deteriorated further during the Great Recession as public sector demand, supported by the stimulus, more than offset the decline of private sector demand.

Figure 5.8Real Export Growth, 2001–05 to 2006–10

(Percent)

Source: IMF staff calculations.

Note: Percentage change of average export volumes between two periods.

The deteriorating competitiveness of French exports, and associated loss of market share, reflects both price and nonprice factors. France has lost about 2½ percentage points of world export market share in the last decade.6 While most advanced economies have lost market share owing to the increasing role of emerging market economies in global trade, France’s loss has been more severe than that of its peers. Moreover, its loss of market share in the euro area is noteworthy, given that the area accounts for about half of France’s total exports. During the latter half of the 2000s, France lost about 1½ percentage points of market share in the euro area, compared to a ¼ percentage point loss for Germany.

A key factor behind this weakening of competitiveness has been a larger gap between wage growth and total factor productivity (TFP) growth relative to neighboring countries since the mid-2000s (Figure 5.9). In particular, relative to Germany, French wages grew much faster, while TFP growth lagged for more than a decade. Traditional price-based indicators are insufficient to explain France’s weaker export performance. Since the mid-2000s, all countries in the euro area experienced a real appreciation relative to the United States in terms of the consumer-price-index-based real effective exchange rate (REER), mainly due to the appreciation of the euro. However, relative to the other core countries in the euro area (Germany, Italy, and Spain), France lost competitiveness only to Germany in terms of REER, export prices, unit labor costs, and labor productivity (Figure 5.10). In contrast, France experienced a smaller real appreciation, a slower increase in export prices and unit labor costs, and a faster increase in labor productivity than Italy and Spain (Figure 5.11). This implies that nonprice factors, which are related to structural issues, are likely to have contributed to the underperformance of the French export sector.7

Figure 5.9Wage Growth Minus Total Factor Productivity Growth

(Percent)

Sources: The Conference Board Total Economy Database, January 2011.

www.conferenceboard.org/data/economydatabase/; and the Organization for Economic Cooperation and Development (OECD).

1OECD countries excluding Germany and France.

Figure 5.10Real Effective Exchange Rate

(Index based on the consumer price index; 1999 = 100)

Source: IMF, Global Data Sources.

Figure 5.11Unit Labor Costs, Manufacturing Sector

(Index; 1999 = 100)

Source: IMF staff calculations.

French exports have faced stronger competition from emerging market economies than have the exports of France’s large euro-area peers. French exports consist of some high-tech products (aeronautics and pharmacy), but also contain a large share of low- to medium-tech products that face competition from both industrialized and emerging market economies.8 Although France’s exports to fast-growing emerging market and developing economies have increased significantly during the last decade, its export growth to these destinations has lagged behind that of the other euro-area countries. France has also lost market share in fast-growing sectors, including some of its large export sectors, in marked contrast to Germany.

The underperformance of the French export sector also reflects labor and product market rigidities. Labor market rigidities have restricted firms’ flexibility to adjust to the changing economic environment. A high level of employment protection, high minimum wage, and one of the highest labor tax wedges among member countries of the Organization for Economic Cooperation and Development (OECD),9 among other factors, have led to high unemployment and lower working hours, contributing to low labor input (Figure 5.12). OECD estimates show that France’s product market policies have also inhibited competition relative to its EMU peers (Figure 5.13).10 These rigidities have led to loss of efficiency, inability to make a breakthrough in new markets, insufficient research and innovation, and a loss of technological edge, contributing to the underperformance of France’s export sector.11

Figure 5.12Employment Protection, 2008

(Index)

Source: Organization for Economic Cooperation and Development.

Note: A high reading implies high levels of employment protection.

Figure 5.13Product Market Regulation, 2008

(Index)

Source: Organization for Economic Cooperation and Development.

Note: A high reading implies high levels of regulation.

Are France’s Imbalances a Problem?

While a moderate current account deficit does not pose risks, it is not desirable at this stage for France. At about 2 percent of GDP in 2011, France’s current account deficit is not excessively large. However, given demographic factors, it is not desirable for France to maintain current account deficits for extended periods. In addition, given the need for fiscal consolidation, maintaining strong growth would require a larger contribution from external demand by restoring competitiveness. Also, since lower potential growth and loss of competitiveness share common underlying factors, addressing potential growth would lead to higher welfare for the French population, while also helping to reduce the external imbalance.

Market concerns pertaining to France’s fiscal position and public debt rose amid the intensification of the euro-area crisis in 2011, with a widening of bond spreads relative to German bunds and rising credit default swap spreads. Financial stability concerns have abated considerably since then, with a marked decline of interest rate spreads vis-à-vis Germany, but the experience highlights the importance of the sustainability of public debt in terms of financial stability. High public debt levels reduce policy space to deal with future shocks and can crowd out private investment, lowering growth prospects. Also, as higher public debt inevitably implies a higher tax burden in the future, given the already high level of French tax rates, it could create other distortions, undermining ongoing efforts to revitalize the economy.

France’s external and internal imbalances should be viewed with care. France is the second biggest economy in the euro area. A credit event in the French debt market or a loss of investor confidence in the creditworthiness of the sovereign could have significant wider repercussions for other sovereigns (including for the European Financial Stability Facility/European Stability Mechanism, which is critical for managing the ongoing euro-area crisis) as well as for corporate spreads. Also, given the close interlinkages between the real and financial sectors, the risks of contagion are high, as evident from the sovereign debt crisis in euro-area periphery countries.

In sum, financial instability in France could have large cross-border spillovers. French banks have large cross-border exposures to the euro-area countries under IMF programs or are experiencing heightened market scrutiny. Thus, intensified market pressures on euro-area periphery banks could affect the balance sheets of French banks.

How to Address Imbalances

Domestic Priorities

Sustaining fiscal consolidation over the medium term is needed to keep public finances on a sustainable path, while longstanding structural reforms should be implemented to boost competitiveness and growth. The external and fiscal imbalances are closely interlinked. A more competitive and growth-oriented economy is essential not only for keeping external balances in check, but also for achieving sustainable public finances. Fiscal policy that puts public finances on such a sustainable path, combined with growth-friendly tax reform, could usefully support growth- and competitiveness-enhancing structural reform policies and help contain external imbalances by ensuring an improved public saving–investment balance.12

Anchoring Fiscal Sustainability

A key policy priority is keeping public debt on a sustainable track. To abide by the terms under the second EDP, the authorities have committed to ambitious fiscal deficit targets to reduce the fiscal deficit to 3 percent of GDP by 2013 and 2.2 percent by 2014. According to an IMF staff assessment, there would be a shortfall of about 0.5 percent of GDP due to somewhat optimistic growth projections, requiring additional measures from 2013 onward to meet the fiscal targets and to maintain public debt on a sustainable path (IMF, 2012). Failing to implement such additional measures would result in higher public debt ratios (about 91 percent of GDP, as projected by IMF staff). Previous consolidation experience highlights that strong political will and a shared resolve for consolidation at all levels of government, including local governments and the social security system, are critical factors for the success of fiscal consolidation. In the event of lower-than-expected growth, the authorities should allow the automatic stabilizers to operate fully and focus on a deficit target in structural terms.

To achieve the fiscal targets for 2013 and 2014 without undermining incentives to work and invest, it is necessary to achieve greater fiscal adjustment, beyond what is currently envisaged. Second, the composition of adjustment could be strengthened by rebalancing the fiscal effort toward expenditure containment. A more ambitious expenditure reduction over the medium term would also help enable a gradual reduction of the tax burden, which is already among the highest in Europe, and strengthen incentives to work and invest. Expenditure containment should involve all levels of government, based on a rationalization of spending. The initiatives taken by the government to improve the efficiency of public spending and initiate stricter ex ante evaluation of public investment projects need to be accompanied by a better match between resources and mandates across the various levels of government, strict management of health spending, and tighter controls over the wage bill of all government institutions.

France’s Organic Law, which transposes the European Fiscal Compact into French law, would contribute to enhancing fiscal policy credibility. Through its built-in fiscal rule and corrective mechanism, the Organic Law will anchor annual budgetary policies more firmly into a medium-term objective of budget balance. Establishing the High Council of Public Finances to provide independent macroeconomic projections and monitor implementation of corrective actions in the event of deviations from the established fiscal trajectory would enhance the credibility of the multi-year budget.

Furthermore, to ensure long-term sustainability, deeper reforms of key pension and health care parameters are also needed. On the pension side, further increasing the legal retirement age in line with life expectancy would prevent continued increases in time spent in retirement as medical advances continue to lengthen life spans.13 On the health care front, as the rise in living standards and technical progress will continue to put pressure on public expenditures, continued efficiency gains are necessary, in addition to initiation of a planned reform of long-term care in 2012, to prevent an unsustainable rise in health and long-term care spending. It should be noted, however, that France is among the lower- to medium-risk countries in terms of future health care costs, with the projected increase of annual spending on public health being lower than the European average over the next 20 years.14

Financial stability concerns abated considerably in mid-2012, but international regulatory changes could still result in significant adjustment costs. French banks have improved their solvency ratios and funding structures through retained earnings and disposal of international noncore businesses, and are currently well positioned to comply with Basel III capital requirements. However, international regulatory changes—more stringent liquidity requirements for banks and new regulations and accounting standards for insurance companies—would make it costlier to provide long-term financing. The overhaul of the financial taxation of savings envisaged by the government should be an important instrument to address this challenge by creating a more level playing field among financial instruments and by increasing incentives for long-term saving.

Enhancing Competitiveness

To keep external imbalances in check, France needs to improve its competitiveness by pursuing structural reforms to increase TFP while moderating wage growth. France’s lagging export performance over the past decade indicates the importance of strengthening competitiveness. The latest overall exchange rate assessment suggests the possibility of some overvaluation of the REER, indicating that the need for wage moderation and cost containment is especially important given that France is a member of a currency union. To address nonprice factors that have played significant roles in the underperformance of France’s export sector, it is important to pursue comprehensive structural reform strategies in the product market, labor market, and tax area.

The reform strategy in product markets should be focused on promoting innovation and creating favorable conditions for business. Enhancing competitiveness by lowering regulatory restrictions would help increase productivity and employment. In this context, the easing of regulatory entry barriers to the services sector, including professional services, would raise value added in the services sector but also have positive spillovers to the manufacturing sector by reducing costs of key inputs.15

Labor market reform should focus on increasing labor market participation and reabsorbing the unemployed. Although welcome progress has been made to reabsorb the unemployed by providing appropriate incentives for both firms and job-seekers—including by simplifying layoff procedures and enhancing work-study schemes—more efforts are needed. Easing high levels of employment protection would provide appropriate incentives for firms to create more jobs, and reducing the comparatively long duration of unemployment benefits or lowering benefit levels over time could strengthen incentives for people to look for jobs and increase the effective labor supply.

Labor market participation of young and low-skilled workers as well as seniors needs to be increased (Table 5.1). The high minimum wage (salaire minimum interprofessionnel de croissance – SMIC) has priced low-skilled workers out of the labor market, especially the young. To increase labor demand for these groups, it is important to continue to limit the increase of the SMIC, for example by reviewing the indexation formula, which is currently partly based on inflation. To increase the labor force participation of seniors (among the lowest in Europe), it is important to continue the phasing out of pre-retirement benefits, relax constraints on combining employment and retirement benefits, and undertake pension reforms.

TABLE 5.1Employment Ratios
Total1Women2Older workers3
201120112011
Belgium62.556.738.7
Finland70.567.557.0
France64.359.741.4
Germany74.067.759.9
Greece56.645.139.4
Ireland61.156.050.8
Italy57.946.537.9
Netherlands76.169.956.1
Portugal68.260.447.9
Spain59.052.844.5
United Kingdom72.665.356.8
United States70.062.060.0
OECD countries67.556.754.4
Source: Organization for Economic Cooperation and Development (OECD).

Percent of working-age population.

Percent of female population (15–64).

Percent of population age 55–64.

Source: Organization for Economic Cooperation and Development (OECD).

Percent of working-age population.

Percent of female population (15–64).

Percent of population age 55–64.

Reform of labor and business income taxation would improve incentives for employment and growth. Lowering the labor tax wedge, which remains high on average relative to the other OECD countries, could increase labor demand while preventing higher wage claims by unions. Reforms of the tax-benefit system targeting work incentives to the high labor supply margins—senior workers and women with school-age children—are expected to be effective and cost-efficient.16 Notwithstanding the already-existing social benefit (Revenu de Solidarité Active – RSA) and tax credit (Prime pour l’emploi – PPE) that encourage labor supply, more generous earned income tax credits and special credit for social security contributions paid for these groups of workers could be considered. A corporate tax reform, by lowering the statutory rate along with broadening the tax base and reducing complexity, would help make the system fairer and simpler and make the corporate tax system less biased against small firms, which are often the source of innovation and job creation. Reducing the relatively large bias toward debt financing from interest deductibility would reduce banks’ excess leverage and promote greater reliance on equity finance, which could ultimately boost innovative investments.

Toward Global Action

With respect to global rebalancing and collective action, France needs to take the following steps:

  • Additional fiscal consolidation to firmly place public finances on a sustainable track. The announced fiscal measures in the pipeline are based on relatively optimistic growth projections, so additional measures are needed to meet the deficit target under the EDP by 2013, and further fiscal consolidation would be needed to achieve fiscal sustainability as targeted in the Stability Program. The consolidation could be financed by expenditure cuts and additional revenue measures, including an increase in value-added tax (VAT) revenue.

  • Tax reform to reduce distortions and raise potential output. The corporate income tax could be lowered to raise investment and potential output. Labor taxation could also be reduced to increase labor participation. These tax and social security contribution cuts could be financed with further increases in VAT revenue and a cut in tax expenditures.

  • Structural reforms to boost productivity in nontradables, together with wage moderation.17 Product market reforms to boost productivity, particularly in services, could include convergence of regulation in network industries, retail trade, and professional services to standards for best practices. Additional labor market reforms and minimum wage moderation are also crucial to improve productivity and reduce unemployment (notably of the young and low-skilled workers).

References

    ChengKevin2010Developments in France’s External Competitiveness—An Update” in France: Selected Issues Paper IMF Country Report No. 10/243 (Washington: International Monetary Fund).

    European Commission2010Surveillance of Intra-Euro-Area Competitiveness and ImbalancesEuropean Economy 1 (May) (Brussels: European Commission Directorate General for Economic and Financial Affairs).

    HallaertJean-Jacques2012aStructural Reforms and Export Performance” in France: Selected Issues Paper IMF Country Report (Washington: International Monetary Fund).

    HallaertJean-Jacques2012bGains from Service Sector Deregulation” in France: Selected Issues Paper IMF Country Report (Washington: International Monetary Fund).

    International Monetary Fund (IMF)2011aFrance—Staff Report for the 2011 Article IV ConsultationIMF Country Report No. 11/121 (Washington: International Monetary Fund).

    International Monetary Fund (IMF)2011bFiscal Monitor: Shifting Gears: Tackling Challenges on the Road to Fiscal AdjustmentApril (Washington: International Monetary Fund).

    International Monetary Fund (IMF)2012France—Staff Report for the 2012 Article IV ConsultationIMF Country Report (Washington: International Monetary Fund).

    KabundiAlain and Francisco NadalDe-Simone2009Recent French Export Performance: Is there a Competitiveness Problem?IMF Working Paper 09/2 (Washington: International Monetary Fund).

    MartinEdouardIrinaTytell and IrinaYakadina2011France: Lessons from Past Fiscal Consolidation PlansIMF Working Paper 11/89 (Washington: International Monetary Fund).

    PoirsonHélène2011Toward a Growth-Oriented Tax System for France” in France: Selected Issues Paper IMF Country Report 11/212 (Washington: International Monetary Fund).

Joong Shik Kang is an economist in the IMF Research Department. This chapter was written with guidance from Emil Stavrev and with support from Eric Bang, David Reichsfeld, and Anne Lalramnghakhleli Moses.

Fiscal balances include the central government, local governments, and the social security administration.

The new administration elected in 2012 restored the early retirement age of 60 years for workers who began to work before the age of 20.

Only part of this fiscal stimulus had an impact on the general government deficit, as some measures (e.g., public enterprise investments) are not included in the general government accounts.

Higher energy costs also contributed to the worsening current account during 2005–08.

Export market share is calculated by dividing France’s exports by world imports. The European Commission (2010) also pointed out that France’s share of exports of goods in world trade (including intra-EU exports) declined by 2.2 percentage points between 1998 and 2008.

Cheng (2010) also found that traditional price and foreign demand factors can only partly explain the decline of the market share of French exports during the 2000s, suggesting that nonprice factors may have played a significant role in the competitiveness loss.

For more details, see European Commission (2010).

Earlier reforms aimed at reducing employer-paid social security contributions for low wage levels (between 1 and 1.6 times the minimum wage) have significantly lowered the tax wedge at the bottom of the income distribution.

Kabundi and Nadal De-Simone (2009) find that adjustment to a negative cost shock tends to be more via quantities than via prices, pointing to an insufficient flexibility of labor and product markets.

See Hallaert (2012a) for further discussion on the structural factors that have affected France’s export performance.

Policy recommendations are based on the IMF’s 2011 and 2012 Article IV discussions (IMF, 2011a; IMF, 2012).

The 2003 pension reform linked the contribution years for a full pension to life expectancy.

See the IMF’s April 2011 Fiscal Monitor for details (IMF, 2011b).

See Hallaert (2012b) for a discussion on potential gains from services sector deregulation.

While the employment rate of prime-aged women (30–54 years) has increased in line with that of other OECD countries, the average hours worked by French women have declined markedly since the late 1970s. See Poirson (2011).

The structural reform scenario was developed in close partnership with the OECD, which provided estimates of the impact of structural reforms on productivity.

    Other Resources Citing This Publication