As the German economy shines, next door France plunges into recession, shedding jobs and losing its top credit rating.
However, French President Nicolas Sarkozy has a plan to save the country, by making it more like Germany.
The right-wing leader will on Wednesday host a “social summit” with unions and employers to try to make France’s job market more flexible and halt rising unemployment ahead of presidential and parliamentary elections this year.
Sarkozy is hoping he can emulate the so-called Hartz labor reforms of 2003 to 2005, which are seen as having helped Germany escape the economic crisis currently gripping most of Europe.
However, this is just one of the many pages that France hopes to borrow from Germany’s economic textbook. Earlier this month, Sarkozy’s government vowed to cut payroll charges on employers and workers to try to make French firms more competitive and to recoup the revenues mainly by raising the value added tax.
The countries with this so-called “social tax” most cited by the government are Denmark and Germany, where it was introduced in 2007. French Budget Minister Valerie Pecresse said it was worth copying Germany’s move to reduce labor costs because this had enabled France’s neighbor to reduce unemployment and remain Europe’s biggest exporter despite the crisis.
Sarkozy also hopes to follow Germany’s lead and introduce a “golden rule” for French government budgets, which would oblige future governments to borrow only to invest and not in order to fund current spending.
However, contrasts between Germany and France are striking.
The German economy does show signs of slowing down — it shrank slightly in the fourth quarter of last year — but overall for the year it grew a healthy 3 percent, making it one of its best years since the country was reunited in 1990.
INSEE, the French national statistics office, says it expects France to fall into a brief recession, with the economy contracting 0.2 percent in the three months to last month and another 0.1 percent in the first quarter of this year.
German unemployment is at its lowest level in 20 years, at 7.1 percent, while in France the number of jobless — at nearly 3 million — is at a 12-year high, at 9.8 percent.
The French government -predicts that its public deficit — the shortfall between tax income and — for last year will be 97.2 billion euros (US$123 billion), or slightly lower than its target of 5.7 percent of GDP.
Germany managed to bring its public deficit down to just 1 percent last year, from 4.3 percent the year before.
Sarkozy’s “social summit” this week is a major plank in his bid to narrow the yawning gaps between the French and German economies.
A central measure to be discussed will be new rules that would allow firms to adjust to an economic downturn by cutting workers’ hours instead of laying them off. A major reason Germany has managed to keep unemployment low is the use of kurzarbeit (reduced working hours), a system that allows firms to reduce workers’ hours, with the government making up some of their lost pay.
Pierre Larrouturou, an author and political commentator, warns against blindly copying Germany’s methods. He said the German model has many positive aspects, but said that the labor reforms there might have made the country’s firms more competitive, but left most Germans with reduced spending power.
He pointed to a growing underclass of badly paid workers who have benefited little from Germany’s strong economy and said statistics that show that German real gross wages declined by 4 percent between 2000 and 2010.
“Competitivity is like cholesterol — there is good and bad, as [Nobel-winning economist Paul] Krugman said,” Larrouturou said.
“Training workers, inventing new products, getting up in the morning and conquering more market share, that’s all good, but lowering everybody’s salaries is very dangerous,” he said.
Sarkozy’s hopes of introducing kurzarbeit in France is likely to run into opposition from unions who are already objecting to any reform that might hit workers’ pockets further.
Standard & Poor’s downgrading of France’s top “AAA” credit rating has further complicated matters for Sarkozy because the agency left Germany’s top rating intact.
“Being downgraded along with Germany would not be a downgrade, just a shift in scale,” wrote Arnaud Leparmentier, a political journalist at Le Monde newspaper.
“But now Nicolas Sarkozy’s politics, which consist of presenting France as Germany’s alter ego, have collapsed,” he said.
Stephen Garrett, a 27-year-old graduate student, always thought he would study in China, but first the country’s restrictive COVID-19 policies made it nearly impossible and now he has other concerns. The cost is one deterrent, but Garrett is more worried about restrictions on academic freedom and the personal risk of being stranded in China. He is not alone. Only about 700 American students are studying at Chinese universities, down from a peak of nearly 25,000 a decade ago, while there are nearly 300,000 Chinese students at US schools. Some young Americans are discouraged from investing their time in China by what they see
MAJOR DROP: CEO Tim Cook, who is visiting Hanoi, pledged the firm was committed to Vietnam after its smartphone shipments declined 9.6% annually in the first quarter Apple Inc yesterday said it would increase spending on suppliers in Vietnam, a key production hub, as CEO Tim Cook arrived in the country for a two-day visit. The iPhone maker announced the news in a statement on its Web site, but gave no details of how much it would spend or where the money would go. Cook is expected to meet programmers, content creators and students during his visit, online newspaper VnExpress reported. The visit comes as US President Joe Biden’s administration seeks to ramp up Vietnam’s role in the global tech supply chain to reduce the US’ dependence on China. Images on
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
New apartments in Taiwan’s major cities are getting smaller, while old apartments are increasingly occupied by older people, many of whom live alone, government data showed. The phenomenon has to do with sharpening unaffordable property prices and an aging population, property brokers said. Apartments with one bedroom that are two years old or older have gained a noticeable presence in the nation’s six special municipalities as well as Hsinchu county and city in the past five years, Evertrust Rehouse Co (永慶房產集團) found, citing data from the government’s real-price transaction platform. In Taipei, apartments with one bedroom accounted for 19 percent of deals last