98 leaders, members of AFEP, the French association of private companies that includes most of the major French enterprises, have decided to issue a solemn appeal to the President of the Republic, urging him to free companies from numerous administrative, legislative, and of course, fiscal constraints.
“We, leaders of the largest private French companies, propose a pact to the government to revive growth and employment. It reflects our ambition for France and is designed in a spirit of dialogue. France is facing an unprecedented deficit in its trade balance, current payments, public finances, and social accounts. Our companies’ margins are historically low. Unemployment undermines social cohesion and excludes our youth. France must transform deeply. It is urgent to act now and collectively. We recommend a comprehensive response supported by simple and concrete measures.
Competitiveness: lower labor costs and make the state more economical
1) With public spending at a record 56% of GDP, we have reached the limit of what is bearable. The state must achieve savings of 60 billion euros (3 percentage points of GDP) over the next five years.
2) For companies, labor costs need to be reduced by at least 30 billion euros over two years by lowering social contributions that weigh on average wages (2 minimum wages and more). A transfer financed half by raising VAT from 19.6% to 21% (the European average) and the other half by reducing public spending.
3) A favorable and stable fiscal environment must be guaranteed for companies, notably by reducing corporate tax to match the levels of our European neighbors.
(Editor’s note) All political, economic, and social decision-makers, faced with the magnitude of the crisis and its consequences, call for “economic and social recovery” in their outlook and wish to implement the necessary policies to regain growth and employment and improve competitiveness.
However, in this case, wanting is not the same as being able… so what? Then, proposals, pressures, and actions multiply to ensure decisions go in the right direction, namely serving “particular” interests propagated as “general.”
The argument is central in the current economic context, it must be debated without ulterior motives and prejudices.
Statement from Robert Injey (PC)
They are 98 leaders who want to impose austerity measures on our society for the majority, in order to preserve and increase their dividends. Often hoarders on the Boards of Directors of CAC 40 companies, they have decided to launch a major offensive.
To achieve this, they have imposed their watchwords “competitiveness” and “reduction of labor costs” on the government.
But what exactly is it about?
What is the reality of competitiveness?
A/ They always use Germany as a pretext, but figures show a different reality (1). In euros, in 2008, according to the latest comprehensive data available (Eurostat-Insee), the hourly cost was €33.2 in the French industry versus €33.4 in the German industry.
In the automotive industry, Germany’s strong point, the hourly cost is 43.14 euros, while in France, the hourly cost is only 33.38 euros (“Labor Cost: European Comparison 1996-2008,” Bertrand Marc, Laurence Rioux)
B/Beyond the cost of social charges, what burdens the economy and the competitiveness of companies is the cost of capital.
Thus, INSEE’s National Accounts for 2010 indicate that for non-financial corporations (excluding banks and insurance), employer social contributions (social charges) amount to 145 billion euros.
C/At the same time, financial levies paid in interest to banks and dividends to shareholders amount to 308.8 billion euros, which is 2.13 times the amount of “social charges!”
It is not the “social charges” that suffocate companies but the financial charges of banks and shareholders’ dividends.
C/ Illustration of this reality, in 2011, CAC 40 groups achieved 74 billion euros in net profits, with 51% of these profits distributed as dividends. Another example, Sanofi, which recently destroyed 914 jobs, achieved a net profit of 5.7 billion euros last year (+4%) and distributed 44% as dividends to shareholders.
By breaking and precariousing employment, by limiting investments and research and training efforts in France and Europe, these large groups accumulated, in 2011, a cash position of 267 billion euros, equivalent to the entire net resources of the state!
The 98 leaders who signed the appeal have avoided talking about this reality.
by Robert Injey (PCF)
“A unilateral reduction in contributions would be economic nonsense”
We have no reason to be impressed or to submit to this diktat of AFEP (Association Française des Entreprises Privées) which seizes a real issue (competitiveness) to impose an economic and societal vision that is not in line with the general interest.
First, competitiveness concerns companies that are in global competition. Claiming a unilateral reduction of social contributions for all companies does not make sense. Restaurant owners, already favored by reduced VAT without clear counterparts, should not benefit from a reduction in their employer contributions in the name of competitiveness when they are not in international competition? Should we also lighten the burdens of certain large groups such as Total, which makes record profits and shields a large part from taxes? AFEP should not take us for fools…
Moreover, reducing competitiveness to only the issue of labor costs is a very concerning mistake on the part of major business leaders who should first and foremost worry about improving research and innovation, where we lag more behind our direct competitors than in labor costs. In the automotive industry, labor costs in France and Germany are comparable. Yet, German cars sell like hotcakes while our automotive groups are facing very serious difficulties. The main problem lies elsewhere and it is not the state that is responsible for the poor strategic choices made.
We are not opposed to accompanying the march towards better competitiveness of our industry, quite the opposite. If it is a solution, transferring part of the contributions can be discussed. But not by favoring a VAT increase that would penalize consumption and purchasing power. And it must be done in a targeted way to meet the goals of safeguarding and developing employment, certainly not in a one-sided manner as a vector of state withdrawal and an ultra-liberal societal project.
François Hollande has committed to a courageous policy of deficit reduction because it is about our sovereignty in the face of financial markets. An effort of 10 billion on state spending was made in the 2013 budget. But the massive and brutal reduction of public spending, as proposed by these 98 business leaders would be a misstep economically and a challenge to our social pact. Like in Great Britain, it would lead us straight to recession, which means more difficulties for our companies, increased debt, and sacrifices demanded of the French with the only prospect being to pay the debt interests. This is quite the opposite of our social project and it is not for this reason that the French elected François Hollande.
Xavier Garcia
Spokesperson of the Socialist Party of Alpes-Maritimes
