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ECONOMY

‘Disastrous’ economy claim riles Hollande

French president François Hollande has taken umbrage after the leading voice of France’s business community described the country’s economy as “disastrous” this week and called for an end to the flagship 35-hour week and 75 percent tax rate.

'Disastrous' economy claim riles Hollande
French business leader Pierre Gattaz's glare at the French president tells a story. Photo: Philippe Wojazer/AFP

Hollande has made efforts in recent months to appease France’s business leaders, so he clearly did not appreciate the attack by Pierre Gattaz leader of bosses union MEDEF this week.

In an interview with right leaning newspaper Le Figaro Gattaz, who has been an outspoken critic of the socialist government, described the “disastrous” state of the French economy.

“There’s no more investment or recruitment. What I see most among business leaders is a feeling of mistrust as they play a waiting-game. The economic situation is catastropohic,” Gattaz added.

The leader of Medef also called for Hollande to take symbolic measures like dropping the 75 percent tax and the France’s flagship 35-hour week.

Hollande was clearly aggrieved by the broadside from someone, who many on the left have accused him of pandering to, as he attempts to cut employment and the drag the economy of its feet.

The president’s much heralded Responsibility Pact, which will cut weighty payroll charges for companies by €30 billion in return for a recruitment drive was in response to concerns raised by the likes of Gattaz.

As Le Monde newspaper points out the Medef leader has been an outspoken supporter of the pact, which could partly explain Hollande’s angry reaction this week.

“It’s not the first time he has made these kind of declarations,” the president told journalists this week. “You’d like to ask what exactly is he trying to achieve?

“If you signed the Responsibility Pact, it’s because you believe it’s heading in the right direction. If you say it will have no effect on France, how are you going to give confidence back to French businesses,” Hollande said.

“His language is a problem and it has to change,” said Hollande who warned Gattaz that his outbursts could have economic consequences for France.

Gattaz has said that Medef will present a dozen new measures this summer to boost employment in France. He may have damaged his chances of Hollande and his  government taking notice of them however.

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ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

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