French CEOs: So, we’re kinda’ drowning over here…

posted at 3:46 pm on November 14, 2012 by Erika Johnsen

Last spring, despite the many and deep fiscal woes of multiple eurozone countries, France went ahead and decided to just keep skipping merrily in their wide and calamitous wake by electing a whole swath of certifiable Socialists to their national government. Unsurprisingly, French President Francois Hollande proceeded to do what socialists do best: I believe the fashionable term these days is “raise revenue,” and I don’t mean the sort that happens naturally after enacting measures that encourage competitiveness and economic growth. I mean the other one.

The incoming results are even less surprising. Via Bloomberg Businessweek:

Over the past few weeks, an extraordinary cry of alarm has risen from chief executives who warn that the French economy has gone dangerously off track. In an interview to be published on Nov. 15 in the magazine l’Express, Chief Executive Officer Henri de Castries of financial-services group Axa (CS:FP) warns that France is rapidly losing ground, not only against Germany but against nearly all its European neighbors. “There’s a strong risk that in 2013 and 2014, we will fall behind economies such as Spain, Italy, and Britain,” de Castries says.

On Nov. 5, veteran corporate chieftain Louis Gallois released a government-commissioned report calling for “shock treatment” to restore French competitiveness. And on Oct. 28, a group of 98 CEOs published an open letter to Hollande that said public-sector spending, which at 56 percent of gross domestic product is the highest in Europe, “is no longer supportable.” The letter was signed by the CEOs of virtually every major French company. …

The problems they’re complaining about aren’t new. Heavy taxes and social charges required to support high government spending have eroded corporate profitability. In the l’Express interview, de Castries says that on average, the government charges incurred by his company for each employee are more than double the employee’s take-home pay. French labor costs are the second-highest in Europe, after Belgium, as companies are burdened with rigid and devilishly complicated work rules. No surprise, then, that operating margins at French companies have shrunk almost 40 percent over the past decade…

The French economy has been stuck at zero percent growth for months, while unemployment has climbed to above 10 percent — and all signs point to an oncoming recession. Hollande gave himself two years to turn the French economy around, and if this is the direction he’s taking it, I can’t say I’m placing much hope in his pledge. It’s a universal truth (though unfortunately not one that’s universally acknowledged) that expanding taxes and an expanding welfare state do not a robust, innovative, and job-creating economy make.

And then… there’s this. The cherry on top. The government can’t get their stuff together, and so they punish Nutella? …I can’t even talk about this.

First the French government went after the rich. Now it has it in for Nutella.

Despite an outcry in support of the beloved chocolate and hazelnut spread, the Senate passed a measure Wednesday that would triple the tax on palm and some other vegetable oils in the hope of cutting down on obesity.

The “Nutella tax” would affect any foods made with those oils and bring in about €40 million ($51 million).


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