French will get a clear choice on the economy

With French growth hovering around zero, the economy will be a key battleground in France's presidential vote next spring, and the fight looks likely to present voters with the clearest right-left choice in 25 years, economists and political analysts say. Ségolène Royal, who was officially confirmed as the Socialist candidate Sunday, and Interior Minister Nicolas Sarkozy, her presumed opponent from the center-right Union for a Popular Movement, are expected to offer radically different prescriptions for how to jump-start economic growth.

Both are seen as iconoclasts, and their advisers hint that neither will feel bound to the letter of their parties' platforms. Yet those platforms, carefully crafted with the aim of gaining maximum public support in the contest to succeed President Jacques Chirac, give an early indication of the direction French economic policy may take, depending on who moves into the Élysée Palace in May.

"This could be the first election campaign since 1981 that offers voters a clear left-right choice on economic policy," said Nicolas Baverez, an author and political commentator. If in other European countries, leftist parties have tended to align themselves with the center-right on key economic principles, in France the center-right has steadily drifted to the left along with public opinion. Chirac, a conservative, last year declared that free-market capitalism was just as dangerous an ideology as communism.

The economy is a particularly thorny matter for Sarkozy, an advocate of the free market who is presenting himself as offering voters a new alternative despite the fact that he has served as a government minister under Chirac nearly without interruption since 2002.

Sarkozy was interventionist during a brief stint as finance minister in 2004, and he appeared to soften his free-market stance further after a two-month student protest last spring. But his party surprised commentators earlier this month by unveiling a 10-point program that calls for some far-reaching economic reforms.

What jumps out most is a pledge by the Union for a Popular Movement to do away with France's two-tier system of work contracts and introduce a single contract with streamlined dismissal procedures. The aim is to end a split in the labor market between employees on generous open-ended work contracts that are costly to terminate and those on short-term contracts with little security.

The party also proposed abolishing the 35-hour workweek in all but name by offering to cut payroll taxes and social contributions on all extra time worked. The philosophy behind the program, says Emmanuelle Mignon, economic adviser at Sarkozy's party, is that you have to "work more to earn more."

The Socialists, in contrast, want to stimulate growth by increasing purchasing power. They propose raising France's monthly minimum wage to €1,500, or about $1,960, by 2012, an increase of about 20 percent from the current €1,245, and they say the state should guarantee a minimum pension level near the level of the minimum wage. Bolster buying power, the thinking goes, and people will energize growth by spending more, thus inciting companies to hire. The party also pledged to stimulate innovation by raising public spending on research.

As for the 35-hour week, which currently is not applied across the board, the Socialists want to abolish exemptions to give everyone access to the shorter hours - the opposite of what Sarkozy's camp is planning. They have also pledged to penalize companies that hire on short-term contracts, while rewarding those that do not. And they have vowed to renationalize Électricité de France.

Changes in the two approaches may be in store. Royal, who has quipped that the Socialist program is not Mao's "little red book," plans to travel across France for the next two months to listen to voters' ideas to "complete" those of her party. Sarkozy will not unveil his own program until the party chooses its candidate on Jan. 14.

Still, in a country where political boundaries have long been blurred by a broad consensus about the importance of the state, the different approaches on economic policy are striking. "Ségolène Royal is very broadly committed to the Socialist program, and it's very much on the left," said Gilles Savary, a close ally.

This is in Royal's political interest, commented Gilles Moëc, an economist at Bank of America, because she is already more conservative on certain lifestyle and law-and-order issues than previous Socialist leaders. Indeed, her declared aim of uniting the left beyond the Socialist Party makes a leftist stance on economics indispensable, he said.

Source: iht.com