France Inc. Backs Fillon Pledges for Labor Reform, Tax Cuts

The 62-year-old conservative defeated rival Alain Juppe on Sunday in the second-round run off to become the Republican party candidate for the 2017 presidential election. With incumbent Socialist President Francois Hollande attaining near-record lows in opinion surveys, and the party in disarray, polls suggest Fillon is likely to face and defeat Marine Le Pen, leader of the anti-immigrant, anti-euro National Front, in the final round of the election in May, Bloomberg reported.

A career politician, Fillon was prime minister for five years under former President Nicolas Sarkozy as well as having been minister four times in three previous governments. A fan of Margaret Thatcher, he is offering voters a program of economic reforms that include lowering labor costs, doing away with a wealth tax and 40 billion euros ($42 billion) in tax cuts for companies over five years. These include lowering France’s corporate tax rate to 25 percent, compared with 34.4 percent currently and rates of 30.2 percent in Germany and 20 percent in the U.K.
"François Fillon has made some very strong promises" that move in the right direction, said Pierre de Lauzun, who heads the Amafi organization representing French financial market participants, whose 138 members include JP Morgan Securities and BNP Paribas Securities Services. Fillon’s plan is more “energetic, courageous and far-reaching” than that of his rivals, he said.

In a country where growth and employment lag European averages, potentially the most contentious aspect of Fillon’s plan is to scrap France’s 35-hour work week, which critics say hinders the ability of manufacturers to compete in the global market. The biggest employers’ group Medef has long lobbied for its abolition as a way to entice more investment and job creation, as well as making French workers more competitive.

“His program is very realistic, serious, for the business community,” Pierre Gattaz, the head of Medef, said in an interview Monday with Bloomberg Radio in Paris. Now he needs to convince voters, and especially organized labor, and “we’ll help him explain that to the unions.”

During a televised debate on Thursday, Fillon said the law has “done a lot of damage” and must come to an end.

Work Longer

“In some companies, skilled workers are rare and it’s a pity to see people leave after 35 hours when they could have worked longer,” said Francois Asselin, head of the French business lobby for small and medium-sized companies known as CGPME. “When business is dynamic and the outlook is good, yes, we would like to be able to work longer.’’

One sector looking to Fillon for answers is the country’s highly-competitive telecom industry, in which four mobile operators have engaged in cut-throat price wars for the past five years. As minister in charge of telecommunications in the 1990s, Fillon laid the groundwork for the privatization of former monopoly France Telecom, which is now called Orange SA. As prime minister a decade later, he worked toward a further opening of the mobile market in 2012 by allowing Iliad SA to have a license.

Corporate Leaders

Telecom operators want a framework to encourage investment, ensure fair taxation and regulation for all operators and many of Fillon’s proposals show he is aware of these issues, said Michel Combot, managing director of the French telecommunications industry association called the Federation Francaise des Telecoms.

Some prominent French corporate leaders have gravitated around Fillon. Former Axa SA Chief Executive Officer Henri de Castries accompanied Fillon on a New York fund-raising trip this year, while Total SA Chief Executive Officer Patrick Pouyanne was Fillon’s chief of staff when he was information, technology and space minister in 1995 and 1996. Pouyanne didn’t respond to requests for comment.

Not all of Fillon’s policies are being applauded by business representatives. He is proposing to cut around half a million civil servant jobs as well as raise France’s value-added tax by 2 percentage points to 22 percent . These measures could weigh on the French consumption, according to Pierre Boucheny, head of French Equity Research for Kepler Cheuvreux.

Fillon has said he plans to loosen labor laws to make it easier for French companies to hire and fire workers. He has also promised to lower employer contributions. These measures would benefit firms working in France, especially in construction, infrastructure and IT services, according to analysts including Frederic Jamet, head of investment at State Street Global Advisors France. Private companies could also benefit from Fillon’s plan for 12 billion euros in extra spending over fives years on defense, justice and the police.

“We don’t want excessive measures, but something simple, clear and lasting,” said Jean-Francois Buet, chairman of France’s largest residential property-broker federation known as FNAIM.