France's president, François Hollande , sought to shrug off his business-bashing reputation on Tuesday with a€20bn-a-year (£16bn) package of tax credits and other pro-industry measures.
The prime minister, Jean-Marc Ayrault, surprisedmany by announcing that the government would accept much of the recommendations of a reportby Louis Gallois, the former EADS boss, on making the French economy more competitive.
"France is not condemned tothe spiral of decline. But we need a jolt at a national levelto regain control of our destiny," Ayrault said. "This is about giving our companies room to manoeuvre."
Firms will be offered tax credits worth up to €10bn next year, rising to €20bn by2015, to be financed by an increase in VAT and €10bn in public spending cuts, as yet unspecified. That was lessthan the €30bn-a-year cut inpayroll taxes that Gallois demanded, but far more than many analysts expected. The rebates will be proportionate to the size of a company's payroll, up toa maximum of two-and-a-half times the minimum wage, in an attempt to support jobs.
Amid rising concern about France's global competitiveness, Hollande is keen to show that despite implementing a 75% top rateof income tax on the super-rich, he is on the side of business. Fabrice Montagne, of Barclays, said the announcement would"improve sentiment vis-a-vis the government's economic policy, which will be welcomed by the president as approval rates are at significantly low levels".
The International Monetary Fund said in its annual report on the French economy, published on Monday, that without radical reform France could slip behind Spain and Italy, which have been hobbled by lack of competitiveness against the mighty German economy.
