PARIS: President Francois Hollande on Wednesday vowed to go “faster and further” with reforms as he seeks to bolster France’s economy, which has ground to a halt.

In an interview with Le Monde daily, Hollande promised to stick with the key plank of his economic policy — the Responsibility Pact — in the face of criticism across the political spectrum.

The Responsibility Pact offers businesses tax breaks of some 40 billion euros ($55bn) in exchange for a pledge by companies to create 500,000 jobs over three years.

Hollande plans to finance this with 50bn euros in spending cuts.

“I have set out a way forward. That is the Responsibility Pact,” Hollande said.

“The aim is clear: to modernise our economy by improving competitiveness and supporting investment and jobs. The fact that the economy is today slower in Europe and in France does not mean that we should give up on this,” he said. “On the contrary, we need to go faster and further.”

He added that any “zig-zag” would “make our policy incomprehensible and would not produce results”.

Hollande said his Economy Minister Arnaud Montebourg would soon present “draft legislation on purchasing power, which aims to boost competition for services offered to consumers”. The president did not provide detailed measures but said they would include an attempt to simplify construction permits and reform restrictive laws on Sunday shopping.

On fiscal policy, Hollande said the government would “simplify and make fairer the income tax levels for the ... low-income taxpayers. “Earlier this month, France’s constitutional court slapped down a key plank of the Responsibility Pact that would reduce social charges for low-income employees, dashing hopes of sparking consumption by putting more money in workers’ pockets.

On Wednesday, the deeply unpopular Hollande held his first cabinet meeting since the end of the long summer holiday in France, with his government under severe pressure, particularly in terms of economic growth.

Euro ‘overvalued’

The French national statistics office said last week that the economy had stagnated in the first six months of the year, forcing the government to halve its forecast for growth this year to 0.5 per cent.

Paris also said its deficit would be “around 4pc” of gross domestic product this year, an upwards revision from the 3.8pc forecast previously.

European Union rules state that countries should not have a public deficit above 3pc of GDP, but Hollande said that the regulations should be relaxed given the slow growth in most European countries.

“I believe the pace of budgetary consolidation in Europe should be adapted to the exceptional situation in which we find ourselves, which is a situation of low growth and very low inflation.”

German Chancellor Angela Merkel has insisted there is no reason to change the bloc’s deficit rules, leading many to predict a Franco-German clash at a forthcoming summit at the end of the month.

But Hollande insisted: “I’m not putting myself in a position of confrontation with Germany. It’s a European debate. “

“I have not asked for the rules to be changed, but for them to be applied with the flexibility inserted into the treaty to allow for exceptional circumstances.”

The EU rulebook offers a certain flexibility if a member state is afflicted by a “severe economic downturn. “Like many French officials before him, Hollande complained that the euro was “overvalued”.

“It has appreciated in an exaggerated fashion considering the economic situation in Europe. The ECB (European Central Bank) is aware of this. A rebalancing of the level compared to the dollar in is in progress. It hasn’t finished yet.”

Published in Dawn, August 21st, 2014