France is divided over whether measures to foster a new spirit of enterprise are a success, writes RUADHAN Mac CORMAICParis Correspondent
FLORA AMANOU could be a poster girl for the idea of modern France that Nicolas Sarkozy came to power promising to nurture and advance. Confident, hard-working and ambitious, the 26-year-old Parisian talks passionately about her job at a major PR firm in the capital, but it’s her sideline that really excites her.
About 18 months ago, Amanou took advantage of a French government scheme aimed at making it easier for people to start their own businesses and set up her own communications company specialising in public affairs.
Mining the contacts she has built up through her involvement in the youth branch of Sarkozy’s ruling UMP party – she was attracted by its thinking on “work, social values and responsibility” – Amanou has already built up a small portfolio of clients, mostly local election candidates or young politicians.
Between the two jobs, she works seven days a week and catches up on her own project in the evenings. The plan is to turn to it full-time when the business has grown. “I don’t take many holidays, but in this business I only need to have a laptop and a mobile phone,” she remarks.
Amanou points to the auto-entrepreneur scheme, launched by the French government in January 2009, as an example of the quiet successes of Sarkozy’s economic reforms. The scheme was put in place to cut through the notorious red tape required to start a business and significantly lightens the heavy taxes and social charges companies pay.
“It was completely impossible [before],” says Amanou. “People who wanted to do something like that had to do it illegally, without declaring their revenue. Now it’s very simple – you can apply in five minutes on the internet . . . It’s totally free, and what’s helpful when you’re young and just starting out is that the bureaucratic aspect is light and simple.”
Since it was introduced, some 500,000 new businesses have been registered under the auto-entrepreneur scheme, which is open to people who already have a job, the unemployed and retired people who want to try out a business idea. Most are one-person enterprises – if business starts booming and the owner wants to expand, he has to register under the normal labour regime – so the project’s success is unlikely to make a big impact on France’s high unemployment.
But, according to Didier Barbet, a veteran of several IT start-ups who runs an association for auto-entrepreneurs, its most important effect may be psychological. In 2007, Sarkozy spoke of the need for a “cultural revolution” in French attitudes to business, and Barbet feels he may have succeeded in at least one sense.
“It’s a huge success,” he says of the scheme. “It’s a revolution for the French, who used to think that entrepreneurialism wasn’t for them. In France there was a real separation between the “thuggish” boss and the employees, whom the world seemed to think were only interested in striking.” Official figures show that about 40 per cent of auto-entrepreneurs are women, the average age is just over 40 and 20 per cent of owners wish to set up a proper company in the future. He believes mentalities are changing in France towards business, not least because of Sarkozy’s success in explaining his reforms to the public. “It’s a real political revolt – not by being out on the streets and going on strike but by creating activity, showing the positive, showing people’s savoir faire.”
With a presidential election less than two years away, the economic reform legacy of a head of state who swept to power promising rupture and renewal is set to become one of the most fiercely-contested topics in French politics. Supporters such as Amanou say Sarkozy’s domestic reform agenda has largely been fulfilled, if perhaps overshadowed by the global crisis.
A “modernisation of the economy” law introduced by finance minister Christine Lagarde cut red tape for businesses and made it easier to set up a hotel or supermarket. Companies are now allowed to negotiate tax-free overtime with staff to get round the 35-hour week. French ports – traditionally a trade union stronghold – have been reformed, while the government has tabled a draft law to raise the retirement age to 62 from 60. Thanks to a two-sided strategy that consisted of going out of his way to court selected trade union leaders while initiating many reforms at once, supporters say, Sarkozy has outmanoeuvred interest groups and so far avoided the traditional spectacle of a French government backing down to pressure from the streets.
The Invest in France Agency, a public-private body, says post-2007 reforms have made France significantly more attractive to inward investment. These include the elimination of certain taxes and the reduction of others, more flexible labour law, support for innovation and price deregulisation in sectors such as energy.
But as Anne Marie Ronayne, an Irish woman who is managing partner of the Paris-based Terra Connecta, a recruitment specialist, points out, Sarkozy’s reforms have been greeted indifferently by a public more preoccupied with recession. “There’s high unemployment, people feel they’re making less money, the cost of living seems to be going up,” she remarks. Ronayne has seen some positive changes in recent years. She believes French companies have become “much more international”, while the recent management shake-ups at some of France’s biggest companies – the upper echelons of which were until now reserved for graduates of the elite grandes écoles – may help French business “look at leadership in a different way”.
But notwithstanding recent reforms, she says, France is still “a very expensive country to have a company in”. “You pay very high social charges for your employees, you pay very high corporate tax . . . So you’re being taxed at all angles, even if there is a certain relaxation on the 35 hours.” Moreover, there is far from universal agreement on the value of Sarkozy’s reforms. The Institut Thomas More, a centre-right think-tank that has been monitoring 490 campaign promises and 732 measures announced since his election, last May rated the president’s progress at just 10.5 out of 20. Although it found that the government had started work on implementing some 77 per cent of Sarkozy’s promised reforms, only 40 per cent of them had actually been completed, and then often in a watered-down version of the initial pledge.
In Sarkozy’s Failed Reforms, a book he co-wrote last year, the economist André Zylberberg argued that in some of the most important areas, notably in the labour market, reform has either not happened or measures introduced have achieved the very opposite of what was intended. On the relaxation of the 35-hour week, he believes little has changed. “Nothing was done, in fact. The legal working time in France is still 35 hours,” says Zylberberg, who is director of research at France’s National Centre for Scientific Research (CNRS).
As a device to get round the 35 hours, the government has exempted a worker’s supplementary hours from taxes and social charges. But according to Zylberberg, a report carried out in 2006 showed that between 35 and 40 per cent of supplementary hours were not being declared because it was such a complicated process at the time.
“Since the moment in 2007 when the law made it attractive to declare supplementary hours, all these supplementary hours that were in a sense ‘grey’ were now declared,” he says. “But it didn’t make any difference to overall activity. We could see it. They were declared, and we saw very clearly a jump in additional hours by 30 or 40 per cent. But with what result? No rise in activity, because this work was already being done. But a huge loss for the public finances, since these wages were no longer taxable.”
As another small “but completely emblematic” example, he points to a plan to do away with an SNCF travel card for large families which ended with those families actually receiving more benefits. And whereas Sarkozy’s supporters say his decision to launch several big reforms together succeeded in smothering the opposition, Zylberberg believes the opposite is true. “It didn’t work,” he says flatly. “Because on every important project, the big lobby groups with something to lose from these reforms were very well organised and knew perfectly well how to go about not conceding.”
“In the end, he preferred to strike a deal. He said: we’ll find a symbolic measure for the media so we can say we have reformed this, and we’ll leave it there.”
