Hollande rejects shock action for economy

30 Oct 2012, 8:35 am   -   Source: AAP
French President Francois Hollande has rejected a two-year shock plan to boost the economy. (AAP)

French President Francois Hollande has rejected a two-year shock plan to boost the economy. (AAP)

The French president has rejected a demand by business leaders for a two-year shock plan to boost competitiveness.

French President Francois Hollande, caught in a storm over ways to heal the battered economy, has rejected a demand by business leaders for a two-year shock plan to boost competitiveness.

The Socialist leader, who also held talks in Paris with the heads of leading global economic institutions, including the World Bank, has pledged a five-year action plan to revive the French industry.

Vowing decisions "that will be taken in November in all the spheres of competitiveness", Hollande spoke of a "pact" in which all players had to do their bit.

"All the indicators show that we are not in the best of situations," Hollande said after meeting World Bank chief Jim Yong Kim, the International Monetary Fund's Christine Lagarde, World Trade Organization (WTO) head Pascal Lamy, International Labour Organization Secretary General Guy Ryder and the OECD's Angel Gurria in Paris on Monday.

"France is now facing triple challenges," he said, referring to steep debt, poor growth and high manufacturing costs.

He also called for more market regulation, saying what the world needed now were "mechanisms, regulation and action".

The WTO's Lamy, who is also French, said there was a "link between growth, competitiveness and jobs", adding: "This is the main problem for France ... and for Europe now."

The heads of 98 of the biggest French groups on Sunday pleaded the case for a 30-billion-euro ($A38 billion) cut in welfare charges paid by French employers over two years, and massive cuts in public spending.

"With a record public spending of 56 per cent of gross domestic product, we have reached the limit of what is tolerable," said the Afep, which represents more than 90 of France's top companies, in an open letter to the president.

Their onslaught against increases in taxes and charges comes in the midst of growing national controversy of ways to make lagging French industry, with factory closures announced almost every week, competitive in international trade.

But two leading ministers immediately rejected such radical action.

Hollande, on the ropes in opinion polls and under attack for perceived muddle in the government, is grappling with pre-election pledges to create jobs and spur growth while applying austerity to plug a 37 billion euro hole in public finances.

The business leaders have called on the French government to slash public spending by 60 billion euros - or 3.0 per cent of gross domestic product - over five years.

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