Hollande Has Unique Chance to Overhaul French Economy, OECD Says

President Francois Hollande has a “unique” opportunity to revamp the French economy in the remaining four years of his term, the Organization for Economic Cooperation and Development said as it cut its growth forecast.

Europe’s second-largest economy will expand just 0.1 percent this year after failing to grow in 2012, the Paris-based OECD said in a report on France. That compares with 0.3 percent growth predicted in November.

Hollande, whose five-year term runs until May 2017, is struggling to revive an economy ravaged by Europe’s debt crisis and a policy malaise symbolized by more than three decades of budget deficits. While lauding a relaxation of labor rules and a cut in payroll taxes, the OECD said Hollande must not flinch from further plans to trim spending and social benefits.

France faces serious long-term challenges,” the OECD said. “The political timetable offers a unique opportunity to put in place an ambitious reform strategy.”

The organization’s recommendations include changes to France’s pension and unemployment-benefits systems, both of which Hollande has promised to do in the coming months. Spending on pensions amounts for more than 12 percent of gross domestic product, the second-highest among the 34 OECD members after Italy. Spending on health care, amounting for more than 8 percent of GDP, can also be trimmed “without harming quality,” according to the report.

“The public debate on pensions promised for 2013 gives an opportunity to promote fresh reforms,” the OECD said. A revamp of jobless payouts -- such as a “staggered reduction in unemployment benefits” -- “would save costs and promote employment.”

Unemployment is already at a 13-year high of 10.6 percent and will probably continue climbing before peaking at 11.2 percent next year, the OECD said.

To contact the reporter on this story: Mark Deen in Paris at markdeen@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

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