Pensions, education, employment: OECD urges France to relaunch reforms

Posted on November 18, 2021 at 11:45 amUpdated November 18, 2021 at 2:32 PM

France was able to react quickly and en masse to the Covid crisis. For the Organization for Economic Co-operation and Development (OECD), which publishes its report “France 2021” on Thursday, the challenge now for France will be to transform the upswing of activity into sustainable growth.

Five months before the presidential election, it is almost a roadmap for the next five years that the Paris-based international institution sets out in this study. “We share all the recommendations issued,” said Economy Minister Bruno Le Maire, who has been advocating for government action since 2017.

The axes are clearly defined: on the one hand, France must continue to support the activity. According to the OECD, the excess savings accumulated during the health crisis should support consumption next year, while external demand will boost exports and investment. But “the risks remain high,” he warns.

“Fast and efficient” implementation of France Relance and France 2030

Although it warns against a “premature” withdrawal of aid, the institution believes that budget support should be more selective. “We need to focus on the necessary transformations of the economy,” said OECD Secretary-General Mathias Cormann. According to him, the “rapid and effective” implementation of France Relance and France 2030 will be a “central element” in the search for recovery.

But at the same time, France must also relaunch its reform program, which began in 2017. This is even the condition for a “sustainable recovery” according to the OECD. Faced with the “historically high” level of indebtedness, he calls for an “ambitious program” to consolidate public finances.

Increases productivity

The institution is bringing water to the executive’s mill, again asking France to reform its pensions. While Emmanuel Macron now defends the principle that the French will have to “work longer by going beyond the legal age”, the OECD suggests gradually increasing the effective retirement age to 64 from 2025.

To reduce public spending, the organization supports the idea of ​​a multi-year spending rule for the entire public sector. Parliament just voted on it this Thursday. He also advocates better management of social spending as well as a simplification of the “local authorities” milfou that will allow for “substantial” savings.

In addition, the OECD recalls the importance of carrying out reforms that promote employment – in particular quality employment – and increase productivity. “The unemployment rate in France remains close to 8% among the highest in the eurozone,” recalls Mathias Cormann. France must continue its efforts to educate young children, better educate young people and the less skilled, and facilitate career transitions.

“More inclusive growth”

Everything must be done to “prevent the crisis from increasing inequalities of opportunity,” insists the Paris-based institution. That it calls for increased support for the most vulnerable territories and households to ensure “more inclusive” growth. Another issue worries him: the insufficient digital transformation of SMEs, a weak point of the economy during the pandemic that “hinders productivity gains.”

Finally, France must promote “greener growth”. Again, the message is that it must improve the efficiency of public investment, while ensuring that it helps the most vulnerable populations to bear the cost of this transition.

The OECD estimates that following its recommendations, France could gain 1.2% of GDP per capita over the next ten years.

The OECD raises its growth forecast for France to 6.8% in 2021

The OECD on Thursday raised its French growth forecast by around 6.8% this year from 6.3% earlier, welcoming “the strongest recovery since the summer.” The international institution expects growth of 4.2% in 2022, compared to 4% forecast so far. At this stage, the French government maintains its forecast of 6.25% in 2021 and 4% next year. “Three risks could weigh on growth,” warns Bruno Le Maire: the return of the pandemic, labor shortages and inflation “although we note that it is transitory.”

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