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Hollande unveils measures to pep up stagnant French economy

President Francois Hollande on Wednesday (Aug 20) vowed to go "faster and further" with reforms as he seeks to bolster France's economy that has ground to a halt.

PARIS: President Francois Hollande on Wednesday (Aug 20) vowed to go "faster and further" with reforms as he seeks to bolster France's economy that 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 (S$66.4 billion) in exchange for a pledge by companies to create 500,000 jobs over three years. Hollande plans to finance this with 50 billion 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.

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 percent. Paris also said its deficit would be "around four percent" of gross domestic product this year, an upwards revision from the 3.8 percent forecast previously. European Union rules state that countries should not have a public deficit above three percent of GDP.