PARIS (MNI) – Faced with a mounting wave of factory layoffs, the
French government is preparing measures to protect the country’s auto
industry and a strategy to reduce labor costs, President Francois
Hollande and Finance Minister Pierre Moscovici confirmed over the
weekend.

The plan of the French car maker PSA Peugeot Citroen to shut down
an assembly line north of Paris that would cost 8,000 jobs is
“unacceptable” and “must be renegotiated,” Hollande said in a televised
interview Saturday, demanding that the number of layoffs be reduced.

Criticizing PSA’s development strategies and the dividends it pays
to shareholders, Hollande said a state expert would look into the
group’s books to determine the “real situation” of its finances. He did
not promise to stop the shutdown, but demanded that “solutions” be found
for each employee and that new industries be implanted on the site.

The government will present a “structural plan” for the auto sector
on July 25 aimed at protecting domestic production that could include
incentives to purchase clean cars, notably by public authorities,
credits for car buyers and measures to bolster research and innovation,
Hollande indicated.

Acknowledging that high labor costs could be one reason for
France’s loss of industry jobs and market shares over the past decade,
Hollande argued for alternative resources to pay some of the social
programs now financed largely through payroll taxes, which add to
employer costs and reduce employee take-home.

“It’s not normal that the financing of our social projection, for
pensions, for families…should be only salaries,” he said.

The national Audit Court advised recently that supplementary
resources to shore up public finances should come primarily from a broad
tax such as the VAT or the CSG, which also covers investment revenues.
Hollande argued that the money should come from “those who have most.”
He rejected the strategy of previous government to shift part of social
payroll taxes to the VAT and said the CSG should not be the sole
alternative either, “because I don’t want only households to pay.”

Moscovici, in a radio interview, suggested that additional funding
for social outlays could come from environmental taxes or from
dissuasive levies (for example on alcohol or tobacco).

Hollande confirmed his opposition to anchoring a balanced-budget
objective – the “golden rule” – in the national constitution, preferring
instead an overriding (“organic”) law that would not necessarily be
permanent.

“I don’t consider that a commitment that is obligatory for a few
years should be written in stone,” he reasoned. “The constitution is not
for a few years – it’s forever.”

–Paris newsroom +331 4271 5540; email: ssandelius@marketnews.com

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