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France has 'unique window of opportunity' to reform: IMF
July 17, 2017 / 12:36 PM / in 3 months

France has 'unique window of opportunity' to reform: IMF

PARIS (Reuters) - France has a “unique window of opportunity” as growth picks up to tackle its weak public finances and high unemployment while reversing its decline in competitiveness, the International Monetary Fund said on Monday.

The International Monetary Fund logo is seen inside its headquarters at the end of the IMF/World Bank annual meetings in Washington, U.S., October 9, 2016. REUTERS/Yuri Gripas

The IMF said after its annual country review the new French government’s plans to focus on cutting spending was “appropriate” and also deemed its push to make its employment laws more flexible as “broad and ambitious”.

Meanwhile, President Emmanuel Macron’s plans to gradually cut corporate tax to 25 percent from 33.3 percent while setting a flat 30 percent tax on capital income would make France more competitive while boosting investment, IMF staff wrote in the conclusion of their review, known as an Article IV mission.

“With a strong political mandate and economic conditions improving - growth is on track to reach 1.5 percent this year and further accelerate next year - there is now a unique window of opportunity for such a bold and comprehensive economic reform package,” the IMF said in a statement.

The IMF had previously expected the economy would grow 1.4 percent this year and 1.6 percent next year. The French government is targeting growth this year of 1.6 percent and 1.7 percent in 2018.

Macron, a former investment banker who later served as economy minister, was elected as France’s youngest president ever in May running on a largely pro-business platform and promises to reform the economy.

A month later he won a commanding majority in parliamentary elections to help carry out his agenda.

However, an official audit in July found the public finances running billions over budget.

That left the government scrambling to come up with savings necessary to cut the public deficit to 3 percent of economic output and meet an EU cap for the first time in a decade.

The IMF said that would not only require major, across-the-board spending freezes this year but a further “exceptional effort by historical standards” again next year to hit the government’s deficit target of 2.7 percent.

Reporting by Leigh Thomas; Editing by Michel Rose and Andrew Callus

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