The Sarkozy Plan: Wrong Formula for Growth

Nicolas Sarkozy, the president of France, might have the best of intentions when it comes to business and the economy. But his ideas leave much to be desired.

Sarkozy wants to improve the competitiveness of French businesses and the nation's economy by providing some relief on payroll charges paid by business to fund various social benefits programs. The UK's Guardian News reported: "He hopes the changes will boost job creation and discourage French industry from moving abroad. ‘We have to re-ignite growth,' Sarkozy said. ‘We have to catch up in Europe and in the world. Our market share is declining. If we continue to burden our companies with charges that aren't theirs to pay, how can we compete?'"

The Associated Press also reported: "Sarkozy said French labor costs have risen 20 percent between 2000 and 2009, compared to 7 percent in Germany. He said the relative cost to employers for a worker who earns a gross monthly salary of euro2,500 ($3,200) was twice as high in France than in Germany."

Reducing such costs obviously would be a big plus for France's competitiveness. So far, so good.

Unfortunately, at the same time, Sarkozy is proposing assorted increases in taxes and misguided spending programs...

Read the rest of this SBE Council Cybercolumn by chief economist Ray Keating here.