François Hollande’s Rhine journey

IN NOVEMBER 2003, France and Germany teamed up to bust the euro’s stability-pact rules for budget deficits that they had agreed to six years earlier. For three years neither Jacques Chirac of France nor Gerhard Schröder of Germany respected the deficit cap of 3% of GDP. Neither suffered sanctions. But Germany used its fiscal space to become more competitive and loosen its labour market. France, which had just introduced the 35-hour working week, mainly made matters worse.

Now, under François Hollande, France is once more breaching the deficit rules and has, yet again, been given more time to bring its deficit below 3%. The unwritten deal is that this time it will make a proper stab at reform, especially of its labour market. France’s labour code, a fat red doorstop of a book, runs to 3,809 pages, 45% longer than ten years ago. The collective-bargaining agreement for hairdressers alone covers 196 pages. “The key challenge”, concludes a recent survey of France by the OECD, a Paris-based think-tank, “is to reform the labour market to promote job growth.” Yet is this likely?