Focus on France Ian Sparks reports from Paris

EURO-REPORT

FOCUS ON... France

Ian Sparks reports from Paris on more set-backs for the president.

Francois Hollande may not be sorry to see the back of 2012 after a ‘triple whammy’ of setbacks that have blighted the end of his first six months as President of France.

Earlier this month, he was forced into an embarrassing U-turn by Britain’s richest man Lakshmi Mittal over the fate of two blast furnaces at ArcelorMittal’s steel plant at Florange, eastern France.

Mr Hollande’s industry minister Arnaud Montebourg told the Indian-born tycoon he was ‘not welcome in France’ over his company’s controversial decision to axe 630 jobs at the loss-making site.

When the president upped the stakes by threatening to nationalise the Florange plant in the event of job cuts, Mr Mittal called his bluff by casting doubt on the future of all its operations in France, where his company employs 20,000 people.

The government swiftly backed down and agreed Mr Mittal would be allowed to close down the two blast furnaces as long as he promised to find new jobs for the redundant workers – a deal which even the socialist government’s usually supportive unions branded ‘vague and flabby’.

The steelmaker also agreed to invest 180 million euros over five years in the further development of hot strip mill production at Florange – but it later emerged that the ‘strategic investment’ component would no more than 53 million euros, with the rest going on maintenance activities that Mr Mittal would have spent anyway.

The debacle, which almost cost the outspoken Mr Montebourg his job, came just a month after the head of MEDEF – the French equivalent of the UK’s Confederation of British Industry – had given Mr Hollande a ‘hurricane warning’ over his ‘disastrous policies’ that could cripple the French economy.

In an open letter to French newspapers, MEDEF boss Laurence Parisot said a proposed new hike in corporation tax from 34 per cent to 62.2 per cent – double the rate in Britain and Germany – could sound the death knell for thousands of businesses across France.

She said: “We’ve now moved from a storm warning to a hurricane warning and some business leaders are in a state of quasi-panic. The situation has become very serious indeed. The pace of bankruptcies has accelerated over the summer. Large foreign investors are shunning France altogether. It’s becoming really dramatic. Ten years ago, Germany was the poor man of Europe and if we don’t act now, that title will soon be ours.”

But the government has so far refused to climb down on the corporation tax rises, and is also pressing ahead with an even more unpopular plan to raise personal income tax to 75 per cent on all earnings over one million euros.

The policy has prompted an exodus of some of France’s richest people to overseas tax havens, and triggered a third – and personally embarrassing – setback for the president when Gerard Depardieu, the man he publicly declared to be his favourite film star, announced he was moving to Belgium to pay less tax.

When prime minister Jean-Marc Ayrault branded the 64-year-old actor’s decision to emigrate as ‘shabby and unpatriotic’, Mr Depardieu reacted by putting his 40 million-pound Paris home on the market and declaring he was a ‘free man’ and he would also be giving up his French passport.

Belgium’s foreign minister Didier Reynders then fuelled the fire even further by telling France ‘they only had themselves to blame’ for the flight of their wealthiest citizens.

He said: “There has been an evolution in the French tax system which may have had consequences. One must look at the reasons why citizens are leaving their own country, and even if these are tax reasons, they are all very welcome in Belgium.”

“We’ve now moved from a storm warning to a hurricane warning and some business leaders are in a state of quasi-panic. The situation has become very serious indeed.”

Another French cheese?

But amidst all the gloom, Mr Hollande had a glimmer of good news when bureaucrats in Brussels agreed French cheesemakers should from now on be allowed to make their own brand of Swiss Gruyere cheese – as long as it has holes ‘between the size of a pea and a cherry’.

Until now, only Switzerland has been allowed to use the name Gruyere as a ‘protected geographical indicator’. But the EU ruling came after years of campaigning by French dairy farmers to overturn the ban on making Gallic Gruyere, when the Swiss finally agreed in December that France should be allowed to make the cheese, but insisted it must have holes to distinguish from its own centuries-old variety, which does not.

It must also be clearly labelled as French Gruyere, and not have any markings on the packaging suggesting it is from Switzerland.

The French are also famous for being hugely protective over their most famous brand names, regularly taking legal action against other countries who use product names such as Champagne, Bordeaux wine and their own cheeses like Brie and Camembert.

Australian and New Zealand cheesemakers, as well as the American dairy industry, had all lodged objections to the recognition of French Gruyere as a distinct product, the EU said. n