FACTBOX-Political risks to watch in France
PARIS, Jan 2 (Reuters) - President Francois Hollande's pledge to turn around France's stalled economy this year will be under scrutiny as growth stays feeble, unemployment continues to rise and employers and unions struggle to agree how to make hiring more flexible.
Hollande's fiscal credibility among foreign partners is at stake as he battles to meet a deficit-cutting goal, and signs are growing that France could seek to negotiate more time to meet a European Union deficit ceiling of 3 percent of GDP.
Hollande will also aim to reverse a blow to his political standing after the Constitutional Council rejected his plan for a 75 percent upper tax band on millionaires, days before it was due to go into force.
The seven-month-old government also faces a growing security risk as Islamist rebels tighten their grip on northern Mali and a rebel uprising spreads in Central African Republic, both former French colonies.
ECONOMY
Hollande has pledged to turn around the economy by end-2014, a hard task with unemployment above 10 percent after 19 consecutive months of rises in jobless claims, and economic growth likely to be well below his 0.8 percent target in 2013.
National statistics agency INSEE has trimmed its reading of a long-awaited return to growth in the third quarter 2012 to 0.1 percent from 0.2 percent, reducing the likelihood of a strong rebound in the short term.
What to watch:
- Macroeconomic data releases
PUBLIC FINANCES
The International Monetary Fund has added its voice to those that doubt France can meet its 2013 public deficit-cutting target and ratings agency Fitch, the only one to still rate France as triple-A, has warned there is no room for slippage.
While the striking down of Hollande's 75 percent upper tax rate will not have a significant impact on tax revenues next year, signs are growing that Paris may try to negotiate more time to bring its deficit below a EU 3 percent of GDP ceiling.
What to watch:
- Any move by France to seek flexibility on its deficit goal
LABOUR REFORM TALKS
Unions and employers are under pressure to resolve their differences and strike a deal in January to introduce more flexibility to labour contracts, after missing an end-year deadline set by Hollande.
With foreign investors keen to see France loosen rigid labour laws that weigh on job creation, Hollande has pledged to legislate in 2013 even without the backing of unions and bosses.
What to watch:
- Whether a labour deal can be reached swiftly
IMPLODING OPPOSITION
Fierce infighting among the opposition conservatives over the UMP party's leadership is providing political relief for Hollande as his ratings plumb new lows due to the economy and unemployment.
The two rivals for the UMP's leadership have agreed to hold a fresh poll of party supporters late in 2013, leaving the main opposition party rudderless and in a policy vacuum that should work to Hollande's advantage, especially if flagging growth forces him to impose more spending cuts.
What to watch:
- Whether the UMP can hold together or will split apart
MIDEAST AND AFRICA
The French government is concerned the failure to resolve the crisis in Mali, where Islamist rebels control a swathe of the north, is raising the risk of attacks from al Qaeda's North Africa arm against France. Paris is wary of pushing for speedier action while it has hostages in the country.
Separately, France has sent troop reinforcements to safeguard French nationals in another former colony, Central African Republic, where a rebel uprising is taking root. It has ruled out intervening to defend the government, however.
What to watch:
- Signs of deterioration in Mali's security situation
- Any change in France's position on the CAR crisis
(Compiled by Catherine Bremer)