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'House on Fire': Business Leaders Slam France’s Hollande

France's President Francois Hollande has an ever growing in-tray
Bertrand Langlois | AFP | Getty Images
France's President Francois Hollande has an ever growing in-tray

One was a letter; the other was a tweet. Both will cause a blistering headache for the year-old presidency of François Hollande.

"The house is on fire. France is destroying 8,000 jobs a day," read the letter in Les Echos, signed by chief executives of firms such as Peugeot Citroën, EADS, and Sanofi. It attacked the policies of the Socialist president, which they said are stifling economic progress with high taxes and over regulation.

The tweet read: "This is not my political comeback. When I return to the podium it will be to speak to the French people about France." While Nicolas Sarkozy's first tweet since May last year denied any political movements, his decision to emerge into the public spotlight comes at an opportune moment, as Hollande's government comes under increasing pressure from the business community to change his ways.

(Read More: Moscovici to France's Businesses: Stop French-Bashing)

The letter from leading figures in the French business community follows a weekend which saw Pierre-Andrede Chalendar, the chief executive of Saint-Gobain (a leading manufacturing company), accuse Hollande of pursuing "zigzag" policies.

Those remarks prompted French finance minister, Pierre Moscovici, to call on the business community to be "conscious that we need to reform this country; that the government is at work to do so; and that we need some national unity in order to build a stronger France".

He then attacked the business community: "I'm against any kind of French-bashing," he said. "I really fight that. I also think that we need to respect each other."

(Read More: France's Hollande: The Euro Zone Crisis Is Over)

In the letter in Les Echos, the business leaders urged Hollande to focus on a rolling back of state spending before elections threaten his ability to push through major measures.

Hollande's socalist government presides over an economy which slipped back into recession in the first quarter of 2013. The president, who was elected last May, is treading a thin line between attempting to placate businesses keen on lower taxes and a public that is increasingly tired of budget cuts.

Since Hollande's election, unemployment in France has increased steadily to 10.8 percent in the first quarter of 2013, according to the French statistics agency INSEE, up from 10.2 percent in the second quarter of 2012.

(Read More: France Faces 'Devastating Scandal' as Economy Stalls)

Sarkozy used a speech to his opposition UMP party, which is in dire financial straits, to attack the present economic situation. "We're the only country that is afraid of progress," he said in the speech on Monday. This mirrored comments made by the business community, which cited the United States and Ireland as countries making clear improvements since the 2008 financialcrisis.

Sarkozy was calling for donations to prop up his battered party after France's highest legal body ruled that the UMP had overshot its spending limits during his 2012 election campaign and needed to repay 11 million euros ($14.5 million) in state subsidies.

(Read More: French Consumer Confidence at All-Time Low, Outlook Bleak)

David Lea, senior Europe analyst at Control Risks, says the French President is being hounded on all sides of the political spectrum.

"Hollande is feeling it from all sides at the moment," Lea said, "with his Left complaining that he isn't doing enough to stimulate job creation and that he's marginalizing their representatives in the broad church that is the Parti Socialiste; the Greens furious with him for not ruling out shale or scaling down nuclear; while the Right say his spending policies are dangerous."

Philippe Waechter of Natixis Asset Management launched a defense of the Hollande government on CNBC Europe's"Squawk Box," arguing that the administration was making progress and that too many were impatient with the pace of reforms.

"We are changing in France though," he said. "We have had a reform on the labor market in January this year and we will have reform in retirement scheme. So you know, things are changing not as fast as people can expect but things are changing and that's very important."

For Lea, the 2017 election is along way off and the Sarkozy message should not cause too much distress to the Hollande presidency.

"I think Sarkozy's return shows the parlous state the UMP is in, more than anything else," he said."In the short term, it's a good political move for them to invoke a bit of nostalgia while Hollande's on the rack. In any case, I think Hollande would rather take his chances against Sarkozy than against someone new."

Indeed, perhaps all the back-and-forth arguments between the business community and Hollande's government, as well as between the Socialists and the UMP, will play into the hands of another political player: Marine Le Pen and the Front National (FN).

"Any attacks on the government help Le Pen and the FN in their stance of radical opposition," said Jim Shields, professor of French Politics and Modern History at Aston University. "And the more this Socialist government proclaims itself business-friendly, the more it opens itself to the charge of being just like the conservative right – i.e. not interested in protecting the people, the workers, the unemployed, the 'invisible masses; to whom Marine Le Pen is now addressing her appeal."

Lea also noted that the decline in Hollande's popularity was a cause for concern: "A drop in a president's popularity after a year is not that unusual – but the extent of Hollande's drop is. The French electorate can give up on a president quite quickly (look at Sarkozy), so he needs to show some results soon."

—By CNBC's Kiran Moodley: Follow him on Twitter @kirancmoodley

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