France Says Controversial Pension Reform Is Key to Woo Investors

(Bloomberg) -- President Emmanuel Macron’s government isn’t abandoning its controversial plan to reform the French pension system, hammering home the argument that it’s key to attracting foreign investors.

“We’ll keep working on the pension reform,” France’s Delegate Minister for Foreign Trade Franck Riester told Bloomberg News. “It shows we are committed to keep improving the business environment in France.”

Macron came to power in 2017 with a pledge to boost growth and employment by cutting bureaucracy and encouraging foreign investment. But the pandemic derailed his plans and forced him to halt some of his reforms -- including the one that triggered the strongest opposition on the streets, the overhaul of the pension system.

Opponents criticized the reform for being too vague and unfair, with some people losing benefits. Riester says foreign investors are keen for France to overhaul its social safety net, because the prospect of sounder public finances would improve the long-term outlook of the country.

On the campaign trail on Thursday, ahead of upcoming regional elections, Macron fueled long-running speculation about whether he would try to revive the plans, saying that “difficult” decisions were needed in the remaining year of his mandate. The president added that the overhaul, as he first envisioned it, was off the table.

One ministerial adviser said Macron needed to first tour the country to gauge public opinion before making a decision.

‘Whatever It Costs’

The French president has also wagered that the state’s “whatever it costs” strategy to support businesses and employees with public money through three national lockdowns would appeal to foreign companies and foster job creation. The bet has yet to pay off.

According to a new study by EY, on average, one foreign investment project creates 34 jobs in France, compared with 61 in the U.K. and 48 in Germany. About 8% of the French workforce is still unemployed, despite a drop in 2019.

Overall, around 1,000 foreign investment projects in France last year led to the creation of some 30,000 jobs, the EY study shows.

Fewer Projects

Yet the coronavirus pandemic has taken a toll on foreign investment comparable to the 2008 financial crisis, according to EY. The number of investment projects in France fell 18% last year, the research shows, compared with 12% in the U.K. and 4% in Germany.

Aeronautics, the auto industry and services -- key sectors of the French economy -- were particularly affected. Logistics and financial services held up.

Even so, the country remains the most attractive destination in Europe for foreign investors, ahead of the U.K. and Germany, according to EY. That’s largely because finance industry headquarters relocated to the country after Brexit and due to the government’s tax cuts for businesses and wealthy individuals, Riester said.

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