From 1997 until the first half of 2001, France has experienced a period of particularly sustained economic growth, thanks to the widespread confidence of national and international operators, the availability of financing for investments and the contained inflationary pressure. (see tab) In that period, households benefited from good purchasing power, the State was able to count on a large volume of tax collection (despite the lower tax burden), businesses recorded an increase in their profitability. The structural reforms carried out since the beginning of the nineties of the 201st century, with the aim of containing the increase in wages and promoting greater flexibility on the labor market, accompanied by a favorable economic situation, led to an increase in employment. The vigorous recovery in foreign trade, favored by the depreciation of the euro against the dollar and the yen, has strengthened the competitiveness of French products on world markets, contributing to the consolidation of positive current balances in the balance of payments. Starting from the second half of 2001 however, a deterioration in the country’s economic situation began to appear, mainly caused by the slowdown in the US economy and then the Japanese one. Unemployment therefore began to rise again, GDP suffered a setback and the external accounts recorded a drastic deterioration. This situation of uncertainty led to a rapid worsening of public finances, with the consequent formal recall by the European Commission in 2002.
As regards the economic policy adopted by France during the period 1999-2005, its main objectives were the growth of production until reaching the maximum potential, and the simultaneous reduction of unemployment. After having ensured a significant reduction in the public deficit during the 1990s, since 1999 the government authorities have favored the objective of containing the huge tax burden. The control of public spending has therefore become a central element of French macroeconomic policy, as a necessary tool to prevent inflationary pressures and ensure fiscal consolidation. In particular, central government real public spending was kept fixed for the period 2003-2006,and a process of fiscal decentralization has been initiated which has led to the attribution of greater responsibilities to the local authorities in relation to the management and control of funds for the implementation of the programs approved by the State. Greater transparency was also promoted in public finance management methods, in order to make the evaluation of the effectiveness of the economic policies implemented more immediate. Important structural reforms have been implemented to contain public spending flows. In a country marked by a progressive average aging of the population, the revision and simplification of the social security system have become a priority. Among the numerous changes introduced in this period, the main ones concerned the raising of the retirement age, in line with the increase in the life expectancy of the population, and the gradual elimination of inequalities in social security treatment between the public and private sectors. According to APARENTINGBLOG, the regulation on early retirement has also been revised. The health care reform was mainly aimed at containing costs. The measures adopted previously had in fact made possible limited savings, without however managing to permanently affect the habits of the French in terms of consumption of medicines and use of the health system. The government authorities have therefore intervened more rigorously since 2004, and the following year the call (both to the administrations and to the users of the service) to greater responsibility in the management of expenditure brought its first fruits. The privatization process initiated in the 1990s continued (especially following the establishment of the government of J.-P. Raffarin in 2002) with the sale of various public commercial enterprises. However, although sales of state shareholdings in over 2,000 companies had been recorded in the previous twenty years, at the turn of the millennium the French state remained a shareholder in about 1,500.companies. Aware of the very important role that some of these companies have in the production context, the government authorities have set up the Agence des participations de l’Etat (APE), which has been entrusted with the task of ensuring more effective management of public enterprises.
With regard to the labor market, moreover, the most significant intervention concerned the reduction from 39 to 35 hours per week of the legal duration of the working activity (i.e. the limit of duration beyond which the hours worked must be considered additional hours), implemented by the government of L. Jospin in 1998. The compulsory shift to 35 hours in the private sector (since 2000 for companies with more than 20 employees and since 2002for the others) it was accompanied by the provision of state support aimed at alleviating the effects on labor costs incurred by companies, and at the same time allowing workers to maintain the salary level prior to the reform. However, in 2005 the 35- hour law was profoundly modified by the Raffarin government, which introduced the possibility for workers to sign agreements with companies to work up to 13more hours. Other interventions on the labor market were aimed at containing structural unemployment; among them the reduction of social security contributions for low-wage workers, the introduction of new contractual forms, the simplification of administrative regulations. To promote integration into the world of work, apprenticeship and professional qualification contracts were offered to the less skilled workforce in exchange for a lower wage, while other interventions were discussed in 2006 by the government of D. de Villepin to decrease youth unemployment.
During the period in question, the government’s commitment continued, following the impetus of European directives, to encourage an increase in the level of competition in the internal market, with the aim of reducing prices and improving the quality of products and services. In the first years of the third millennium, the telecommunications, air transport and electricity sectors were gradually opened to new operators, but the traditional monopolistic position of the state in some sectors, such as railways, natural gas and postal services. Among the initiatives aimed at promoting the competitiveness of national companies, the one undertaken in 2003 stands outby the Raffarin government and aimed at reducing the administrative complexity of the regulatory framework and strengthening the incentives for innovation. In particular, the government has promoted the creation of industrial networks and research laboratories capable of identifying cutting-edge technologies that could be the subject of state aid. However, the hoped-for greater integration between companies and the state in research funding was not fully achieved, and public funding remained prevalent. The State has also renewed its commitment to ecologically sustainable growth, while denouncing difficulties in adopting a true strategy of environmental protection and operating mainly with targeted interventions, such as the adoption of measures regarding taxation in the oil sector.