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Macro-Economic Policies - Essay Example

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The controversial face off between Segolene Royal and Nicolas Sarkozky in France's upcoming elections elicits memories of the economic issues and difficulties the country confronts. For one, the country's economic stability is dependent on the government's macro-economic policies, and expectations on the candidates are very high…
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Macro-Economic Policies
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Download file to see previous pages At the heart of this conflict is not only the politics of Royal and Sarkozky, or the pitting of ideals of the Socialists against the Rightists, but also the more crucial macroeconomic issues the country face, the extent of the government's efforts to provide solutions to these quandaries and the future political and economic stability of the country. It is therefore, crucial to understand the major macroeconomic issues which plague France as a nation and evaluate the actions and the success the government has taken in order to achieve economic stability.
One of the key issues, which challenge the nation in recent decades, is the high rate of unemployment. The French government in the past has taken diverse approach and initiatives to spur growth and employment. However, the approach was not feasible to provide solutions to the problem of rising unemployment rate (OECD, 2007). The OECD has encouraged the French government to bring forward measures that could advance structural changes in the economy. The organisation has identified three main problems the government need to recognise: a) guarantee medium-term financial viability and develop the tax system structure to augment benefits and minimize expenditure, b) raise employment rate among low-skilled workers and focus on particular groups through the restructuring of the labour market institution, c) improve the possibility of growth and jobs creation through further economic reforms which in turn encourage competition (OECD 2007). In addition, the current French policy and procedures for the firing of workers especially permanent labourers are more intricate compared to the dismissal of temporary workers. If a firm wants to dismiss a permanent worker, it has to provide legal justifications which are too rigorous to follow. Thus, redundant workers become a burden and liability of the company as the firms themselves are obliged to help dismissed workers find employment (OECD 2007). This hinders the majority of companies in France to provide permanent contracts to their employees, adversely affecting the job prospects of the youth and the unskilled. In the recent years, the government has come up with a solution by introducing a special contract called the "Contrats Nouvelles Embauches" which gives companies - those which do not have more than 20 workers - the flexibility to terminate the contract in the span of two years. However, the contract requires firms to disburse high severance payments (OECD 2007).
Another economic dilemma France struggle to hurdle is the public sector deficit. Although the government has been successful in curbing deficit in the past couple of years, France is not ready for the long-term effects of indiscreet expenditures on health and pension resulting from the ageing of the population. Hence, despite the significant reforms the government has already achieved, OECD recommends that the ratio of public debt to GDP be reduced. GDP or Gross Domestic Products refers to the value of all the goods and services produced within a state or a country in a particular period of time. This is also the sum of consumption, investments as well as other various elements such as government's expenditure and export/output. France's GDP gap widened over the year as compared to government expenditure but GDP growth has becoming stronger over the years moving from 1 percent a year from the year 2000 to about 2 percent ...Download file to see next pagesRead More
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