SARKOZY USHERS IN ROSIER VISION OF FRANCE

By John Thornhill in Paris
Published: June 1 2007 17:44 Last updated: June 1 2007 17:44
Just two weeks after taking over as France’s president, Nicolas Sarkozy is surfing an extraordinary wave of popularity and economic fortune that gives him every chance of sweeping this month’s parliamentary elections and implementing his reform programme.
An opinion poll in Les Echos newspaper on Friday showed that 62 per cent of respondents approved of his government’s economic proposals. A clear majority favoured a rapid implementation of Mr Sarkozy’s promises, including making mortgage interest payments tax deductible, forcing employees to provide minimum levels of public services during strikes, and capping an individual’s tax payments at 50 per cent of income.
Economic data released this week confirm that Mr Sarkozy has assumed power at a particularly benign time. Manufacturing output picked up in May and order books are strong, according to purchasing managers’ index data published on Friday. Consumer confidence also surged last month and the unemployment rate, which shot through 10 per cent two years ago, has now fallen back to 8.2 per cent.
Eric Chaney, Europe economist at Morgan Stanley, said it was traditional for incoming presidents to enjoy a political honeymoon, but Mr Sarkozy appeared to have transformed the mood of the country. “I take the consumer confidence indicators with a pinch of salt but there is really something new that makes me relatively positive about the process of reforms,” he said.
Françoise Fressoz, a political commentator for Les Echos newspaper, wrote that as if by magic the habitually gloomy country had assumed a far more rosy outlook following Mr Sarkozy’s election on May 6. “At all levels of society confidence is back. All that because a new man has entered the Elysée palace and promised his people that everything is possible. The miracle of Sarkomania!”
Mr Sarkozy, or “Speedy Sarko”, as he is often called, has rapidly formed a streamlined, cross-party government and opened talks with business and trade union leaders about loosening rigid labour laws. Opinion polls suggest his ruling UMP party will almost certainly retain its majority in parliament following two-round elections on June 10 and 17.
Mr Chaney said Mr Sarkozy’s tax-cutting proposals would unnecessarily boost France’s robust consumer spending in the short term and could later strain the public finances. “The economy does not need a stimulus, but there will be a fiscal stimulus,” he said.
More crucial labour market reforms, to be hammered out between the government and “social partners” before the year-end, would have a far slower economic impact. “The new labour laws will only have an incremental effect. For the stock of workers things will not change immediately. It is only for the flow – or turnover – of workers that things will change,” Mr Chaney said.
Morgan Stanley forecasts the French economy will expand by 1.9 per cent this year and 2.2 per cent in in 2008. But France is still likely to underperform within the eurozone.

source : www.ft.com