Hollande’s domestic affairs threatening to ruin domestic policy

HollandeA media ruckus over French President François Hollande’s private life risks overshadowing his overture to business leaders this week in a bid to jump-start France’s economy.

Mr. Hollande will hold a news conference Tuesday in what has been billed as a key moment in constructing a “responsibility pact” with companies. The proposal, which he first announced Dec. 31 and is expected to elaborate on Tuesday, aims to reward companies by cutting taxes on labor in exchange for more private-sector job creation.

French news media have since pored over Mr. Hollande’s proposal, debating whether the pact would mark a turning point in the French president’s five-year term or, at the least, an acceleration of pro-business policies to revive the country’s economy.

Business leaders have welcomed the move and said they were ready to negotiate with the government.

But allegations in a French weekly tabloid magazine last week that Mr. Hollande was in a relationship with a French actress may have blurred the focus on his economic policies. The hospitalization of Mr. Hollande’s girlfriend and France’s first lady, Valérie Trierweiler, due to apparent fatigue has fueled additional media buzz over Mr. Hollande’s private life in recent days.

“This puts a thorn in Mr. Hollande’s side at a time when he needs to communicate clearly on his objectives,” said Adélaïde Zulfikarpasic, head of opinion polling at LH2.

Ms. Trierweiler was admitted to a Paris hospital on Friday to rest and undergo tests, her office said Sunday. She is “in a state of great tiredness and fragility” and doctors haven’t yet decided when she will be discharged, said Patrice Biancone, Ms. Trierweiler’s chief of staff.

A spokeswoman for Mr. Hollande declined to comment, but the president on Friday said he “profoundly deplores these violations of private life.”

The French leader has relied on a combination of gradual changes to France’s vast state apparatus and its labor laws, combined with tax increases to plug holes in public finances. But the economy recorded zero growth in 2012 and is expected to have only expanded slightly in 2013. Meanwhile, unemployment has climbed to a 16-year high of near 11%, defying Mr. Hollande’s pledge to halt the increase by the end of 2013.

Public finances, as well as France’s global competitiveness, have suffered as a result of its economic woes, and it continues to run a high trade deficit compared to key European peers. The government says that the budget deficit won’t fall below 3% of gross domestic product until 2015, instead of 2013 as Mr. Hollande originally pledged, and that debt will rise to over 95% of GDP this year.

“The crisis turned out to be longer and deeper than we expected,” Mr. Hollande said in his New Year’s address.

Analysts see Mr. Hollande’s news conference as an opportunity to respond to such concerns about competitiveness.

“It is urgent France shows it is on track with a clear plan,” said Olivier Passet, an economist at French business consultancy Xerfi. “If not, there is a risk of creating a structural handicap.”

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