France seeks to combat de-industrialisation with tax breaks

French minister Nicolas Sarkozy has announced
his plans to offer tax breaks in order to persuade companies to
stay in or return to France.

The French Finance Minister Nicolas Sarkozy has put forward
plans to dissuade companies to leave the country and to persuade
others to return, reports Les Echos. Companies based in
economically weak regions would benefit from business tax breaks of
up to 100,000 euros over three years, while returning companies
would additionally be incentivised by lower social costs. 

Politicians in France and other European countries have strongly
reacted to recent threats of companies to leave the EU, with the
German Chancellor Gerhard Schröder going as far as calling such
behaviour “unpatriotic”. In some cases, alternatives to
delocalisation were found, mostly by employees agreeing to work
longer hours for the same pay. 

The French initiative is the latest in a series of Sarkozy’s
efforts to get the French economy back on track and protect the
country’s industry. Critics have recently attacked him for his
“nationalistic” and “interventionist” approach during the debates
surrounding the financial aid granted by the French government to
bail out the struggling engineering giant Alstom (see  EURACTIV 28 June 2004). The Commission has further criticised
plans by the French and German governments to create ‘European
industrial champions’ (see EURACTIV 28 May 2004). 

There is widespread disagreement over the risk of
de-industrialisation in Europe. In April 2004, the Commission
adopted an analysis, saying that “there is no proof of a
generalised process of de-industrialisation”, but that Europe is
facing a general process of structural change at various levels.
Other economists argue that Europe’s future is not so much
threatened by de-industrialisation as by other aspects of
delocalisation, including the migration of R&D activities to
the US.