Today's Date:

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By turning their backs on the economic and social recipes of the past and reaffirming their desire to feel a sense of pride, the French people have opted to clearly address the challenges of the twenty-first century. I ask you to get across the message of this revival of national vitality everywhere in Europe and beyond. (…) Our message is clear and to the point: France is modernizing! She has embarked on this task with a new style of politics, clearer organization of her institutions and open government. She is doing so with values which recognize work, innovation and risk-taking, and with economic and social reforms designed to achieve growth and full employment. (…) After decades of hesitation, we want to adapt France to the new world situation and, in so doing, reconcile the world with France. Hence the programme of structural reforms the government has launched.

It is only four months since we took office. Already we have laid to rest many of the old clichés that France is static, fearful of change and protectionist.

Our nation is on the move. Taking action where world balance is at stake, where human rights and the strategic balance of power are at issue and where our economic and cultural presence is essential. We have chosen to go all-out to champion our interests and our assets.

ECONOMIC POLICY/35-HOUR WEEK/TAX

Your task is to relay a new policy designed, in particular, to make France a productive, competitive and investment-friendly country.

The Euro Area growth rate in the second quarter was 0.3 %: France did neither better nor worse than her neighbours, although the level of our investments and our foreign trade deficit are indicators which we must improve. The recent stock market turbulence which disrupted the American and European economies has had some repercussions, of course. But it has not fundamentally altered the spirit of our proactive strategy. On the contrary, it justifies it! Now more than ever, the quest for growth demands that we act even more tenaciously and adapt even more resolutely.

Thanks to the entry into force on 1 October of the Act on work, employment and purchasing power, we're going to be able hugely to increase the number of people working over 35 hours. The first message I ask you to pass on: France is no longer the country of the 35-hour week.

After years of rationing activity, a new culture is going to take over. A culture based on effort and reward for merit - the exemption of overtime from tax and social security charges. A culture based on tax incentives - the limit on all tax liabilities is reduced to 50% of a taxpayer's income.

A culture based on tax incentives to encourage investment in SMEs as well. The 75% rebate granted to wealth-tax payers on capital investments in SMEs will give a substantial boost to our economy. This tax benefit of up to €50,000 is expected to energize investment in our SMEs.

One of the big financial papers reported this week that income tax in France is now comparable to that of our European partners. That's the second message I ask you to convey to all foreign investors! We want to take this progress on the tax front further. A fundamental review of all our tax and social security contributions is currently under way.

As you all know, France suffers from a singular handicap in international competition: the small number of her medium-sized undertakings, only half as many as in Germany. It is a matter of competitiveness, of organizing activities by sector, and of encouraging an export culture. This is a challenge we are going to take up and you will have to play your full part in this because our trade deficit is not inevitable. I expect you to give unfailing support to our businesses: proactive lobbying in defence of their interests, not only with the governments [in your host States], but also with big private enterprises with orders to place; economic and financial intelligence; discovery of new talent under our new policy of economic immigration; and development of scientific cooperation, drawing on our competitiveness clusters with global potential and the innovative SMEs which comprise them. At all these levels you need to play an active role.

UNIVERSITY REFORM/R&D TAX CREDIT/JEIs/COMMUNITY PATENT

At the very heart of our challenge, intelligence, training, research and innovation are crucially important.

After 25 years of hesitation, university reform is finally under way. Autonomy will allow more efficient management and improved scientific achievement. Our universities will once again be able to rival the best in the world. In the international concert of nations, France must once again become the key place for knowledge and innovation. With almost €2 billion more at her disposal, the 2008 budget bill represents a substantial increase in our expenditure on higher education and research.

At the same time, private-sector research will also receive major support as a result of a radical reform of the crédit impôt recherche [R&D tax credit, the main mechanism for supporting private R&D].

The present unduly complex system will be replaced by a simple and well funded one: a 30% tax rebate on all investments in research. 100% of expenditure on research will thus be eligible under the new scheme. To encourage firms to join the scheme, the rate will be raised to 50% in the year of entry.

Ultimately, €2.7 billion a year will be allocated to firms engaging in research, thus tripling our financial commitment.

To encourage students and others engaged in research work in higher education establishments to set up companies, we are going to grant the status of jeune entreprise innovante [JEI - France's equivalent of the UK's "Young Innovative Company" (YIC)] to new university businesses.

Lastly, we have decided to ratify the London agreement. This will cut the cost of the European patent by reducing the cost of translations, and we shall support the revival of talks on a Community patent so as to have a single patent protecting industrial property throughout the European Union. At the same time, the tax system applicable to intellectual property will be simplified.

STRUCTURAL REFORMS

In short, we have already removed a number of major obstacles to growth by freeing up the labour market and recognizing the value of knowledge and innovation.

This is only a first step. The last quarter of 2007 and the whole of 2008 will be marked by structural reforms.

LABOUR MARKET

An Act on the modernization of our economy will remove the brakes impeding growth. President Sarkozy and I have decided to put Jacques Attali in charge of heading a new committee tasked with coming up with innovative ways to free up the labour market. It includes experts from every professional and political background, including foreign ones, such as Theodore Zeldin (…).

The rules governing our labour market will be reviewed. Our ambition is to introduce more fluidity, more flexibility, more security into changes in professional life. Unions and management are invited to produce ideas on genuine "French-style flexicurity". The committee is scheduled to deliver us its proposals by the end of the year. Amalgamation of the ANPE [national employment agency] and Unedic [an agency in charge of benefit allocation], changes in employment contracts, reforms of vocational training and employment of senior citizens: work has begun in all these areas and will be fleshed out in the next few months.

Our ultimate aim is ambitious: 5% unemployment by 2012! To meet it, we shall have to move into top gear to remove the restrictions still constricting employment and our level of activity.

GROWTH/GOVERNMENT DEFICIT/CIVIL SERVICE REFORM

For more than a decade, our country has been living with a level of growth below that of our main European partners. Neither Europe nor globalization is to blame for this; the fault lies primarily with us!

To achieve the extra percentage point of growth we are seeking, we'll have to tackle two of our main problems.

First, the chronic government deficit, quite simply the sign of poor management of "the house of France". We have launched a general review of government policies. It will be followed by an in-depth reform of the State, with a reduction in the number of civil servants being only one of the parameters. The objective is to rationalize the structures, develop responsibility and evaluation, and reduce the number of civil servants, who will have to be better paid and encouraged to work additional hours if they so wish.

A modern, reactive State is one whose ability to invest isn't crushed by the cost of its operation and repayment of the debt: this is a vital necessity for French growth!

The 2008 budget will signal our fierce determination to keep government expenditure down. We shall stick to this in line with our commitments. Restoring our finances to an even keel is not an adjustable variable in economic policy, it is the key to the break with the economy of the past.

This is why reducing our deficit is one of our priorities. We are urged to do it to honour our European commitments but, first and foremost, the national interest demands it.

SOCIAL SECURITY

Then there is the nagging question of the social security deficit. France is and will always be a nation of solidarity. This is the society she has chosen! But the choice is a demanding one. You can't have health for all, guaranteed pensions for everyone, without a shared effort.

Small minimum payments made by all patients towards the cost of any treatment or medicine, the establishment of a fifth branch of the social welfare system to deal with all matters relating to dependency [elderly and disabled people] and introduction of regional health agencies: work on all these measures will start in the next few months.

As for the changes to our pension schemes - marked by an increase in the contribution period from 40 to 41 years and the reform of the special schemes [for specific categories of employees] - these are inescapable. And let no one be in any doubt about my determination to carry them through. In short, France's renewal is in full spate. She is modernizing and your task is to deliver the message loud and clear. She is modernizing for her own sake but also, a fortiori, in order to be heard and respected beyond her borders. And primarily in Europe.

EUROPE/ENVIRONMENT/"ENVIRONNEMENT GRENELLE"/FRENCH EU PRESIDENCY

Ever since he took office, President Sarkozy has put Europe at the centre of his priorities, and France at the centre of Europe.

Member States had been waiting for France to return to the heart of the EU. And she is back! We have broken the institutional deadlock, but much still remains to be done.

Europe needs to pursue a goal. It needs to be more convincing on the essential issues and less pernickety on the secondary ones. It needs to transcend its status as an organization to attain the more enlightening one of a civilization project. Yes, Europe must be a civilization. A civilization of progress and humanism. A civilization of cooperation whose influence has to enrich and organize the whole of the Mediterranean basin, as President Sarkozy has called for.

France will hold the EU presidency in 2008. Strategic decisions will have to be taken on energy and combating climate change. This will be one of the major issues for our presidency. This autumn's "Grenelle Environnement" (The "Grenelle Environnement" is a conference bringing together the government, local authorities, trade unions, business and voluntary sectors to draw up a plan of action of 15 to 20 concrete measures to tackle the environmental issue. The name "Grenelle" comes from the first conference bringing all these players together which took place in May 1968 in the Rue de Grenelle) will set our national ambitions in this area. And in Bali, in December, we shall have to persuade our American allies and the major emerging countries to go along with an ambitious approach to prepare for post-Kyoto.

EU POLICIES REVIEW

The great debate on the review of European policies and their funding will also be on the agenda. This must provide an opportunity to look at the real benefits and cost of every policy. It's not taboo to recognize that the EU's policies have not been examined in depth for a long time. We must set about this task courageously.

IMMIGRATION

Other issues will be tackled during the French presidency, including immigration. A common approach is absolutely necessary. It must be consistent with our own policy of targeted immigration, with emphasis on the importance of the links between Europe and Africa.

GLOBALIZATION/TRADE/WTO/COUNTERFEITING

The European Union is destined to be one of the players, not a spectator, in the globalized economy. Surrounded as we are by empires, we can't afford to be passive or naive!

The first aim of the European Union's trade policy must be to bring concrete benefits to European businesses. In the WTO negotiations on investment and access to public procurement for SMEs, we have asked the Commission to ensure strict reciprocity in the concessions granted.

We will no longer accept a situation where Bombardier supplies railway equipment for the Ile-de-France region while Alstom cannot submit a bid for the Montreal metro. We will no longer agree to American, Canadian or Japanese SMEs having a special right of access to public procurement when French businesses are refused this right in those same countries. I have also decided to raise again in the G8 the French idea of an "international group of experts against counterfeiting". The bill on counterfeiting to be debated in Parliament this autumn signals our determination to protect our businesses more effectively, notably by improving the civil procedure for asserting their rights.

Nor must we be passive or naive about access to the new markets. France's economic presence here is below its potential. China, India, Russia, Brazil, Mexico and South Africa: all these countries are open to us provided that we develop our relations with them. President Sarkozy and I have decided to visit all these countries.

We intend to involve them more in the management of world affairs and, in return, get them to respect both social and environmental common rules.

DEVELOPMENT AID

Nor can we be passive or naive about development aid. France has obligations in this area and will not shirk them. But we must stop adopting an exclusively quantitative approach and concentrate instead on sectoral and geographical priorities. The broad outlines of our development aid policy will be defined at tomorrow's select Council of Ministers' meeting and at a forthcoming meeting of the Interministerial Committee on International Cooperation and Development.

DEFENCE/WHITE PAPER

Lastly, we can't be passive or naive about security. We must develop our military capabilities in the fields of force projection and deterrence. On President Sarkozy's authority, a new White Paper on defence and national security will be published at the beginning of March. It will be followed by a new Military Estimates Act. The resulting choices will be contingent on our commitment to the European Security and Defence Policy, the dangers threatening us, the terrorist challenge, and our strategic needs, including equitable and secure access to commodities and energy.

As a backdrop, there's the arms industry. In a rapidly expanding market, our arms exports are facing increasingly diversified competition. France must not allow her positions to deteriorate. During the next few weeks, I shall set up a new body: the Interministerial Committee for Support to Security Exports [CIEDES - Commission interministérielle pour le soutien aux exportations de sécurité]. It will set our geographical and sectoral priorities in order to define a genuine strategy in this area.

(…)

Our government has a results culture! I am setting you the task of changing the image of our country's economic and social policy. I ask you to convey the message from our country's research scientists and entrepreneurs. Now, more than ever, your mission calls for total commitment commensurate with the high responsibilities France has entrusted to you./.