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UNCLAS SECTION 01 OF 03 PARIS 000228 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON EIND EINV ETRD ELAB PGOV FR
SUBJECT: THE ATTALI REPORT: A NEW PATH TO REFORM AND GOVERNING 
 
 
NOT FOR INTERNET DISTRIBUTION 
 
Summary 
------- 
¶1. (SBU) President Sarkozy on January 23 pledged to enact -- with 
three exceptions -- recommendations for spurring economic growth 
devised by a commission headed by Jacques Attali, former political 
adviser to Socialist President Mitterrand.  These proposals range 
from boosting competition in the retail sector, to deregulating 
certain professions, developing the digital, biotech, and 
environmental technology sectors, creating a leaner state and 
building high-tech green cities.  The Attali Commission estimates 
the measures, if implemented as a package, could raise potential 
growth by one percentage point and reduce unemployment to 5 percent 
by 2012.  The Attali imprimatur on a series of mostly sensible 
reform proposals is not inconsequential, and consensus from this 
politically-disparate group provides a level of cover to further 
reform efforts.  But Attali's imperious style has rubbed politicians 
of all stripes the wrong way, and his "take-it-or-leave-it" approach 
to his commission's recommendations has fostered resentment within 
Parliament -- including in Sarkozy's UMP party -- for 
short-circuiting the political process.  PM Fillon convoked an 
intergovernmental seminar on February 1 to discuss implementation of 
the Attali measures and promised that action would be taken "in 
consultation with social partners, economic partners, and elected 
officials."  That, combined with opposition of vested interests - 
the taxi drivers have already been on strike twice - will at the 
very least slow Attali's ambitious timetable of implementation by 
¶2009.   End Summary. 
 
"What you propose I shall carry out"... 
------------------------------------- 
 
¶2.  (SBU) President Sarkozy appears invested in the economic reform 
recommendations of the Attali Commission, established last May to 
find ways to "unleash the economic growth that France is lacking." 
On January 23 Sarkozy presented his comments to Attali and 42 
members of a commission that included CEOS, economists, journalists 
and foreign luminaries, such as former EU Competition Commissioner 
Mario Monti.  Commissioners who were present tell us Sarkozy cast 
aside prepared remarks and spoke off the cuff for over an hour, 
indicating to them that the president had internalized much of the 
report's content. 
 
¶3. (SBU) Sarkozy vowed to carry out "the best part" of the 
Commission's proposals, centered on eight themes or "ambitions" 
ranging from educational reform to development of the digital, 
health, biotech, environment and services sectors (including a call 
for nation-wide ADSL coverage by 2016 and appointment of a High 
Commissioner for Digital Development, placed directly under the PM). 
 Among the more politically-challenging proposals are those that 
call for further labor market liberalization, including changes to 
union representation rules and a series of recommendations 
liberalizing product and service markets. 
 
Boosting Competition 
- - - - - - - - - - - 
 
¶4. (U) Attali pulled few punches in the introduction to his report, 
saying "rent-seeking is triumphant" in France, as evidenced by the 
country's "real estate fortunes, collusion among the privileged and 
in recruitment of the elite."  The commission's response is to boost 
competition and overhaul France's most heavily-regulated service 
sectors (including notaries, hair dressers, taxi drivers and 
pharmacists).  France has already had a taste of potential 
opposition to such measures.  Some 25,000 taxi drivers throughout 
France staged one-day protests on January 30 and February 5 against 
the Attali proposals to increase the number of taxis by issuing out 
free licenses to new cab drivers. 
 
¶5. (SBU) Largely absent from the report are recommendations 
targeting what Attali terms "collusion among the privileged."  For 
example, an Attali commission member told us a proposal to do away 
with France's "grand corps," the network of technocrats coming out 
of France's premier universities who continue to dominate key 
positions in government ministries and (still) business, had been 
mooted.  But Areva Chairman (and commission member) Anne 
Lauvergeon's vigorous defense of the institution had helped to shoot 
it down.  (Comment: Indeed, Figaro economic editorialist Yves de 
Kerdrel, also an Attali commission member, told us recently the 
current reform efforts -- and to some extent the Attali 
recommendations -- targeted important foundational change, but left 
untouched France's economic superstructure, which was in equal need 
of change. End comment.) 
 
¶6. (SBU) The Attali report also calls for reinforcing France's 
competitive environment by merging the Finance Ministry's 
Directorate for Consumer Affairs, Anti-Fraud and Competition 
(DGCCRF) into the independent Competition Council.  The latter would 
become France's sole authority on competition issues with its 
authority reinforced.  Competition Council President (and Attali 
commission member) Bruno Lasserre told us he believes the move would 
 
PARIS 00000228  002 OF 003 
 
 
send an important signal on the importance of open competition to 
boosting consumer welfare.  He noted, however, that Finance Minister 
Lagarde opposes the idea and intimated that follow-through would be 
difficult. 
 
¶7. (U) Improving the competitiveness of SMEs is a central theme of 
the Attali report.  One proposal calls for a one-stop shop business 
service for small and very small firms to facilitate adherence to 
administrative procedures and complicated legislative requirements. 
The report points out that going from 49 to 50 employees requires 
compliance with an additional 34 new laws and regulations.  The 
Attali Commission estimates the cost of such procedures at 4 percent 
of the average company's labor-related expenditures. 
 
Liberalizing the Labor Market 
- - - - - - - - - - - - - - - 
 
¶8. (U) The Attali report proposes a number of measures to liberalize 
France's labor market, some of which the Sarkozy government has 
already set in motion.  The report recommends the end of mandatory 
retirement at 65.  It also calls for new financing and 
representation rules that would end the monopoly currently enjoyed 
by France's five labor unions in negotiating national agreements on 
labor law and financing of the French healthcare system.  (Comment: 
Sarkozy has tasked business and the unions to negotiate an agreement 
on this issue by March 31.  End comment.)  In one of its more 
controversial measures the Attali commission proposes liberalizing 
immigration rules to encourage greater numbers of foreign workers. 
While Sarkozy was silent on the recommendation in his remarks, the 
president did highlight recommendations that encourage labor force 
participation, noting in particular that early retirement schemes 
were a thing of the past. 
 
¶9. (U) Training and contract reform are key elements of the 
Commission's report.  In his remarks on the report Sarkozy claimed 
victory for having encouraged unions and employers to negotiate an 
agreement on labor contracts (reached January 13) making it easier 
for employers to shed staff in return for higher severance pay and 
easier access to benefits in between jobs.  On training, the report 
calls for paid training and a variety of adult education 
initiatives, concluding that "(if) the appetite for risk is an 
irreplaceable motor (of the economy), protecting those who take risk 
is its condition." 
 
Reform of the State 
- - - - - - - - - - 
 
¶10. (SBU) The report makes a number of recommendations for reducing 
the size of the public sector, including doing away with redundant 
levels of regional government.  The Commission claims the moves 
would help to reduce French public debt to 55% of GDP by 2012 (from 
the current rate of 66%).  The commission proposes 10 new 
e-government programs (for hiring, payment of payroll taxes, etc) 
that, it says, would save the GOF some 15 billion euros per year 
(Comment: At nearly 40% of France's 2007 budget deficit, the figure 
strains credibility. End comment.)  Although we understand there was 
consensus on the importance of putting France's fiscal house in 
order, Commission members tell us the group could not agree on more 
specific measures for cutting expenditures.  Scrapping of the 
existing employment guarantee for civil servants was proposed, but 
Attali took it off the table at the last minute as politically 
untenable.  For his part, Sarkozy promised to continue reform of the 
State, pointing to the 23,000 civil servant jobs that he said would 
not be renewed this year. 
 
Sarkozy's Exceptions 
------------------- 
 
¶11.  (SBU) The intense fourth months of activity of the Attali 
Commission were carefully orchestrated by Attali himself and Elysee 
Chief of Staff, Claude Gueant.  A member of the Commission informed 
us that Attali and Gueant were in daily contact to ensure that only 
those proposals "politically acceptable" to Sarkozy would make it 
into the final report.  As a result members of the Commission 
self-censored certain proposals, particularly on tax issues. 
 
¶12.  (SBU) In part to add credibility to the process, three 
"unacceptable" proposals made it into the report.  Sarkozy rejected 
a recommendation to scrap the precautionary principle, which has 
been enshrined in the French Constitution since 2005.  He could not 
one day support sustainable development and the next do away with 
the precautionary principle, a symbol of "vigilance, transparency 
and responsibility." "I would not be understood or appear coherent." 
 
 
¶13.  (SBU) Sarkozy further discarded the idea of abolishing France's 
99 departments.  The French are simply "not ready," he said, and 
such a move was not essential to achieving greater growth.  Finally 
Sarkozy said he did not oppose the principle of deregulating 
France's pharmacies and limiting their current monopoly on 
prescription and over-the-counter medicines.  But as President he 
had to take into account the "public service rendered by pharmacies" 
 
PARIS 00000228  003 OF 003 
 
 
in small villages. 
 
Next Steps 
---------- 
 
¶14. (SBU) As suggested by the Attali Commission, the recommendations 
would have to be fully implemented by June 2009 to have an impact by 
¶2012.  A first bill on the modernization of the economy will be 
presented by Economy, Finance and Employment Minister Christine 
Lagarde in the spring.  The contents of the bill are not yet known, 
though it is likely to incorporate a number of the Attali report 
recommendations. 
 
¶15. (SBU) PM Fillon held an inter-ministerial seminar on February 1 
to strategize over the GOF's approach to implementing the Attali 
report recommendations.  His public remarks following the meeting 
were conciliatory, saying recommendations would be put in place only 
after consultations with relevant parties had taken place.  Each 
ministry would propose an "action plan" for implementing various 
aspects of the report, and joint working groups between the National 
Assembly and the government would be established to inform next 
steps.  For his part, President Sarkozy will host follow-up meetings 
of the Commission every three months, with the first on announced 
for March 29. 
 
Parliament hostile on form rather than content 
--------------------------------------------- - 
 
¶16. (SBU) Fillon's olive branch comes in response to opposition from 
French Parliamentarians of all parties, as much over form as over 
content.  The method of governing through Presidential-appointed 
Commissions has irked many Parliamentarians who believe their role 
as lawmakers has been diluted.  Attali's insistence that his 
recommendations be taken as a whole package, combined with his 
personal attacks against two eminent members of Parliament, did 
little to allay their concerns. 
 
Comment 
------- 
 
¶17. (SBU) The optimistic view of most observers here is that only 
half of the Attali recommendations will actually be implemented. 
Strained relations with parliament over the report do not help its 
prospects, and PM Fillon's focus on the consultative process could 
push more difficult recommendations well over the horizon.  Still, 
the report represents a remarkable set of recommendations coming 
from the former Mitterand advisor, and it provides a degree of 
political cover for reforming almost all areas of the economy. 
Despite considerable skepticism about the process, Sarkozy's 
intention to reconvene the group every three months indicates the 
commission's shelf-life will be longer than most. Nevertheless, with 
the economy softening and municipal elections around the corner, we 
expect the report's more controversial elements to take a back seat 
to populist tub-thumping in the near term. 
Stapleton