Activity has slowed in the past 18 months, following several years of strong employment and output growth. Although GDP increased by only 1.2 per cent in 2002, the labour market has resisted remarkably well. Employment has continued to rise and unemployment has edged up only marginally...

During the second half of the 1990s, the French economy grew strongly, outperforming the average for both the OECD and the euro area. Between 1997 and 2000 GDP grew faster than potential, reversing the output gap that had emerged in the first half of the decade. The recovery was sustained by strong domestic demand, itself supported by tax cuts, an investment boom connected to the stock market bubble, strong employment growth and, towards the end of the period, a relaxation of fiscal policy…

In order to raise standards of living and ensure the long-term viability of France’s social welfare system, labour utilisation rates need to be increased substantially and the rate of growth of productivity raised. As indicated in Chapter I and notwithstanding the strong employment growth of the past several years, France has among the lowest employment rates in the OECD (22nd out of 30 countries in 2001). While raising France’s employment rate to OECD average levels -- or even that of the best performers -- would not permanently raise the rate of growth of potential output, it would raise the long-term level of potential and, during the transition period, its rate of growth…

The past 50 years have seen the role of the public sector change dramatically in France. As the economy grew and society became richer, the public sphere took on increasing responsibility for providing services to the population. For the most part, responsibility for administering the delivery of these services has been delegated to the social partners and sub-national levels of government…