French President Francois Hollande is in Rome for talk with Italy’s Enrico Letta. Both have a lot on their minds.
The French economy contracted in the third quarter and Hollande faces a blanket of criticism over his timid economic reforms (although he has pushed through some labour and pension changes).
The French government announced yesterday an overhaul of a complex tax system, hoping it will douse a public backlash against high taxes (which have been favoured over spending cuts so far) which has led to back-pedalling on several plans this year. It will not lower the overall tax burden but is promising a fairer system to be enshrined in the 2015 budget. Whether that does anything to revive its rock-bottom popularity rating remains to be seen. Detail is scant so far.
Several of the big institutional investors featured at the Reuters Investment Summit this week have been distinctly gloomy about France.
Letta seems finally to have seen off Silvio Berlusconi after the media mogul’s party split and half of it pledged to continue supporting the coalition government. But there is still plenty of disagreement about the 2014 budget, let alone the deeper structural reforms that Italy’s economy needs to lift it out of a decade-long malaise.