"There's a maturation that is happening in French society, even if we still have leaders who can't admit it," said Gerard Dussillol of the pro-market Thomas More Institute.
But the French themselves have their limits, especially when it comes to taxes. According to recent surveys, six in 10 French think the cost of labor is hurting the economy, but fewer than three in 10 think the burdens should shift to workers.
"When you take a paystub in France and one in Germany, and you see it costs 25 percent more in France than in Germany, you don't need a study" to know which country will come out ahead, said Dussillol. Meanwhile, Hollande and others fret about France's eroding share of global GDP, which has been cut in half to about 2 percent since 1990.
The heads of major French companies came together to demand that the government lower their labor costs by a total of €30 billion over two years. On Monday, Moscovici said that wouldn't happen, explaining that the government could neither risk raising taxes on already struggling consumers nor abandon its plan to reduce the deficit.
Economists are doubtful about real labor reform under a Socialist government, saying they expect the competitiveness report from Gallois, due Nov. 5, to fall into the same dust-gathering category as 40 other studies compiled over the past decade.
"The rest of the world continues to finance the French economy," said Jean-Christophe Caffet, an economist for Natixis.
Markets are starting to take notice.
Standard and Poor's downgraded France's largest bank BNP Paribas on Thursday and lowered expectations for 10 others, citing high unemployment, lower domestic growth and the European recession.
"We've been in this kind of infernal machine for a long time," said Dussillol. "Certain economic systems are stable for years and then suddenly it falls apart."
Sylvie Corbet in Paris contributed to this report.
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