PARIS, July 5: It looks like a bread line in Soviet Russia, but the queue snaking away from Paris’s Opera Garnier house on a Saturday night is full of tourists waiting for a different sort of scarce commodity: a taxi to bring them home.
Frustration with Paris’s taxi shortage – the city has fewer now than it did in 1920 – is just one symptom of competition-killing rules that limit access to dozens of professions and which the European Union says stunt the French economy.
But President Francois Hollande has yet to formulate any plans to break up cartel-like behaviour in professions ranging from taxi driver to notary to veterinarian, despite fresh calls from Brussels to cut red tape.
His reluctance to risk a fight with powerful interest groups shows the limits to his appetite for reform when many economists say more competition could give the faltering economy a boost.
“These are reforms that bear fruit straight away,” Barclays chief European economist Philippe Gudin said. “When you introduce competition, you have new players and so you create jobs and you reduce prices straight away.”
The European Commission is due in September to step up pressure on member states to deregulate under EU provisions on free movements of persons, services and capital, a European source said.
Despite pressure from markets and EU partners to reform, Greece and Italy have made little progress breaking open closed professions to competition in the face of entrenched interests.
But nowhere is resistance more dogged than in the eurozone’s second largest economy, where “competition” has negative overtones and previous attempts to liberalise have run aground.
“It’s not just that these are powerful lobbies with strong traditions of sticking together against threats – it’s the fact that France doesn’t necessarily think competition is good,” said Eric Le Boucher, a journalist at business daily Les Echos and co-author of a 2007 government-commissioned report which called for deregulation of professions.
France’s political class is almost devoid of free-market advocates, reflecting widespread statist and anti-liberal views. The EU’s so-called “Bolkestein” directive on services in 2006 met its fiercest resistance in France.
Scepticism has barely lessened. In a 2012 roadmap for reform by former EADS CEO Louis Gallois, he criticised the Commission’s “dominant” rhetoric on competition and, unlike in 2007, included zero recommendations on deregulation.
THE USUAL SUSPECTS
While Brussels has made deregulation a condition for granting France more time to cut its budget deficit, economists say it should be done for the economic gains.
Herve Boulhol, head of the France desk at the Organisation for Economic Co-operation and Development, said an ambitious reform of services broadly could yield 5 extra points of GDP over ten years, but could be costly in the short term.
Economist Gilbert Cette at the University of Aix-Marseille calculates that opening professional services alone would boost potential growth by as much as 0.2 percentage points annually.
Indeed, if telecommunications are a guide, breaking the state monopoly in the 1990s has led to a sharp drop in prices as well as thousands of new jobs.
But French government officials say it’s not a priority to reform the 150 or so regulated professions whose members guard access through exams, high buy-in costs and varying control over the number of license-holders.
While limited supply maintains prices and standards, it distorts the market: Paris’s 19,000 taxis cover the city easily on weekdays, but fall short on weekend nights when demand peaks. Deregulation could allow new entrants to satisfy that demand.
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