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  Assessment and recommendations
  Like other industrialised countries, France is facing the deepest economic recession of the post-war period. After the severe contraction recorded in the last quarter of 2008, activity seems to have slowed further in early 2009. Yet with financial-market turbulence a persistent threat and the risk of an even larger shrinkage in world trade, there is great uncertainty as to the timing and strength of the recovery. In any case, the decline in economic activity is likely to be very significant, even if less pronounced than elsewhere, with some likelihood of a gradual easing of the recession over the course of the year, supported by budgetary stimulus and interest-rate reductions in France and abroad. The resulting job losses are set to drive the unemployment rate steadily higher throughout the year; at the same time, the inflation rate will probably approach zero.
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  Coping with recession and preserving fiscal sustainability
  The financial crisis did not spare the French economy, which is facing a deep recession in 2009, even if the situation is less severe than elsewhere. After a clear drop in the fourth quarter of 2008, economic activity will most likely continue to contract throughout this year. Both the timing and the strength of recovery remain uncertain, primarily because of the risks surrounding the balance sheets of financial institutions. While French banks have been weakened by the crisis, they are not as shaky as their counterparts in many other countries. Moreover, the risk that the real estate market correction now underway will accentuate the decline in economic activity is attenuated to some extent by the low rate of household indebtedness and the weakness of the wealth effect on consumption. The crisis will leave public finances in poor shape, and once the recovery begins, a priority will be to phase out the general government budget deficit. Given the already very heavy burden of taxes and compulsory contributions, public finance consolidation will require strict control over expenditures. This chapter reviews the latest macroeconomic developments, including those on the fiscal policy front, and discusses priorities for restoring health to public finances.
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  Progress in labour market and other reforms
  The authorities have undertaken numerous structural reforms since the last OECD Economic Survey was published in June 2007. Many of those reforms go in the direction of the recommendations offered at that time, while other reforms conducive to social dialogue have also been put in place. This chapter reviews the progress that has been made in improving the functioning of the labour market, addressing the problem of demographic ageing and making the education system more effective. These efforts will have to be pursued and the momentum of reform maintained, pressing ahead even further in some fields while perhaps changing course in others. The greatest challenge is to raise the employment rate in order to restore the health of public finances and sustain rising living standards.
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  The challenge of restoring French competitiveness
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  Strengthening competition to boost efficiency and employment
  Despite the great progress France has made in opening its markets for goods and services, and in strengthening the overall framework for competition, there are still regulatory barriers to entry in many sectors, particularly in retail trade and various professional services. This chapter traces the most significant changes that have been made in competition policy in recent years, and looks at the main challenges. In terms of the competition framework, an important step was taken with the creation of a new Competition Authority, which now exercises substantial powers that were previously in the hands of the Ministry of the Economy. In the retail trade sector, the amendments to the Economic Modernisation Act have moved further along the path of reform that began some years ago, without lifting the prohibition on resale below cost (RBC), but easing the conditions of negotiation between suppliers and retailers. While these changes should help lessen upward pressure on prices, particularly for "brand name" products, it would be necessary to repeal the Royer-Raffarin laws on commercial zoning to encourage the development of large retail outlets while ensuring greater competition in the many areas where largescale retailers are concentrated. Moreover, there are relatively high regulatory barriers to entry in many professional services, including legal services and healthcare. OECD indicators show that the restrictive nature of regulation in certain professions varies greatly from country to country and suggest that French entry barriers and restrictions on practice in many cases exceed what is necessary for adequate consumer protection. In the case of telecommunications, one of the main challenges for government is to promote broader access to high-speed Internet service through prompt deployment of a fibre optics network, while at the same time trying to repeat the successful development of ADSL in terms of competition and investment. Finally, the emergence of real competition in the retail market for gas and electricity is constrained by several obstacles, the most important of which is the presence of regulated prices along with market prices. 
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