This chapter outlines the key challenges facing the French economy. Although a modest economic upturn seems to be established, low growth and, especially, high unemployment characterise recent economic performance. The government has taken numerous initiatives to encourage growth and employment, but many of these will at best have only short-term effects and the need to intensify structural reforms has to be recognised. Three key challenges are identified in this chapter: i) to ensure the medium-term sustainability of public finances while improving the structure of the tax system to improve incentives and reduce costs;...