France's Chirac gives economic tips for the future

PARIS, Jan 4 (Reuters) President Jacques Chirac proposed a series of steps today aimed at making the French economy more competitive but they will only take effect if adopted by the new government after the April presidential election.

Chirac, who is not expected to run for a third term, said he wanted to give French people some advice for the future as they get ready to pick a new president.

''I want to tell you in what spirit and with which priorities France should go forward,'' he said in a New Year's speech to bosses and unions.

Chirac said France must face up to competition from fast-growing economies such as China and India by giving French companies the tools to compete.

He proposed cutting company taxes to 20 per cent from 33 per cent over the next five years -- a proposal that was welcomed by employers group MEDEF.

Companies complain that they are weighed down by taxes and social charges and strict labour rules that discourage them from taking on new employees.

Chirac acknowledged that employment rules were too complicated and too rigid.

''Our companies are not fighting on equal terms, notably those with fewer than 50 workers,'' he said.

''We need to give them the means to expand by offering them more flexibility.'' His government was forced into an embarrassing climbdown last year after trying to push a new flexible job contract for young people through parliament, riling the unions in a move which led to widespread protests.

During his time in office, Chirac also spearheaded a campaign of economic patriotism -- seen as an effort to protect French companies from foreign takeover bids.

But Chirac said it was important for France to respect the rules of a market economy and that takeovers could provide opportunities as well as new dangers.

Chirac urged reflection on a new social model for France.

In a shot in the direction of the opposition Socialist Party, he said increased competition should not encourage France to cling to old ideas.

''We must guard against ideologies and illusions like reducing working times as a solution against unemployment and raising taxes rather than making reforms,'' he said.

Socialist Party leader Francois Hollande has said his party would not be afraid of raising taxes and the Socialists were also behind the introduction of the 35-hour work week.

But Chirac also warned against making France nan ''all-liberal'' country, a warning to the right's frontrunner, Interior Minister Nicolas Sarkozy, who wants break with the past and has a reputation in France as a supporter of free-market economic ideas.

Reuters DKA VV1928