Sanofi cuts fewer jobs after Paris pressure Sanofi, the pharmaceutical group, became the latest French company called to order by the socialist government on Tuesday when it yielded to strong political pressure to limit a planned redundancy programme. The company, which originally planned to cut 2,500 jobs in France as it reorders its research functions, reduced the total to 900 voluntary departures when confronted by the government's rearguard action against rising unemployment. "A company that is earning money cannot behave like a company in trouble," declared Arnaud Montebourg, the industry minister. After meeting the chief executive, whom I saw again last night, I explained that the lay-off plan was abusive and needed to be reduced. The pressure on Sanofi followed similar moves by Mr Montebourg on a range of companies planning big redundancies, including PSA Peugeot Citroën and Air France. But the overall impact on job losses of Mr Montebourg's tireless firefighting may not amount to much in the face of a tide of unemployment that is the clearest indicator of the acute economic challenge facing President François Hollande four months after taking office. As the government prepares to unveil its first full budget on Friday, it is caught between its promise to stick to stringent deficit reduction targets and an economy that has shown no growth for three quarters in a row - with unemployment rising to 10 per cent of the workforce. The number out of work broke through the 3m mark in August and latest business confidence figures out on Tuesday, though not as bad as recent purchasing managers" indicators, dipped to 86 against a long-term average of 100. The problem for the government is how to restore quickly the public finances and reverse unemployment. The two pull in opposite directions," said Mathieu Plane of the French Economic Observatory. It is cornered. It can accept that it has no choice but to reduce the deficit to 3 per cent [of gross domestic product] next year, with the risk of recession and a rise in unemployment. Or it can decide not to respect the deficit target and risk the reaction of the markets. Mr Hollande, facing tumbling approval ratings, has bet that he can beat the trap. He has pledged both to meet the budget target, which requires an unprecedented total of €37bn in tax rises and spending curbs, and to "invert the curve" of unemployment within a year. The government has revised down its growth forecast for 2013 to 0.8 per cent from 1.2 per cent - but that is still higher than most private sector predictions, some of which foresee zero growth next year. The picture remains of relatively soft GDP growth in the near term. It's not a particularly bright outlook, to say the least," says Tullia Bucco of UniCredit. What is really important is addressing the structural imbalances weighing on France's growth potential. Mr Hollande is clearly hoping that prospects will improve if the recent calming of the eurozone crisis is sustained. He is also planning to boost jobs growth through the creation of a new public investment bank aimed at financing small and medium-sized enterprises - and he has signalled he wants to push through some reforms of France's strictly controlled labour market and its high labour costs. France's business community, frustrated by the government's reluctance to cut public spending and moves such as Mr Hollande's blockage of shale gas exploitation, at least wants to see these reforms to help restore its flagging profit margins and waning competitiveness. "Today our disadvantage is our cost of production - and we need more flexibility," says Etienne Bernard, head of the SME section of Medef, the employers" confederation, and himself the chief executive of a medium-sized engineering company. We must get rid of some of the rigidities and then we will be able to hire more people. And the government must stop putting more taxes on companies. The budget will, however, include €10bn in new taxes on business - and another €10bn on households. Mr Plane warns that will inevitably hit both investment and household purchasing power - two of the main drivers of the economy. With structural reforms requiring time to show results (assuming they happen), Mr Hollande's unemployment pledge already looks ambitious - however many redundancy plans Mr Montebourg manages to restrain.