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France is in the midst of transition, from a well-to-do modern economy that has featured extensive government ownership and intervention to one that relies more on market mechanisms. The Socialist-led government partially or fully privatized many large companies, banks, and insurers, but the government retains controlling stakes in several leading firms, including Air France, France Telecom, Renault, and Thales, and is dominant in some sectors, particularly power, public transport, and defense industries. The telecommunications sector is gradually being opened to competition. France's leaders remain committed to a capitalism in which they maintain social equity by means of laws, tax policies, and social spending that reduce income disparity and the impact of free markets on public health and welfare. The current government has lowered income taxes and introduced measures to boost employment. The government is focusing on the problems of the high cost of labor and labor market inflexibility resulting from the 35-hour workweek and restrictions on lay-offs. The government is also pushing for pension reforms and simplification of administrative procedures. The tax burden remains one of the highest in Europe (43.8% of GDP in 2003). The current economic slowdown and inflexible budget items have pushed the 2003 deficit to 4% of GDP, above the EU's 3% debt limit. Business investment remains listless because of low rates of capital utilization, sluggish demand, high debt, and the steep cost of capital.
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