Post by pim on Sept 28, 2012 19:17:34 GMT 11
There is no worse time to be in government than when circumstances oblige you to impose belt-tightening on ordinary people. The only thing that could be worse would be to place young men & women of your country's armed forces in harm's way in a war zone. France rejected the government of Nicholas Sarkozy with its austerity politics and installed François Hollande who promised an alternative to austerity. There was to be no "Spain" or "Greece" scenarios in the France of François Hollande.
Now it's crunch time. Here's what looks to be on the menu:
France budget: Hollande's grim choices
www.bbc.co.uk/news/world-europe-19755417
President Hollande's support has slumped since he came to power in May this year, polls suggest - 'twas ever thus (opines Pim)! A new government comes in with all the hopes and raised expectations of a Messiah who promises to replace the discredited policies of the rejected former government with "The Answer"!! Remember Obama and "Yes we can!"? After the people have finished dancing on the former government's grave they then turn their gaze to the government they've elected. And they're always disappointed. Now read on, gentle reader ...
France is committed to reducing its deficit next year to 3%. If it backtracks it fears the markets would force up its borrowing costs, in the way they have done with Spain and Italy. France needs to save around 30bn euros (£24bn; $37bn). Only a third of that will come from spending cuts. Taxes on the rich will raise 10% and a similar amount will come from businesses. There is the expectation that capital gains, interest and dividends will be taxed as regular income.
The 2-3,000 people who earn over 1m euros will see their income tax rise to 75%. Already some of the ambitious and well-off French people have trudged to London and Brussels in pursuit of lower taxes. The government has denounced them as unpatriotic and pretends not to care. This budget, said a government minister, would spare the middle and working class, which is where the votes lie.
This budget is a political test for President François Hollande. Can he reduce public spending? Which cuts will he choose to make to save 10bn euros? Mr Hollande is a president with little room to manoeuvre. His supporters in the unions are watching closely. He came to power criticising the policy of austerity first. Growth would be the priority. His first months in office have borne that out. There has been no growth for three quarters. France is stagnating. Although the goverment has increased public spending that has been offset by a decline in household spending. The consumer lacks confidence. Unemployment has risen above three million and the president's approval ratings are falling.
One major test of the government's commitment to growth is the country's labour laws. It is notoriously difficult to take on new workers and replace them. Nothing would, over time, boost growth and employment more than a radical overhaul of France's employment laws. But will the government take on its natural supporters and insist change must come?
At this point I have to make an editorial comment. Sarkozy was right to commit to ending the featherbedding in the French economy which was reminiscent of the sort of featherbedding in Greece. The difference being that the French economy is a heck of a lot bigger and more diverse than the Greek economy! Nevertheless there comes a point where you have to say "ça suffit!" = that's enough! For people to retire at age 50 after working in the railways on a retirement pension of 80% of their salary is not sustainable. Sarkozy declared that the French economy needed a dose of "le modèle anglo-saxon" and he was right. But paid the ultimate political price and the French labour market remains as sclerotic as ever. Now it's the turn of François Hollande and, since he came to office as a reaction against the Sarkozy model, it follows that reforms of the French labour market d'après le modèle anglo-saxon are not an option. I still think Sarkozy was right. But back to the article ...
The French goverment will move cautiously. It will have noticed that elsewhere in Europe the years of austerity are bringing protesters to the streets. On Sunday in Paris there is a demonstration against the EU fiscal pact that sets strict limits on deficits. It is frequently said by European officials and some leaders that what the EU needs is "more Europe". What this week of budgets and protests has revealed is that what the people want is a Europe that delivers. France does not want to be Italy. France does not want to be Spain. That is the motive behind today's French budget, according to the prime minister. The relatively new French government hates the very word "austerity", but it too will have to unveil some spending cuts.
I'm always condemned by Labor haters for saying this: Labor parties in the UK and Australasia, as well as the Democratic Party in the US and the social democratic parties of Europe, are capitalist parties who, in the end, will defend the capitalist system as ferociously as their conservative opponents. The term "socialism" can mean whatever you want it to mean. I'm becoming cynical in my old age and have begun to believe that "socialism" is what the giant corporations resort to when the economy goes belly up. A venerable capitalist principle is that you socialise losses and privatise gains.
So ... a government in France that officially calls itself "socialist" is called upon to heal the goose so that it keeps on laying the golden eggs. No question, even for the socialists, of turning the golden goose of capitalism into pâté de foie gras. So the question for Hollande will be: "how do I impose austerity on the French people in a way that lets me call it something else?"
Je pense, donc je suis ...
Now it's crunch time. Here's what looks to be on the menu:
France budget: Hollande's grim choices
www.bbc.co.uk/news/world-europe-19755417
President Hollande's support has slumped since he came to power in May this year, polls suggest - 'twas ever thus (opines Pim)! A new government comes in with all the hopes and raised expectations of a Messiah who promises to replace the discredited policies of the rejected former government with "The Answer"!! Remember Obama and "Yes we can!"? After the people have finished dancing on the former government's grave they then turn their gaze to the government they've elected. And they're always disappointed. Now read on, gentle reader ...
France is committed to reducing its deficit next year to 3%. If it backtracks it fears the markets would force up its borrowing costs, in the way they have done with Spain and Italy. France needs to save around 30bn euros (£24bn; $37bn). Only a third of that will come from spending cuts. Taxes on the rich will raise 10% and a similar amount will come from businesses. There is the expectation that capital gains, interest and dividends will be taxed as regular income.
The 2-3,000 people who earn over 1m euros will see their income tax rise to 75%. Already some of the ambitious and well-off French people have trudged to London and Brussels in pursuit of lower taxes. The government has denounced them as unpatriotic and pretends not to care. This budget, said a government minister, would spare the middle and working class, which is where the votes lie.
This budget is a political test for President François Hollande. Can he reduce public spending? Which cuts will he choose to make to save 10bn euros? Mr Hollande is a president with little room to manoeuvre. His supporters in the unions are watching closely. He came to power criticising the policy of austerity first. Growth would be the priority. His first months in office have borne that out. There has been no growth for three quarters. France is stagnating. Although the goverment has increased public spending that has been offset by a decline in household spending. The consumer lacks confidence. Unemployment has risen above three million and the president's approval ratings are falling.
One major test of the government's commitment to growth is the country's labour laws. It is notoriously difficult to take on new workers and replace them. Nothing would, over time, boost growth and employment more than a radical overhaul of France's employment laws. But will the government take on its natural supporters and insist change must come?
At this point I have to make an editorial comment. Sarkozy was right to commit to ending the featherbedding in the French economy which was reminiscent of the sort of featherbedding in Greece. The difference being that the French economy is a heck of a lot bigger and more diverse than the Greek economy! Nevertheless there comes a point where you have to say "ça suffit!" = that's enough! For people to retire at age 50 after working in the railways on a retirement pension of 80% of their salary is not sustainable. Sarkozy declared that the French economy needed a dose of "le modèle anglo-saxon" and he was right. But paid the ultimate political price and the French labour market remains as sclerotic as ever. Now it's the turn of François Hollande and, since he came to office as a reaction against the Sarkozy model, it follows that reforms of the French labour market d'après le modèle anglo-saxon are not an option. I still think Sarkozy was right. But back to the article ...
The French goverment will move cautiously. It will have noticed that elsewhere in Europe the years of austerity are bringing protesters to the streets. On Sunday in Paris there is a demonstration against the EU fiscal pact that sets strict limits on deficits. It is frequently said by European officials and some leaders that what the EU needs is "more Europe". What this week of budgets and protests has revealed is that what the people want is a Europe that delivers. France does not want to be Italy. France does not want to be Spain. That is the motive behind today's French budget, according to the prime minister. The relatively new French government hates the very word "austerity", but it too will have to unveil some spending cuts.
I'm always condemned by Labor haters for saying this: Labor parties in the UK and Australasia, as well as the Democratic Party in the US and the social democratic parties of Europe, are capitalist parties who, in the end, will defend the capitalist system as ferociously as their conservative opponents. The term "socialism" can mean whatever you want it to mean. I'm becoming cynical in my old age and have begun to believe that "socialism" is what the giant corporations resort to when the economy goes belly up. A venerable capitalist principle is that you socialise losses and privatise gains.
So ... a government in France that officially calls itself "socialist" is called upon to heal the goose so that it keeps on laying the golden eggs. No question, even for the socialists, of turning the golden goose of capitalism into pâté de foie gras. So the question for Hollande will be: "how do I impose austerity on the French people in a way that lets me call it something else?"
Je pense, donc je suis ...
