Chirac wants to get out of Brussels straitjacket (EU budget rules too tight for France)

The Telegraph ^ | August 30 2003 | Philip Delves Broughton

[knighthawk]

Eleven years after France signed the Maastricht Treaty it has decided it has had enough of its obligations. The straitjacket of the stability pact, which paved the way for the euro, is bound too tight for an economic downturn, it has told Brussels.

So instead of suffering for the common European good, President Chirac has decided to bust out, to let his deficits soar and try to spend his way to an economic recovery.

It is hard to know what lesson Sweden is to draw from this as it prepares to vote on Sept 14 on whether to start using the euro. Is every country that uses the single currency allowed to behave like this?

Was not the very purpose of the stability pact to ensure a collective economic responsibility? What if every country decided to cheer up their depressed economies with a credit card binge?

In public at least, M Chirac is unlikely to go as far as Philippe Marini, the government's economic spokesman in the Senate, who called the stability pact "completely obsolete" this week. But he has concluded that his own political interests and those of France are not served by adhering to the pact.

Long before sending his prime minister, Jean-Pierre Raffarin, to Brussels this week to explain that France would not even try to bring its deficit to below the stability pact limit of three per cent until 2006,

M Chirac made an obvious calculation. As he considered reforming the French state and cutting taxes, he asked: "Who is more likely to cause me trouble? The French unions or Romano Prodi?"

Mr Prodi, for all his gifts, has no record of stopping trains, closing schools, smothering Paris in tear-gas and turfing out Right-wing governments.

M Chirac, who experienced all of this the last time he tried reforming France in 1997, does not want to give the unions another chance.

By telling the EU where to go on deficits, M Chirac is telling his citizens that France's problems and recovery are now their own to deal with. No foreign entity can be held responsible - unless you count America, whose economic recovery is being prayed for fervently by the French. M Chirac hopes the tax cuts he has started to implement take effect and generate spending.

A pick-up in the economy will help ease the pressure on the government. Structural reforms can then be made to the public sector, the cost of running the state reduced, businesses will thrive, tax receipts rise and by 2006 France will be ready to rejoin the stability pact's polite society.

M Chirac must set to work now if he wants his efforts to bear fruit before he stands for re-election in four years' time.

M Chirac has also told his government that nothing must affect promised increases to the defence budget. He believes the French military must at least be equal to the British if France is to be a credible global power.

To this end, he has suggested that defence and research spending be excluded from the stability pact rules.

Germany and Italy are having similar problems to France in meeting the stability pact criteria and are also applying unilateral remedies to the economic downturn.

Which leaves those countries still mulling over joining the euro with a new question. Which kind of flexibility is better? The flexibility of staying out or the flexibility of joining and then ignoring the rules?

[knighthawk]

Europe-list

If people want on or off this list, please let me know.

[goldstategop]

Looks like Chiraq is quick to abandon fiscal austerity when its too much baggage. And after sneering at us, the French want an American economic recovery! Oh my what a comeuppance.

[McGavin999]

ROTFLMCO! What was all that stuff about us breaking the rules? How do you say "french cowboy"?

[TheSpottedOwl]

Lol! This should be fun to watch.

[nathanbedford]

I can scarcely credit this article. But, if it is true, look out below for the Euro.

As an example of how significant this could be, I have instantly cancelled tentative plans to buy a house here in Germany. Why not wait for a twenty percent discount?

Can't wait to tell my German friends how I told them so: You can't trust the French. (Gee, that sounds racist to me.)

[ikka]

I give the shared currency called the euro a life expectancy of about 10 years.

[auntdot]

The French, who were very much for the Maastricht Treaty, now seem to take the stand that it is every man for himself.

Have predicted the EU will collapse for years.

Now the French, one of the founders and staunchest supporters of the EU, have decided to toss away the rule book.

When the going gets tough, the French leave through the back door.

What a sorry bunch they are.

[Between the Lines]

How do you say "french cowboy"?

Cowboy Français

[river rat]

"The French,.....now seem to take the stand that it is every man for himself.

If this is the case, the French are dooomed.
There are not enough MEN in France to save them.
Semper Fi

[Timesink]

I give the shared currency called the euro a life expectancy of about 10 years.

Seconded. I've been saying on FR since the day I registered that the Euro is doomed to eventual collapse, precisely because it was inevitable that at least one country would end up ignoring the currency rules the moment it because economically convenient for them to do so. (No big surprise that country turned out to be France.)

And once the Euro collapses, the EU will eventually collapse along with it. There is simply a limit to how much autonomy an ever-growing agglomeration of countries with wildly different cultures - even naturally-submissive European cultures - will be willing to give up to a bunch of elitist jerkoffs from France, Germany and Belgium. And the Eurocrats are already trying to cross that line.

[Timesink]

I can scarcely credit this article. But, if it is true, look out below for the Euro.

The euro's already been trending downward against the dollar for about four months now. Should be interesting to see what happens next week.

[Cobra64]

M Chirac has also told his government that nothing must affect promised increases to the defence budget. He believes the French military must at least be equal to the British if France is to be a credible global power.

For France to catch up to the British military, it will take a triple tax hike and about 30 years to get there. The frogs built their latest aircraft carrier with a flight deck 30 metres too short to launch a jet. On its maiden voyage, it dropped a prop and had to be towed to port. They are supposed to be part of the civilized world and they can't even build a car that anyone would want. What a bunch of dolts those people are... I could go on, but...

[Redmen4ever]

The French seek to go along with the Germans and the Italians in cutting taxes during a recession to spur economic growth, in violation of the EU rule that deficits must be no more than 3 percent of GDP.

Notice that we (the U.S.) have already done the same thing, cutting taxes to spur economic growth (although not in violation of any international treaty). Notice also that our leading indicators point to a strong recovery, which is not to say that the unemployment that we are dealing with is going to disappear like magic.

The EU rule needs to be modified. Countries that run a balanced budget on average should be allowed discretion to run a deficit during a recession, or when spending is high because of a war. The "norm" shouldn't be a deficit of 3 percent. The norm should be a balanced budget (maybe even a surplus, so as to gradually eliminate the national debt). With a balanced budget as the norm, temporary deficits during times of recession, or national emergency, would actually be a good thing.

PLUS producing a deficit by cutting taxes is much, much better than producing a deficit by increasing spending.

[RobFromGa]

bookmark bump...

[adam_az]

How do you say "french cowboy"?

It would translate to "garcon vache," which could be translated back into english as "bitch boy." Go figure.