Regards, Ivan
Posted on 10/09/2002 3:05:10 AM PDT by MadIvan
A runaway budget that vitiates promises of reform
Economic indicators are often ambiguous and contradictory, but figures released yesterday by the European Central Bank sent a clear signal to the region’s governments and, in particular, to Britain and France. Eurozone growth this year could fall below 1 per cent, a level not seen since 1993, while inflation is stubbornly above the ECB’s target of 2 per cent. These figures provide a stark warning to the Government here that it would be foolish to hitch the currency to a region whose economic engine has stalled. The announcement also highlighted the growing challenge facing France.
The country’s centre-right Government headed by Jean-Pierre Raffarin assumed power last May with a huge parliamentary majority and a solid mandate to streamline a lumbering bureaucracy and restore health to the nation's debt-ridden public finances. It also won with the help of a series of costly promises made by President Chirac: to cut income taxes by a third by 2007 and ease the burdens on business, while sharply raising spending on welfare, defence, the police and the judiciary.
Even if the 3 per cent growth on which his campaign pledges were predicated had held up, the new Government would have been hard pressed to make the sums add up. It has had other difficulties. An early audit revealed that the outgoing Socialists had underestimated the deficit by €15 billion. The sinking stock market has upset plans to bring in €8 billion from privatisations. But there is nothing inherently unsound about cutting France's excessive tax burdens, and it should have been possible to square at least some of the expansive presidential promises with fiscal prudence.
The Government has failed to use so much as a pair of nail scissors in the budget for 2003 produced late last month — even on the most obvious store of fat, the public sector. More than seven million French employees, one worker in four, have jobs for life with privileged pension rights as civil servants or in publicly owned enterprises.
M Raffarin describes himself as a rounded man, with edges. His budget was an opportunity to show the edges; instead it was an incoherent exercise in fiscal laxity. He has vowed “to get France on the move”; this performance sets it on course to a brick wall. Public spending will rise next year four times as fast as it did under the Socialists. Even on the too-optimistic assumption of 2.5 per cent growth next year, the deficit would be 2.6 per cent, edging public debt up to 58.8 per cent of GDP. And by the Government's own admission, France will now miss the European Commission's new deadline, 2006 rather than 2004, for balancing its books. So much for the Stability Pact.
M Raffarin argues that France's immediate priority is to gamble on growth to counter unemployment. On pensions, health and other structural reforms, he says that “we must moderate our speed, to take society with us”. The truth is that his financial team, led by Francis Mer, fought for a modest real budget cut of 0.1 per cent and was routed after pressure from the Elysée, where President Chirac fears a repeat of the protests that felled the Juppé Government in 1995. But nothing will be gained by postponing M Raffarin's promised “grand economic, social and administrative reforms”.
Irresolution will merely stimulate protest. The French need state spending cut, along with taxes, but without diminution in the quality of their public services. This goal is attainable, but only by persuading voters that public sector reform is the only way to secure value for money — and to stop France sinking under the weight of its debts. Hard decisions are best made early. There is scant sign of their being made at all, least of all by a President who is choosing to ignore the ominous signs.
Regards, Ivan
Regards, Ivan
A tax cut is never "costly." Asserting it is reveals an underlying statist assumption that all income belongs to the government, and thus by cutting taxes the government is "spending" its own money.
Regards, Ivan
The French should scrap their military... all it's good for is surrendering.
With all that extra money, they can send it to the Palestinians or donate it to the UN.
I don't know who's worse... the Germans, French or Belgians.
At least England still will carry the torch.
Vote buying: The main reason democracies fail. Every fool wants a tax cut and more government handouts. When will people learn that they can't have both, and that they're being bribed with their own d@mned money (minus the "middleman's" cut, of course.)?
I wish I were unscrupulous enough to be a politician. There's nothing quite like robbing a man of $1000, giving him back $500, and then having him thank you for it.
What a racket!
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