by Partager cet article One does sometimes wonder why the French are so morose. The answer is fairly simple. As a result of the errors of their governments, the countries in the Euro zone have just experienced the longest period of stagnation since World War Two. In 2017, the level of economic activity in the area will with difficulty rise to its 2007 level, with huge regional and social disparities. In particular young people and the less privileged were faced with a sharp rise in under-employment. In the meanwhile, the rest of the world will have continued to grow. China, of course, but also the United States, which was at the origin of the crisis in 2008, but which has shown more budgetary flexibility in re-launching their economy. In France the unemployment rate at the end of 2007 was just under 7% and at the end of 2016 will be in the region of 10% – in other words, a rise of 50%. Contrary to what one still hears too frequently in government circles in Paris, Brussels or Berlin, this massive rise has nothing to do with a labour market which has suddenly become less flexible or with bus routes insufficiently deregulated. This is not to say that these discussions on the much-discussed structural reforms aimed at the introduction of more flexibility and more competition are not worth our attention (even if they are often very poorly formulated).
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Partager cet article
One does sometimes wonder why the French are so morose. The answer is fairly simple. As a result of the errors of their governments, the countries in the Euro zone have just experienced the longest period of stagnation since World War Two. In 2017, the level of economic activity in the area will with difficulty rise to its 2007 level, with huge regional and social disparities. In particular young people and the less privileged were faced with a sharp rise in under-employment. In the meanwhile, the rest of the world will have continued to grow. China, of course, but also the United States, which was at the origin of the crisis in 2008, but which has shown more budgetary flexibility in re-launching their economy. In France the unemployment rate at the end of 2007 was just under 7% and at the end of 2016 will be in the region of 10% – in other words, a rise of 50%. Contrary to what one still hears too frequently in government circles in Paris, Brussels or Berlin, this massive rise has nothing to do with a labour market which has suddenly become less flexible or with bus routes insufficiently deregulated. This is not to say that these discussions on the much-discussed structural reforms aimed at the introduction of more flexibility and more competition are not worth our attention (even if they are often very poorly formulated). All we mean is that it would be easier to achieve them if we began by recognising that the explosion in unemployment since 2008 is in the first instance due to austerity programmes, or more precisely, to an attempt to reduce budgetary deficits too quickly. This led to a fall in economic activity in the Euro zone in 2011-2013 from which we have barely recovered. The facts are not disputed if they are examined calmly. It is now time for the various policy makers in France and in Germany, who participated in these decisions, to agree on a common diagnosis of what happened during this period and above all to accept to learn from their mistakes for the future.
From this point of view, the fact that the candidates in the right-wing primary – the winner of which stands a good chance of winning the Presidential and parliamentary elections in Spring 2017 – seem to be in no hurry to reduce the deficits is good news – but on two conditions. In the first instance, the lean budgetary margins thus obtained must enable the defence of the most vulnerable and investment in the future and should not finance gifts for the most wealthy (elimination of the wealth tax, reductions in high rates of taxation for large estates and high incomes). In choosing to ignore the lowest incomes and giving preference to the richest, the right-wing candidates are in the wrong time-period. They are also on the point of ensuring a clear route to the Front national who will present themselves as the defenders of those who pay less tax while at the same time claiming primacy in matters of identity and xenophobia. As far as tax cuts are concerned, priority should go to relief in the property tax for those who wish to become property owners and the structural reduction of the tax burden on labour instead of the CICE (Crédit d’impôt pour la compétitivité et l’emploi, or tax credit scheme for employment and competitivity), an incomprehensible and inefficient scheme invented by the Left in power. Let’s also hope that the Right wing will not be stupid enough to abolish the withholding of income tax at source, at long last voted by the Left. They would do better to continue the somewhat overdue upgrading of our fiscal and social system by unifying the retirement schemes for the younger generations.
Finally, and above all, it is time for policy makers in France, both on the Left and on the Right, to bring to the table proposals for the reform of the European budgetary criteria. We cannot simply continue to violate these without proposing anything in their place. The main lesson in the past few years has been that the circumvention of democracy by automatic regulations does not enable budgetary policy to adapt to unforeseen economic situation. This is what led to the reversal in recovery in 2011-2013. There are not an infinite number of solutions. The rigid rules must be replaced by a majority vote in a true Euro zone parliamentary chamber, in which each country would be represented in proportion to its population (that is, 24% of the seats to Germany and 51% for France, Italy and Spain) following a public and adversarial debate. An instance of this sort would also confer the democratic legitimacy required for a genuine Euro zone budget. If France were to make a specific proposal, then Germany would have to accept a compromise, perhaps with a combination of indicative rules and qualified majorities. Reform is particularly urgent as the budgetary criteria have been considerably toughened by the 2012 Treaty. The aim now is to work toward a maximum deficit of 0.5% of GDP. As soon as the interest rates rise again, this will imply huge primary surpluses for decades (as a reminder: the interests of the debt already represent 200 billion Euros per annum in Europe, versus 2 billion per annum for the Erasmus programme). In passing, it has been forgotten that in the 1950s Europe was built on the cancellation of past debts, in particular to the benefit of France and Germany, to enable investment in the future. The French Right is perhaps preparing to come to power in a very difficult context. Let’s hope that it will be equal to the challenge.