Written by Hilary Barnes
The noose is tightening on the France and "it is only a matter of time before disaster strikes", wrote one of the sharpest of the French economists at the Telos blog today (01 July 2013). Charles Wyplosz said that for the past 30 years France has rowed against the current. While all around it others adjusted terms of retirement to take account of the lengthening life span, France cut the working week by four hours and stuck with 60 as the age of retirement (now, in fact, 62 for most people). While others sought to make the public more efficient and to keep public expenditure under control, France defended its public sector.
It was not an issue of the politics of the right or left, but a defiance of economic logic, or, as the French like to see it, the tyranny of the markets. So France marches with head high into decline. And the present socialist president, Francois Hollande, in his first year in office, has continued what Wyplosz calls the the tradition of "happy immobilism".
- He practised the worst policy possible by imposing a suffocating increase in taxes on the country and, being more attentive to political sensibilities than economic logic, he has done nothing to stop public expenditure from increasing.
- He is tackling unemployment by spending public money to employ people of low productivity in the vain hope that the unemployment figures will begin to decline and he can claim to have kept an election promise.
- But he era of infinite public deficits is past and as he is forced to tackle public expenditure or raise taxes once more, and unemploymentwill rise again.
- Hollande's one success has been to delay for a year the moment when France joins Spain and Italy on the list of countries officially in crisis, but it is only a matter of time before the great disaster strikes. Italy and Spain will plunge before long, and then the markets will focus on the next domino in line – France.
The worst of it is, he wrote, that one cannot be sure that crisis will be put too good use – whether, when France falls under the yoke of the Troika, it will be like Greece, unable to reform, or like Ireland, where wages have fallen by 20%, public spending has been reduced, and some colour is returning to the economy.