Philippe Aghion on François Hollande’s Economic Program

May 26th, 2012
in Op Ed

By Dirk Ehnts

Previous French socialist leaders were wedded to Keynesianism. But Mr. Hollande (pictured) is the first French socialist president to advocate a supply side approach to growth.

So says Philippe Aghion in a recent Finanacial Times article.   The piece is a nice diplomatic effort to appease the Germans.  However, it is only that.  The article continues on the subject of economic growth:

This growth package should have a few distinct components.

Follow up:

The EU should mobilize its structural funds to finance reforms in labor markets, product markets and higher education.

The EU must also do more on what is typically called industrial policy.  One idea would be to use the EU budget as collateral for the issuance of so-called “project bonds” that would co-finance industrial projects with the European Investment Bank.  Information technology and clean energy are obvious areas for such investments.  Another idea that Mr. Hollande will pursue is to allow for mutualized debt (Eurozone bonds) aimed at financing infrastructure projects.

It seems to me that the EU is supposed to do the Keynesian dirty work (“deficit spending”), while national leaders can shine with their balanced national budgets.  If you ever thought that economics has nothing to do with politics, think again.  And if you ever thought that balance sheets were not important in economics – well, get out of here!

Articles by Dirk Ehnts

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About the Author

Dr. Dirk Ehnts is a guest lecturer in monetary macroeconomics at the Berlin School of Economics and Law.   His focus is on economic integration and economic geography, covering trade, macro and development. He is working at the chair for international economics since 2006 and has recently co-authored a book on Innovation and International Economic Relations (in German). Ehnts has written at his own blog since 2007:  Econblog 101Curriculum Vitae.

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