France to the eurozone: But we don’t want to implement more austerity measures

posted at 8:01 pm on February 19, 2013 by Erika Johnsen

Last year, self-proclaimed Socialist Francois Hollande and his fellow Socialist lawmakers were elected to the presidency and parliament in a glorious wave of anti-austerity enthusiasm, as he promised to raise taxes on the wealthy, grow the economy, and eschew those nasty “right-wing” policies of former President Sarkozy.

…Which is getting kind of awkward, because Hollande did assure Brussels he would have no problem sticking with the previous government’s promise to keep France’s nominal budget deficit to below three percent of GDP in the international effort to rescue the euro. As you might imagine, it’s a feat that the Socialists have been oddly unable to manage so far (which is just plain weird, because socialist policies logically and historically work every time in growing the economy, or whatever). In light of the eurozone’s recently and ‘unexpectedly’ disappointing economic growth reports, however, and Germany and France’s respective roles as the largest and second-largest economies in the eurozone, Berlin and Brussels really must insist that France do its part to keep their eyes on the prize of fiscal sustainability. The Financial Times reports:

François Hollande will make his first visit as French president to Greece on Tuesday carrying the same anti-austerity message to Athens that won him election to the Élysée Palace last May. …

But managing the balance between growth and austerity has become a bit more complicated for Mr Hollande back home in France – and with his European partners (notably Germany) – since his Socialist government admitted it was likely to miss its key goal for the public finances this year because of slumping growth in the eurozone. …

The problem for Mr Hollande is that Brussels and Berlin may now insist that France wields an additional budgetary axe to ensure the deficit target is met after all – in other words they may insist on more austerity. …

But Mr Hollande’s government, which spent most of its early deficit-cutting energies on big tax increases, is only now getting down to the painful business of allocating reductions in public spending to achieve the €60bn in cuts it has earmarked over the next five years.

Public spending, by the way, accounts for a whopping 56 percent of GDP, the second-highest ratio in Europe — and yet the Socialists remain reluctant to even take a crack at cutting down any of these government outlays, quelle horreur, while the rest of the eurozone also continues to keel over beneath the weight of their collective inability to stop the spending. Do you suppose that that attitude had anything to do with them coming in with so much negative economic growth in the last quarter, peut-être?

Eurozone rules require that member countries meet their deficit reduction targets in the collective fight to salvage the whole thing from ruin, but if even not-a-bit-player France cannot/will not do their part, I don’t think Germany will be at all pleased. These are going to be some tense negotiations.

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