France’s central bank chief to Socialist government: Get it together

posted at 8:01 pm on May 29, 2013 by Erika Johnsen

France has all kinds of faux-excuses at their disposal for why it is the Socialist government just can’t seem to make any progress on righting their seriously stagnating economy and eleven percent unemployment rate, many of which seem to focus on Germany being a big, intransigent bully in coordinating the eurozone’s financial dealings. At a meeting of the European Commission just today, French President Francois Hollande once again criticized what he interprets as the raw deal getting handed down to him from on high:

Francois Hollande has warned the European Commission not to “dictate” orders on how France should run its economy after the Brussels executive called for urgent eurozone reforms to avert a “social emergency”.

The French president was critical after the commission, which has new European Union powers to enforce reforms in the eurozone, demanded France enact far-reaching overhauls to its employment laws and pensions.

“The European Commission cannot dictate to us what we have to do. It can simply say that France must balance its public accounts,” he said.

“As far as structural reforms are concerned, especially pension reforms, it is up to us, and us alone, to say which is the best path to attain this objective.”

Er, except that, when has France ever balanced its public accounts, really? Talking about financial rigor is one thing, but France has routinely and blithely flouted their deficit reduction targets as well as failed to keep their budget deficits below three percent of GDP, and the burgeoning crisis they are currently experiencing has not nearly as much to do with how much public spending they somehow aren’t being permitted to do as it does their many and terrible fiscal and economic policies. All of the grasping at straws about their entirely self-imposed eurozone shackles isn’t going to do anything to fix their systemic problems of declining competitiveness and economic productivity.

Today’s WSJ highlights the annual report from French central bank chief Christian Noyer, who had some real talk for what France and the eurozone at large need to start working on fixing their underlying problems — and more taxing and public spending aren’t it.

“The underlying objective,” Mr. Noyer writes, “is growth. Not just a temporary spurt, sustained artificially by public spending, but strong and lasting growth that creates jobs and is based on the development of modern and competitive production capacity. This kind of growth cannot just be summoned up. It requires a profound change in public policy.”

Consider France’s inflexible labor market. Mr. Noyer says France “is one of the biggest spenders on employment policies in the developed world, but it still has one of the highest levels of unemployment.” The central banker argues that France’s various programs and incentives to boost employment are undermined by their sheer complexity. …

Mr. Noyer’s third truth concerns government spending, which is 55% of GDP. “For the past ten years,” he writes, “France has had one of the highest levels of public spending in the world. Over a certain threshold, which our country has probably crossed, any increase in public spending and debt has extremely negative effects on confidence” (our emphasis). For this reason, trying to stimulate growth through a spending binge is bound to be counterproductive. Businesses and households, anticipating higher future taxes to pay for the binge, will cut back, offsetting any boost from deficit spending.

Unfortunately, this pretty much mirrors much of the fight going on in the United States: We desperately need to get our economy back on the fast-track to growth, but certain branches of the powers that be are determinedly convinced that flailing around for more taxing, stimulus spending, and increasingly complex regulations are the way to do it.


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That THAT in your brie and… well, whatever you do to brie…

Myron Falwell on May 29, 2013 at 8:06 PM

If memory serves, we forgave them a huge debt after WW2. This is nothing new.
I don’t remember anything good France has done since Lafayette.

They gave us a smokin’ deal on some land, but that was so they could blow it on a war, and not a fight against evil, either.

connertown on May 29, 2013 at 8:14 PM

…wee wee

KOOLAID2 on May 29, 2013 at 8:20 PM

*le shrug*

tom daschle concerned on May 29, 2013 at 8:22 PM

I’m glad I saw the Normandy sights when I had the chance.

Bishop on May 29, 2013 at 8:27 PM

France’s central bank chief to Socialist government: Get it together

Dude, this IS ‘together’ for Socialist governments and economies. It doesn’t get any better.

Resist We Much on May 29, 2013 at 8:28 PM

I do feel sorry for them – no, I really do!

Unconvincing, huh?

OldEnglish on May 29, 2013 at 8:30 PM

Someone should tell the Chief Frog “You take someone else’s bailout money, you dance to THEIR tune!”

And are the French so stupid as to get into a fight with the Germans. Again. ‘Cause no one is going to come and bail them out. Oooops! Forgot, there is someone stupid enough to do that. And he’s sitting in the White House.

GarandFan on May 29, 2013 at 8:45 PM

Francois Hollande has warned the European Commission not to “dictate” orders on how France should run its economy after the Brussels executive called for urgent eurozone reforms to avert a “social emergency”.

What the H**l is that? A Camembert shortfall? Or are the Gnomes afraid that the people of Europe are going to finally realize that the TANSTAAFL Rule isn’t just a theory dreamed up by an American science fiction writer named Heinlein.

France has all kinds of faux-excuses at their disposal for why it is the Socialist government just can’t seem to make any progress on righting their seriously stagnating economy and eleven percent unemployment rate, many of which seem to focus on Germany being a big, intransigent bully in coordinating the eurozone’s financial dealings.

Never mind that right now, about the only bright spot in France’s ledgers is their energy sector, which is bringing in at least some hard currency due to France selling nuclear-generated electric power to Germany, to offset the losses in domestic capacity resulting from the Merkel government caving to the Greens on closing down Germany’s own coal-fired and nuclear power plants.

What happens if Merkel & Co. get fed up and say,

Dear France,

We will no longer require your kilowatt-hours. Instead, we will be changing over to natural gas and buying from Gasprom.

Go pound sand.

Sincerely,

The Country That Has Repeatedly Beaten Your A$$ Like A Gong Since 1757.

My guess is, Hollande ends up under his desk making little yipping sounds. But that’s just a guess.

cheers

eon

eon on May 29, 2013 at 8:49 PM

Unlike Hollande, France’s last Socialist President, Francois Mitterand, didn’t continue to beat his head against the wall. When his socialist policies produced exactly what Hollande’s are, he changed course…as did France’s moribund economy.

[OK, OK, France has never had a really vibrant economy, but our 'moribund' is not their 'moribund.' :-)]

Resist We Much on May 29, 2013 at 8:58 PM

Someone should tell the Chief Frog “You take someone else’s bailout money, you dance to THEIR tune!”

And are the French so stupid as to get into a fight with the Germans. Again. ‘Cause no one is going to come and bail them out. Oooops! Forgot, there is someone stupid enough to do that. And he’s sitting in the White House.

GarandFan on May 29, 2013 at 8:45 PM

Huh? Whose bailout out money did France take and when? What are you smoking?

jimver on May 29, 2013 at 9:33 PM

I take it that Mr. Noyer is not elected but appointed. If he were elected, he’d probably still be singing the virtues of raising taxes and protesting measures that hard necessity has not forced upon him (as opposed to someone else saying he needs to do it).

I suspect that Hollande is still wedded to the idea that if he can just find the magic key (the right combo of taxes, bailouts, and handouts) then he can save French-style socialism and be a hero. He may be wrong (that continued reliance on socialism as currently established is going to fail badly) about that but he does not think so (until the fall when he will then look around, bewildered, and exclaim, “What happened”?).

Russ808 on May 29, 2013 at 11:54 PM

Dear France,

We will no longer require your kilowatt-hours. Instead, we will be changing over to natural gas and buying from Gasprom.

Go pound sand.

Sincerely,

The Country That Has Repeatedly Beaten Your A$$ Like A Gong Since 1757.

I very much needed that laugh! Thank you!

MelonCollie on May 30, 2013 at 12:11 AM

Russ808 on May 29, 2013 at 11:54 PM

Exactly right.

jimver on May 30, 2013 at 12:27 AM

Dear France,

We will no longer require your kilowatt-hours. Instead, we will be changing over to natural gas and buying from Gasprom.

Go pound sand.

Sincerely,

The Country That Has Repeatedly Beaten Your A$$ Like A Gong Since 1757.

gee, yeah, coz doing business with Putin is always a brilliant idea, even the dumbest of the Euroeans know better than to become dependent on Russian gas. Merkel might be mjany things but stupid she is not. Besides she experienced a short session of Vlad muscle flexing in the middle of a vicious winter a few years back and I can assure you she and her volk didn’t find it amusing.

jimver on May 30, 2013 at 12:38 AM

America doesn’t have high-growth demographics any more. That isn’t changing. (Except for the worse, through amnesty and continued mass immigration.)

France also has less promising demographics than it used to have, and again the trend is down. Think in terms of what Arab countries that produce nothing but oil would be like, minus the oil.

France has a lot of financial bad habits that are only getting worse. America does too. But the main thing is, both countries are less and less occupied by people who can work to pay for such burdens and are inclined overturn such policies. More and more, the masses are people who don’t identify with the old, white nation, and simply want their share of the goodies now.

David Blue on May 30, 2013 at 5:20 AM

jimver on May 30, 2013 at 12:38 AM

Very true. But as it stands, Germany has a choice. Continue dealing with France and thereby strengthen Hollande’s hand (“Give us more money or we turn off your heat this winter!”), or figure out a way to put pressure on Hollande & Co. to pull in their horns.

Even the threat of no longer doing business with France on energy might be enough to bring the French government, if not to its senses, at least to a realization that they aren’t necessarily in the catbird seat. As for gas, they could get it from the North Sea, too, but that would require dealing with the Cameron government in the UK, which is very likely to side with Hollande. Remember, Cameron wants to “save the Union” at all costs, less from any real belief that it’s good for the UK than from his own personal ambitions.

The ideal solution would be for Merkel to tell the Greens “Don’t like nuclear power? Move.” and turn German’s nuclear plants back on. But I honestly don’t think she has the political capital to do it. Or at least, she doesn’t want to invest what she has.

One way or another, she will have to do something. It’s either that, or end up like Grayout Davis in California.

cheers

eon

eon on May 30, 2013 at 8:10 AM

Let’s model ourselves after their economic model!!!

acyl72 on May 30, 2013 at 8:22 AM

The ideal solution would be for Merkel to tell the Greens “Don’t like nuclear power? Move.” and turn German’s nuclear plants back on. But I honestly don’t think she has the political capital to do it. Or at least, she doesn’t want to invest what she has.

One way or another, she will have to do something. It’s either that, or end up like Grayout Davis in California.

cheers

eon

eon on May 30, 2013 at 8:10 AM

:) I agree. And yes, if she’s smart she’d reopen the nuclear plants, best move she could ever do, the greens be damned. But yeah, she’s a uber prudent/cautious politician, not the risk taking kind, so I can’t see her telling the greens ‘screw you’, we need the nuclear power’. Though you have to admit the Germans’ hypocrisy and idiocy on this topic is stunning, they closed their nuclear plants coz of environmental concerns but they buy energy (generated by buclear plants) from France, needless to tell you that one of the French nuclear plants (and the oldest one at it :), Fessenheim, is located cllose to the border with Germany (probably 2 km), in Alsace :) As for Cameron – true, every word.

jimver on May 30, 2013 at 2:44 PM

They’re doing all they can…

http://money.msn.com/now/post.aspx?post=aa8584e2-c576-4922-ada7-5eda6b598806

Some of France’s richest taxed more than 100%

Hey, once you raise taxes OVER 100% there isn’t much more to be done to “soak the rich”.

gekkobear on May 30, 2013 at 4:10 PM