It’s been a long, depressing slog for France through a rate of economic growth that has meandered aimlessly between only contraction and stagnation and an unemployment rate that has been marching steadily upward for the past several years, and Socialist President Francois Hollande has been mired in the [entirely predictably] poor results of his only piddling “reforms” to France’s grossly unsustainable fiscal structure that have mostly taken the form of only still further tax increases. Ergo, it wasn’t so much a surprise as a wildly overdue admission of reality when Hollande used his New Years’ address on Tuesday to trumpet a newfound pro-business agenda focused on tax and spending cuts and revisions to the country’s prohibitive labor laws — while steamrolling through recent allegations of a high-profile affair that don’t seem to be doing much to help his already abysmal approval ratings. Via the WSJ:
Speaking at a news conference designed to relaunch his presidency that—like France’s economy—has been stuck in the doldrums, Mr. Hollande said he would tackle France’s chronically high payroll taxes, addressing a long-standing demand of French business leaders.
Mr. Hollande is striving to repair relations with France’s business community, which has voiced anger about climbing taxes and alarm that the euro zone’s second–largest economy is losing ground to Germany. …
The news conference inside the chandelier-laden halls of the Élysée Palace was Mr. Hollande’s first public appearance after a magazine published a report alleging a relationship with a 41-year-old actress, transforming the event into a high-wire act for the president. …
By the end of his mandate in 2017, Mr. Hollande said, French companies will no longer be required to foot the €35-billion ($47.9-billion) annual bill for France’s generous family welfare programs. He said he planned to fund the tax cut by slashing government expenditures, a departure from his previous practice of forcing consumers to bear the burden through high sales tax.
Money quote from the presser: “How can we redistribute if there’s no wealth?” …Well. At least he’s honest, I suppose. “Socialism”-with-a-capital-“S” and all that.
But are these cuts really as big and brutal as the $50 billion number making headlines? Not quite, via Reuters:
But while Hollande largely succeeded in ensuring domestic headlines focused on his economic plans rather than private life, the reaction among reform advocates was more mitigated.
The planned cuts to spending amount to some 18 billion euros a year for 2015, 2016, and 2017 – little higher than an existing rhythm set to shave 15 billion euros this year.
Moreover Hollande said the 30-billion-euro tax reduction to companies by alleviating them of the need to pay family benefit contributions by 2017 could be partly counter-financed by re-diverting 20 billion euros of existing tax credits.
“So the net win is only of the order of 10 billion euros whereas we were after 80,” said Gattaz.
Still, it is something of a movement in a slightly more sane direction, and Germany and Brussels have since been nodding their heads in approval at the idea — but the sad part is, France might not even have the political will to faithfully carry out even just that much, with practically rabid unions and hardcore leftists adamant about keeping up the welfare system currently bleeding the country dry with a growing national debt that stands at almost 95 percent of GDP. Le sigh.