Just last week France’s newly elected socialist president went ahead with his plans to tax “the rich” at 75%. A couple months ago, when France’s high earners got wind of the president’s plan to punish them, they stated their own plans to abandon the country if that happened. We shall see.
Today French President François Hollande finds his economic plans have pushed the country into a depression…
If French President François Hollande thinks he can assuage the bond markets by dishing out tax-heavy austerity instead of genuine reform, he has been given very bad advice.
His tragically-misguided budget offers no strategic plan to reverse — or even to stop — thirty years of slow national decline. He offers no worthwhile measures to slim the Leviathan state, now a Nordic-sized 55pc of GDP, without Nordic labour flexibility or Nordic free markets.
He does not tell us how he will stem the slide in France’s share of eurozone exports over the last decade, down from 17pc to 13pc, or what he will do about the disastrous swing in France’s trade balance from a surplus of 2.5pc of GDP to a deficit of 2.4pc since 1999.
He proposes nothing credible to restore France’s viability within EMU, or to stop public debt spiralling beyond 90pc of GDP. Instead he has served up the most drastic retrenchment in forty years, at the worst possible time, and in the worst possible way. And markets are supposed to applaud?
The budget will tighten discretionary fiscal policy by 2pc of GDP next year into the teeth of deepening depression, without offsetting monetary stimulus or exchange rate relief.
Mr Hollande likes to quote Leon Blum, the Popular Front leader of the interwar years. The reality could hardly be more cruel. He is replicating the disastrous deflation policies of Labour Chancellor Philip Snowden in 1931, before the Labour Party woke up to the delicious possibility that you could lift two fingers to the forces of reaction and leave the Gold Standard.
Worse yet, he is perilously close to re-enacting the desperate deflation decrees of Pierre Laval — an ex-Socialist dreamer, pacifist, and utopian who lost his way, and ultimately cleaved too closely to foreign ideologies — and like Laval he is doing so to uphold a fixed exchange system that is slowly asphyxiating his country and no longer makes any sense.
His budget is pro-cylical error of the first order, carried out to meet an EU deficit target of 3pc of GDP that has no economic logic and is plucked out of thin air to meet bureaucratic tidiness and enshrined like so much other idiocy into EU treaty law. The certain result will be hundreds of thousands of lost jobs.
Coming soon to an economy very near to you…