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Counting, recounting and accounting

The markets are on edge, with some analysts advocating profit-taking and even shorting the market. The French government is on edge, too, having made one bungle after the next. And the crisis that has been on Emmanuel Macron’s hands for weeks now will not simply fade into the mist. Also on edge is INSEE, France’s national statistics and economic research institute, which recently published its traditional December report on the economic environment against the backdrop of Gilets Jaunes protests. According to the report, French GDP growth will ultimately come out at just 1.5% in 2018, and be roughly the same in 2019 despite stronger consumption. The French daily Le Figaro takes a closer look at the report. “Without being able to measure the exact scale of the crisis or the extent of the government’s response, the economists at INSEE have attempted to take these aspects into account in their forecasts. According to INSEE, the blockages will subtract 0.1 growth points in the fourth quarter.
The social movement and the deterioration in the business climate, which began before the crisis, will limit GDP growth by 0.2% in the last three months of the year. Factoring in this paltry performance and revising its previous figures, INSEE has lowered its growth forecast to 1.5% for 2018, after 2.3% in 2017. This is a major blow for the government, which was expecting its measures on purchasing power at the end of the year (including reduced council taxes and employee contributions) to bolster business activity. INSEE precisely measures the impact of these policies, which went almost entirely unnoticed owing to the Gilets Jaunes crisis. In the fourth quarter, household purchasing power will have increased 1.3%. But owing to diminished confidence, consumption has benefited very little, up 0.2%. However, at 15.6% at end-2018, the savings rate is close to the highs of 2010 and 2011.

 

” The end of the year is a natural time for taking stock – an exercise that is proving anything but euphoric for France, as Le Figaro writes: “INSEE is no more optimistic for the future. The massive boost to purchasing power recently administered by the government, with Macron’s measures amounting to some €10 billion, will ensure that domestic demand supports growth, but in an unspectacular fashion. The institute is forecasting business activity growth of 0.4% in the first quarter and 0.3% in the second, as consumption momentum builds, rising 0.7% and then 0.5%. Company investment will keep up a respectable pace, growing 0.6% in both the first and second quarter. Employment will thus continue to fall gradually. With job creation exceeding labour force entrants, the unemployment rate will stand at 9% at end-June 2019 compared with 9.1% a year earlier. According to INSEE, the transformation of the CICE tax credit for competitiveness and employment into reduced employee contributions on 1 January 2019 will create around 50,000 jobs on average in 2019-2021.” Le Figaro concludes as follows: “INSEE has painted a subdued picture for the start of 2019. There will be no abrupt halt in business activity but the recovery will run out of steam. The growth overhang for the first half stands at 1%. In other words, if growth remains stable in the second half, annual GDP will rise 1%. To achieve a modest 1.3%, GDP will need to grow 0.4% in third and fourth quarters. Under these conditions, the prospect of growth of around 1.3% in 2019 looks likely, even though the most recent Banque de France estimate pointed to a more optimistic 1.5%.” All of this makes the already complicated French budget equation that much more arduous to solve. It required all the diplomatic skills of a Mario Draghi to come to France’s rescue by stipulating that the ECB is moving ahead with its gradual process of monetary tightening. It is blocking net purchases of assets. When asked about the Gilets Jaunes crisis, the ECB chairman said he was “confident in the French government’s ability to handle it in the best possible manner”, which observers archly described as a “cautiously confident” message. These are decidedly edgy times, calling for a bold and fresh take on our environment.

 

Which is what a journalist from Le Point attempts to do with a piece titled, “Everything, now”. According to the article, “Our contemporary societies can no longer bear waiting and frustration. We are witnessing the defeat of the long-term view, compromise and deliberation advocated by Habermas. Our era is also about timing. Our ‘right here, right now’ society, in the words of psychologists, demands immediacy.” It is also by listening to observers from beyond our borders that a fresh take on French society can be found. The most corrosive of European philosophers, Germany’s Peter Sloterdijk, has some eye-opening remarks to offer on France. After saying that Emmanuel Macron is no Louis XVI, he continues: “Because France wants to be the people of all peoples, the risk of a hysterical crisis is fairly high. You are the world champions of revolt.” He concludes on a ferocious note: “We are witnessing a wave of colourful clowns and revolt artistes who pretend to understand what is going on.” Those looking for entertainment in 2019 will most certainly be served…

 

Christian Moguérou

 

 

 

 

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