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  • 2018/12/13
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Deficits, Disruptions and Other Delights!

There’s no telling whether the blue skies currently overhead in France will have the desired effect of calming tempers, allaying concerns and finally putting this complicated year to rest. Commentators no longer know what to say, while the majority of economic analysts are harsh in their judgment. With the time for legitimate end-of-year reviews approaching, the atmosphere is a becoming strained.


Writing in Le Point magazine, the editorialist Franz-Olivier sets the tone for discussing the social crisis that has erupted in France. “Talleyrand said that malcontents were poor people who think. Or who suffer a decline in their social status. The second crisis to hit France is indeed a social one that has hit the lower-middle classes particularly hard. Those left behind by the digital revolution, who are at odds with the metaphysics of progress, have already elected Donald Trump in America and Matteo Salvini in Italy, with more still to come”. He concludes: “The whole edifice of France needs to be rebuilt” – nothing more, nothing less. No easy task, say the experts, but vital all the same. The evidence is plain: France’s public debt now amounts to 2.3 billion euros, equivalent to 35,000 euros per person. Our country, like so many others, will have to tread a delicate path between qualitative growth, renewed liberalism and a new economic and social compact. This applies not just to France but to Europe as a whole.


That will mean bolstering growth and boosting social optimism while reining in the public deficit. The cover story on the latest edition of Le Point is headlined “France Comes Face-to-Face with its History. The business daily Les Echos headlines on higher levies on businesses to tackle the current situation. Obviously, the French public deficit is once again a bone of contention in Brussels. Markets are keeping a watchful eye, noting that Brexit is increasingly unruly and that Italy is opportunistically using France’s overshoot as ammunition for its own negotiations. Meanwhile, more and more columnists are struggling to find words to summarise the general situation and make proposals so that 2019 will be an innovative year for governance. Like it or not, there is a widespread feeling of mistrust. Which is never a good advisor because it clouds our visibility and hence our future. Les Echos has reprinted an article by Joseph E. Stiglitz in which he analyses the cold front that has descended in the past few weeks, months or possibly years. The Nobel prizewinning economist argues that, to avoid inequality traps, economies needs to be measured more efficiently. “If we are to eliminate these inequality traps,” he says, “we first have to know that they exist, and then ascertain what creates and sustains them”. In another Les Echos piece, the journalist Guillaume de Calignon observes: “The spending power crisis been brewing for a decade. The standard of living in France as a whole declined between 2008 and 2016. Since the crisis, efforts to clean up the public accounts have focused entirely on households”.


The editorialist Guillaume Maujean makes his own contribution to this intellectually complex issue: “Welcome to capitalism 4.0. The activists will be around for some time to come and they are radically rewriting the market rules”. The announcements made by President Emmanuel Macron at the beginning of the week carry a price tag of nearly 10 billion euros, or nearly half a GDP point. Appeasement certainly comes with a cost. More generally, in the coming weeks we cannot afford to stop thinking about a new model for France. Otherwise, we may no longer be able to calm fraying tempers.


Christian Moguérou



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