France on the Downslope

France is the second biggest economy in the euro zone. Its new president and overwhelmingly socialist parliamentary majority have vowed to get the stuck-in-the-mud economy up and running again. Their first and foremost instrument is to spend even more money on government programs that have thus far wasted billions of euros without doing anything but harm to the economy. Their second brilliant idea is to punish job-creating small business owners with a hate-the-rich tax.

All of this is now going into effect, with a result that should surprise no one except a devout socialist. has the story:

French Foreign Minister Laurent Fabius said on Wednesday that France was unlikely to achieve its target of reducing its public deficit to 3.0 percent of output this year.

If you spend more and drive taxpayers out of the country it is unlikely that you will be able to balance the government budget. Fabius should know this. He was president Mitterrand’s finance minister back in the ’80s. Then again, he’s remained a socialist though all these years… again:

Later, Finance Minister Pierre Moscovici signalled that France might revise is targets for growth of 0.8 percent, and for reducing the public deficit to less than 3.0 percent of output this year. Saying that the targets were being held for the moment, Moscovici said after a cabinet meeting that the situation was difficult and that “if necessary we are able to have another look, to re-examine the different targets” for growth and for reduction of the public deficit.

It is likely that France will now return to the same austerity policies as they have tried before, which has not only depressed the economy but also inflicted serious damage on the French health care system. As for now, they are scrambling, with striking desperation, for tax revenues to replace what they are not getting from high-income earners escaping to Belgium and Britain. But as the article explains, there is mounting pressure on Paris to reverse course on spending, from a combination of higher taxes and higher spending to a combination of higher taxes and lower spending:

At Deutsche Bank, analyst Gilles Moec commented: “Two statements today by government heavyweights suggest that the target is soon to be ‘re-assessed’. “At the same time, we think the government will try to keep the market and its European partners on its side by announcing in more concrete terms how spending cuts and not just tax hikes will participate to the fiscal consolidation.” On Tuesday, the independent French public accounts court warned that the estimates behind the target for reducing the public deficit were not realistic and that the government had to focus much harder on cutting expenditure.

In other words, the same policies that have driven Greece into what is likely to become a decade-long depression. With that prospect in mind, and recognizing the size of the French economy as share of the euro zone GDP, no one should be surprised at the transformation of Europe from the epitome of prosperity to an economic wasteland, mired in industrial poverty and left behind by America, Asia and history.