France’s unbeatable deficit

April 4th, 2014 at 11:00 am by David Farrar

AP reports:

’s new finance minister says he wants to renegotiate the speed at which cuts its budget deficit to limits set by the European Union.

Michel Sapin told French radio station France Inter on Thursday that the 3 percent deficit France has promised its European partners to achieve by 2015 remains the target, but that the “rhythm” at which it is achieved should be discussed.

Sapin, who is taking over as finance minister from Pierre Moscovici, says renegotiating the target “is in the common interest of Europe.”

France missed its deficit target last year and has repeatedly pushed back the date by which it will bring its finances into line with European limits. Its deficit last year was 4.3 percent.

The joys of tax and spend policies.

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34 Responses to “France’s unbeatable deficit”

  1. EAD (1,330 comments) says:

    “has repeatedly pushed back the date by which it will bring its finances into line”

    Now where have I heard that line before? Ahhhh yes – Bill English tells a Credit Suisse investment conference that our debt will start to fall……………..in 2 years time.

    http://www.reuters.com/article/2014/03/26/us-newzealand-economy-idUSBREA2P1QM20140326

    The next one will be “The Government (insert Lab/Nat as appropriate) has repeatedly pushed back the date by which all Treaty claims will be concluded”

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  2. Matt (227 comments) says:

    If not this, then surely the next economic crisis will cause the Eurozone to disintegrate

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  3. Alan (1,087 comments) says:

    Actually the joy of losing economic sovereignty and the not having ability to set interest rates to suit their economy and not being able to allow their currency to devalue to allow for an export led recovery.

    tax and spend is the least of their problems.

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  4. mikenmild (11,777 comments) says:

    Cheese eating surrender monkeys.

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  5. Lance (2,717 comments) says:

    @mikenmild
    Kind of funny really because from what I understand of history (there is always different understandings) the Gauls attacked the Romans back when they pretty much kept to themselves. So great was the murder and pillage the Romans were traumatized and declared to militarize and guess who their primary (revenge) target was?.
    Oh.. and the Germans… pretty much didn’t bother the French until along came Napoleon and pissed them off big time.

    See a pattern here?

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  6. tom hunter (5,093 comments) says:

    I can’t help contrasting the subject of this thread with a comment from Weihana yesterday on Watkins on the Economy:

    Where is your evidence we need a much smaller state? Putting aside tinkering at the edges, which of the major budget elements do you think should be on the chopping block?

    Should we starve Grandma this winter? Parasite moocher that she is.

    Should we tell families to go bankrupt mortgaging their house while they try to pay for healthcare they can’t afford? Nothing’s ever going to happen to me so why should I care about some kid with terminal cancer. Get a job and pay for it yourself.

    And of course we should stop funding public education. Future workforce? Pfft.. who needs it. Google will provide us with all the robot workers we need.

    Or is this all a little too drastic and we’ll just tinker at the edges? :)

    Given that most right-wing commentators in that thread (and in the one on tax cuts) had been bemoaning “Labour-Lite’s” inability to really carve government back, there’s a fair amount of smugness in Weihana’s reply: resistance is futile.

    The implication is one where the only brake on the growth of government is some vague, hand-waving solution where the voters revolt – and how can that occur if they’re being bribed with created or borrowed (as opposed to taxed) money? It seems to me that it leads to this: Never Enough: America’s Limitless Welfare State.

    What would be the size and nature of a welfare state that was not contemptibly austere, that did not urgently need new programs, bigger budgets, and a broader mandate? Even though the federal government’s outlays have doubled every eighteen years since 1940, liberal rhetoric is always addressed to a nation trapped in Groundhog Day, where every year is 1932, and none of the existing welfare state programs that spend tens of billions of dollars matter, or even exist.

    Which in turns leads to this:

    Once a fellow’s enjoying the fruits of government health care and all the rest, he couldn’t give a hoot about the broader societal interest; he’s got his, and if it’s going to bankrupt the state a generation hence, well, as long as they can keep the checks coming till he’s dead, it’s fine by him. “Social democracy” is, in that sense, explicitly anti-social.

    Okay – so the centre-left wins irrespective of election results and France lies in our future, where the limit on the “natural” growth of government is the godawful solution of simply running out of money or where created money injected into such an economy has no real effect.

    Short of this disaster – or Rogernomics/Ruthanasia solutions, which are almost as brutal – do “moderate centre-leftists” have an answer for how big the government should be?

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  7. Viking2 (11,574 comments) says:

    Cameron Bagrie ANZ economist came back from Eurpoe two years ago and said that France would go.
    Looks like you are going to be right Cameron.

    Wait till one of the Arabs goes. That will finish the Frogs.

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  8. All_on_Red (1,648 comments) says:

    IIRC the last time the French were in surplus was…1974!

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  9. Fox (206 comments) says:

    It’s a perfect example of how far-gone many countries in the West really are.

    That the whole idea of ever even running a surplus and paying down debt has been completely forsaken, and the best they can do now is limit the amount of debt accumulation and desperately tread water simply to keep up with their interest payments.

    When a business finds itself in a similar precarious situation, where it is unable to meet principal payments through any other means than raking in more debt, the technical term I believe for it is; bankruptcy.

    No doubt this will lead Europe down the same path as the US and Japan, both of whom are in the same boat: monetising debt—> aka money printing —-> aka ‘quantative easing’.

    This does bring into the question the fairness of the entire global trade system.
    That some countries under financial strain are forced to tighten up their belts, knuckle down and assiduously pay back their loans, whereas others are able to completely skirt their responsibilities to implement painful but necessary economic and governmental reforms and simply fire up their printing presses instead.

    How sustainable can such an unbalanced and inherently inequitable system really be?

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  10. tom hunter (5,093 comments) says:

    Heh!

    With nine comments and virtually no upticks/downticks on any of them, I pretty much have my answer.

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  11. mikenmild (11,777 comments) says:

    How big should government be? About what we have now seems to be doing okay.

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  12. Weihana (4,606 comments) says:

    tom hunter (3,952 comments) says:
    April 4th, 2014 at 12:18 pm

    I can’t help contrasting the subject of this thread with a comment from Weihana…

    Gosh, someone is taking notice of my rambling’s… :)

    Given that most right-wing commentators in that thread (and in the one on tax cuts) had been bemoaning “Labour-Lite’s” inability to really carve government back, there’s a fair amount of smugness in Weihana’s reply: resistance is futile.

    Okay I was smug, but resistance is futile was not the point. The point is that it’s easy to talk in hypotheticals championing an ideology of limited government and considerable cuts to public spending, but what does it mean in practice? There is a substantial disconnect between the most favoured anecdotes of government waste (e.g. beneficiaries travelling overseas) and what the vast majority of taxes are spent on.

    The implication is one where the only brake on the growth of government is some vague, hand-waving solution where the voters revolt…

    My intention was actually to imply that people shouldn’t necessarily demand substantial cuts to government growth simply for the sake of reducing the size of government. That is, that if government should be reduced it should be done with care and skillfully selecting specific things considered wasteful: tinkering around the edges it might be labelled. Regardless of any other disagreement I have with the political right, this is what National has been doing.

    Short of this disaster – or Rogernomics/Ruthanasia solutions, which are almost as brutal – do “moderate centre-leftists” have an answer for how big the government should be?

    It is not the size of the government per se but the needs of the economy. If supply is an issue because of overregulation or excessive taxation then the government should address that by changing or removing the regulations or reducing the tax burden. But when you see low interest rates and our economy being stimulated by the Christchurch rebuild then it suggests a primary issue with our economy today is on the demand side because no one could reasonably believe an earthquake makes us better off even if it gives us something productive to do.

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  13. SPC (5,784 comments) says:

    If New Zealand had been in the EU we would have asked for this delay to get the budget in order too.

    Our deficits got large for a while. And government share of GPP is still higher now than in 2008. That appears as tax and spend. Any country going into a downturn goes through this.

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  14. OneTrack (3,233 comments) says:

    “How big should government be? About what we have now seems to be doing okay.”

    So one shouldn’t be voting Green or Labour this year (because we know they will expand the size and reach of government significantly)?

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  15. mikenmild (11,777 comments) says:

    I think it unlikely that any combination of parties in government this year will significantly expand the size and reach of government. We actually have a pretty well entrenched consensus in NZ on the role of the state.

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  16. All_on_Red (1,648 comments) says:

    Mikey
    Give us a break. The left always expand govt.

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  17. mikenmild (11,777 comments) says:

    And the right always maintain that size.

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  18. All_on_Red (1,648 comments) says:

    True, although at least we have seen National stop the expansion and let natural attrition do its work and they have done some mergers to cut duplication.
    Obviously- I don’t think its enough! :-)

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  19. SPC (5,784 comments) says:

    Government expands, the measure is to what share of the total economy.

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  20. OneTrack (3,233 comments) says:

    “Okay I was smug, but resistance is futile was not the point.”

    Maybe not, but to most people it is accepted as true. Which is why you hear little in the way of well developed arguments on how much smaller (or not ) it should be. Because it will not get listened to anyway.

    When, after 6 years of a center-left government and the economy slowly improving, you still have 50% of the population ready to vote in a hard-left (and obviously incompetent) government this year, and commenters on todays overseas travel post defending the absolute “right” of beneficiaries to take as much overseas travel as they want, without any impact on their benefit (the same people who say that poverty is rife, that the benefit is too low anyway and should be increased), then the likelihood of reducing the size of government is becoming less and less possible.

    Maybe I should learn Greek?

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  21. Fox (206 comments) says:

    Any country going into a downturn goes through this.

    In the case of a country like France, the deficits aren’t really related to any downturn, but have become an institutionalised permanent fixture.

    I don’t think France has recently even come close to running a surplus, not even during the European ‘golden years’ of the late 90’s and mid 00’s.

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  22. OneTrack (3,233 comments) says:

    mike – “We actually have a pretty well entrenched consensus in NZ on the role of the state”

    You must watch a different TV news than I do.

    Power to be nationalised by stealth (well not very stealthy at all actually) – Ministry of NZ Power to be set up.
    Power companies to be bought back ( the private sector cannot be trusted to own the means of production, etc., etc. )
    Ministry of Carbon Taxation
    What will be the fine be if I make a statement disagreeing with AGW this time next year?
    What size shower heads will be required – need a ministry to oversee this?

    The list goes on ( and I am getting depressed )

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  23. mikenmild (11,777 comments) says:

    Minor tinkering, OneTrack.

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  24. OneTrack (3,233 comments) says:

    mike – “And the right always maintain that size.”

    Don’t you mean, And the centre-left always maintain that size?

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  25. SPC (5,784 comments) says:

    Fox, historically before the cap on deficits maybe but the current deficits are caused by downturn not spending increases.

    Debt to GDP of the UK, France and Germany is little different.

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  26. tom hunter (5,093 comments) says:

    I’ve made the point before – first back in 2009 I think – that the Key government very much reminded me of the Holyoake National governments of the 1960’s. When I see comments like these from moderate centre-leftists …

    About what we have now seems to be doing okay.

    That is, that if government should be reduced it should be done with care and skillfully selecting specific things considered wasteful: tinkering around the edges it might be labelled.

    … it strengthens the case for that comparison to be made.

    The problem of course was that “tinkering around the edges” (brilliantly defined in a late 60’s Minhinnick cartoon, The Secret Life of Walter Committee), bolstered by a majority who thought that we were doing okay, ultimately landed us in the shit. This approach – combined with a Left-wing that never tires of coming up with new government solutions or pouring more money into old ones – is not one that gives me any confidence that we will ever stop growing government to the levels of France or beyond (if there is any beyond?).

    It may still come as a surprise to many people, but the Nordic countries have been showing that shrinking the government can be done proactively, rather than under the gun:

    In the 1970s and 1980s the Nordics were indeed tax-and-spend countries. Sweden’s public spending reached 67% of GDP in 1993. Astrid Lindgren, the inventor of Pippi Longstocking, was forced to pay more than 100% of her income in taxes. But tax-and-spend did not work: Sweden fell from being the fourth-richest country in the world in 1970 to the 14th in 1993.

    Since then the Nordics have changed course—mainly to the right. Government’s share of GDP in Sweden, which has dropped by around 18 percentage points, is lower than France’s and could soon be lower than Britain’s. Taxes have been cut: the corporate rate is 22%, far lower than America’s. The Nordics have focused on balancing the books. While Mr Obama and Congress dither over entitlement reform, Sweden has reformed its pension system (see Free exchange). Its budget deficit is 0.3% of GDP; America’s is 7%.

    On public services the Nordics have been similarly pragmatic. So long as public services work, they do not mind who provides them. Denmark and Norway allow private firms to run public hospitals. Sweden has a universal system of school vouchers, with private for-profit schools competing with public schools. Denmark also has vouchers—but ones that you can top up. When it comes to choice, Milton Friedman would be more at home in Stockholm than in Washington, DC.

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  27. All_on_Red (1,648 comments) says:

    Sometimes societies are too stupid to survive
    – Mark Steyn

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  28. Weihana (4,606 comments) says:

    tom hunter (3,955 comments) says:
    April 4th, 2014 at 1:40 pm

    It may still come as a surprise to many people, but the Nordic countries have been showing that shrinking the government can be done proactively, rather than under the gun:

    …and the size of their government is still bigger than ours.

    A little out-dated but not too bad:

    http://www.teara.govt.nz/en/graph/21559/new-zealands-tax-burden

    The lesson of the Nordic countries is not that reducing the size of government is always better (nor is it that a bigger government is always better), it is that a welfare state is compatible with an efficient capitalist economy.

    the corporate rate is 22%, far lower than America’s

    The effective rate in the US is quite a bit lower than the nominal rate.

    Its budget deficit is 0.3% of GDP; America’s is 7%.

    That’s because Sweden taxes in order to spend. The US taxes less but still spends. 4 years in 40 have seen budget surplus. Thanks Obama!

    On public services the Nordics have been similarly pragmatic.

    Which is exactly the point I was trying to make. Pragmatism should trump small government (and big government) ideology.

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  29. tom hunter (5,093 comments) says:

    Pragmatism should trump small government (and big government) ideology.

    Key word that, “should”. I heard it all the time pre-Rogernomics.

    When I see left-wing criticisms here in NZ of Sweden’s approach – private firms running public hospitals, private schools competing with public schools – I don’t see evidence of pragmatism any more than I see in France. These criticisms are not on the Far-Left nutter sites either, but on the likes of Public Address, the very definition of middle-class, urban, leftism. Presumably they look at those Swedish stats and see plenty of room for NZ’s government spending to grow.

    When I see mikenmild’s response to OneTrack’s list of Labour-Green ideas – Minor tinkering, OneTrack. – I also don’t see much evidence of pragmatism, even accounting for snark!

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  30. ShawnLH (5,757 comments) says:

    Who defines what is pragmatic? That’s the immediate problem with claims to pragmatism. And often some people’s “pragmatism” looks suspiciously like their personal ideology.

    The other problem is the issue of justice. Pragmatism easily becomes an excuse for riding roughshod over rights and freedoms.

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  31. jcuk (716 comments) says:

    I have often wondered how the bloggers proposing the right wing solution would survive / enjoy actually living in the world they advocate instead of snug in the bed writing while protected by the welfare state … a bunch of hypocrits for sure.

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  32. adze (2,129 comments) says:

    “And the right always maintain that size.”

    That’s not true – the Bolger government made some rather prominent cuts, and even the Key government implemented a spending cap on public sector spending (after runaway growth in the Clark years).

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  33. mikenmild (11,777 comments) says:

    The point I have tried to make, probably not very well, is that there is a high deal of consensus in the New Zealand political system about economic and social matters. Both main parties belong in the midstream of social democratic welfare capitalism. This consensus has been in place since at least 1949, when the first National government essentially left Labour’s welfare state untouched. We can count ourselves lucky that there are few fundamentals to argue about in New Zealand and that we continue to enjoy standards of living and social cohesion that are very high by international norms.

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  34. freethinker (694 comments) says:

    You are all missing the point – France is different – the laws of economics do not apply to France they are different which is why they appear arrogant – the rest of the world is simply out of step and France is the only one marching in step. French debt is different because its French , so don’t argue just keep sending the cash so we can enjoy our lifestyle, retire earlier than most and keep our supply of Red Wine secure.

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