Economic policy - between austerity and a Rocky Horror Show...

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The Prime Minister François Fillon has just announced a series of new austerity measures to produce a further 12 billion euros in savings for the government in 2011 and 2012. This follows a downgrading in the forecast for economic growth for both years. The measures include a new reduction in the benefits afforded by a variety of tax breaks and a temporary 3% tax on those with massive incomes. But, argues Laurent Mauduit, the overall package is just another sign of the government's incoherent and crazy economic policy. And one which he says risks tipping France back into recession.

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The Prime Minister François Fillon has just announced a series of new austerity measures to produce a further 12 billion euros in savings for the government in 2011 and 2012. This follows a downgrading in the forecast for economic growth for both years. The measures include a new reduction in the benefits afforded by a variety of tax breaks and a temporary 3% tax on those with massive incomes. But, argues Laurent Mauduit, the overall package is just another sign of the government's incoherent and crazy economic policy. And one which he says risks tipping France back into recession.

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On Wednesday evening Prime Minister unveiled the government's austerity plan, which is as crazy as it is unjust. Those with huge incomes are subject to a derisory extra contribution [a 3% tax on net incomes of more than 500,000 euros, that will be lifted if and when France's budget deficit is reduced to 3%] which has attracted a great deal of attention in the media. Meanwhile much more significant and socially painful measures have received no publicity at all.

From the beginning to the end of his five-year mandate, Nicolas Sarkozy has carried out a hybrid economic and social policy, veering between austerity and a Rocky Horror Show. He has constantly changed course, unpicking one day what he had put in place just before. He has presided over unproductive expenditure while carrying out socially dangerous cuts. With no long term coherence or strategy, and amid indescribable chaos, he has carried out a policy that is muddled and deeply unfair.

The new plan of austerity that the head of state had decided upon and which François Fillon had the difficult job of unveiling on the 24th of August is, in this sense, a model of its kind. Crazy and incoherent, full of skilful ruses or hypocrisies to fool public opinion, economically dangerous and worrying socially, it contains every fault in one package.

François Fillon admitted at his press conference that the government's growth forecasts have been lowered to just 1.75% for both 2011 [in place of 2%] and 2012 [from 2.25%].

Less growth inevitably means lower tax receipts, and thus less room for manoeuvre in economic and social policy. Faced with this situation the government had, on paper, two options open to it. One was to advocate a European strategy of co-operation, with the aim of stimulating growth and helping ensure a concerted recovery. The other was to inflict new austerity measures on an economy that is already totally weakened.

It is this second option that the Elysée has chosen. The reasoning is absurd. Growth is faltering and revenues are drying up? Too bad! In spite of everything let's increase the budget saving measures to reduce the public deficit from 7.1% [of gross domestic product or GDP] at the end of 2010 to 5.7% at the end of 2011, then 4.6% at the end of 2012 and 3% at the end of 2013, according to the financial plan sent to Brussels. It is ultra-liberal orthodoxy that demands it; the priority is to reduce deficits whatever the economic situation.

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