On page eight of a report that drips with disapproval for France’s modest economic reforms, the European Commission finds room for a killer footnote. reports The Financial Times. Between 1989 and 2013, the French budget deficit was above the ceiling set by the EU’s fiscal rule book — 3 per cent of gross domestic product — for 16 years, it observes.
The document, entitled 'France: Monitoring of Policy Progress Under the Macroeconomic Imbalances Procedure', chides the French like some gimlet-eyed schoolmaster’s end-of-term report: “Barely satisfactory . . . Must try harder . . . Pays no attention in class.” It advises the French to do their “homework” — to use an expression dear to German policy makers — in areas from high public expenditure, high personal and corporate income taxes and high labour costs to over-protected professions, labour market rigidities and declining international competitiveness.
None of these criticisms is wide of the mark. Still, it should be kept in mind that France, since the dawn of the euro era in 1999, has had a more impressive record on economic growth, labour productivity and financial sector stability than many of its eurozone peers. Even that famous French budget deficit would be under 3 per cent of GDP if France spent as little as Germany on public investment.
All of which explains, without justifying, the unpolished language that Jean-Luc Mélenchon, a leftist former French presidential candidate, directed earlier this month at Angela Merkel, Germany’s chancellor. After she suggested that France should make a bigger deficit-cutting effort, Mr Mélenchon tweeted in German: “Maul zu, Frau Merkel. Frankreich ist frei” — “Shut your trap, Ms Merkel. France is free.”
Tactless or trivial, such outbursts distract attention from an encouraging trend in Parisian policy circles on which some critics of France’s budget deficits seem curiously silent. This is the courage of reform-minded government experts in spelling out exactly where France is going wrong and what should be done about it.
The latest example is “France-Germany: Performances Compared”, a report by France Stratégie, a reformist think-tank set up in April 2013 to advise the prime minister, now Manuel Valls. This report makes no attempt to disguise Germany’s superiority in world export market share, control of labour costs, fiscal discipline and the amount of GDP devoted to research and development.
At the same time, it points out that France enjoys a healthier demographic outlook than Germany and hints that the quality of its infrastructure is holding up better — thanks, perhaps, to Germany’s insistence on squeezing public expenditure in order to meet its self-imposed target of a balanced budget.
Another example is a penetrating study on France’s regulated professions by the Inspectorate-General of Finances, a venerable state body. This report, published in September, concludes that a liberalisation of the entry barriers, fees and similar restrictions that protect notaries, pharmacists and other professionals from competition would add 0.5 per cent to GDP over five years and create 120,000 jobs.
Read more of this report from The Financial Times.