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April ’14 Newsletter: Is the Recovery Sustainable?

Recovery has started, according to some data. Is it sustainable? Or is it based on asset prices inflated by easy monetary policies? Inside this newsletter: * Bond markets and the real economy * Central Banking – The Illusion of Tapering * The Return of Bubbles?


The useless reshuffle : another French exception

Following lacklustre performance at local elections, the French President has appointed a new Prime Minister. Is it a good tactic, and will it change anything?


The fallacious statistics of Mr. Piketty

Book review
In his new book Capital in the 21st century (Belknap Press, April 2014), French economist Thomas Piketty presents a mass of data on asset growth in several European countries and the United States. This information improves the knowledge of our society’s relationship to capital and the divide between the richest and the poorest. Except that the author abuses these data, following 19th century (...)


Are European Elections Bad for Democracy?

Where have all the voters gone....
“Nothing to see here, move on.” So goes the “apology” for low turnout rates in European elections as penned by many European analysts and commentators. “The US have them just as low at mid-term elections, so why worry?” Closer analysis of individual country data by the IREF, however, reveals that the “European turnout deficit” is actually worryingly high in many places, adding to existing concerns (...)


Government’s Fiscal Monopoly: Mono or Poly?

European nations’ fiscal authorities must be doing an excellent job if people are willing to pay hundreds of thousands of euros for the privilege to pay taxes to them… Or is there something else behind the new market for EU citizenship?


The Butch Dutch

They want to be taxed.. or so they say.
Government’s mortgage interest subsidy, besides creating a lot of social costs, benefits almost solely the rich, yet it’s precisely the rich who boldly claim to want to scrap the programme. What’s going on?


Dutch Disease, 2nd edition

… And Then There Were Three…
Ladies and Gentlemen, please welcome to the stage Dutch Disease, 2nd edition. This time it’s not natural wealth that makes you poor, it’s a natural consequence of a poor policy.


Odd Odd-Number Experiment Has Odd Consequences. What Are The Odds?

Only those Parisians whose licence plates end with an odd number could drive their cars down the Boulevards last Monday. It was the 17th, an odd number. This is no solution to a real underlying problem which exists because of a lacking market.


Anti-Pollution Measures: A Third Of Abuse Of Power, A Third Of Mismanagement And A Third Of Demagoguery

And maybe even a fourth third of “electoralism” in order to win the hearts of green voters! In fact, the executive power has nothing but contempt for users, taxpayers and citizens.


Just How Unequal Would We Still Be If We Were All Equal?

Distribution Of Wealth Over The Life-Cycle And Inequality
Suppose we had a society where the only difference among its members were their age. How unequally would wealth then be distributed?


March Newsletter: A Questionable Recovery

The quality of the recovery remains questionable. In the meanwhile, banks must deal with new regulation and investors look for higher yields.


Matteo Renzi And The Reform Challenge In Italy

Of all the shortcomings of the Italian economy, youth unemployment (40%) is the most worrying. The new Prime Minister, Matteo Renzi, took up this issue through labor law reform since it was outdated and harmful. Will he succeed where Mario Monti failed? Yet what happened at Fiat’s may be hopeful.


Obama The Ultimate Survival Guide

A Book By Wayne Allyn Root (Regnery, 2013)
Ultimately, how to resist the Obamamania that is ruining the United States?


France: Away From Global Economy?

"Made in France" produced and exported: it is indeed a very popular program, but it can only be achieved if companies want to stay in or move to France. However, they are escaping from this fiscal and regulatory hell. Abroad, corporate taxes are much lower than in France and the legal framework is stable and (...)


A Weak Recovery Turns Monetary Policy Into A Gamble

European growth stutters along as fear of deflation exerts pressure on the ECB to loosen monetary policy further.


European Energy Policy Is a Failure

Security supply is not guaranteed, energy cost will increase and CO2 emissions will not be reduced. This is an obvious failure that Jean Pierre Riou, President of Mont Champot, has clearly seen. The IREF support his analysis.


Corporate Tax: Northern Good Practices

It is not forbidden to former socialist countries to reduce the weight of the state and drastically reduce taxes, especially on businesses. This was done in Sweden and Denmark, where unemployment is lower than in France .


The Word “Profit” Falls Into Oblivion in François Hollande’s Economic Liberalism

Here is a relevant remarks from Professor Florin Aftalion: the word "profit" has disappeared from the public debate to be replaced by the word "margin". This semantic shift is not trivial: the profit goes to CEOs and shareholders while the margin is under Government control!


Knowledge and Power

A little more than 30 years ago, George Gilder published a book titled: “Wealth and Poverty”. This book became a worldwide bestseller. As a researcher, an economist and an investor, the author showed that government intervention cannot reduce poverty, but economic growth and economic development can only achieve this (...)


The U.S. Economy Is Getting Better Thanks To The Stimulus. Really?

It seems logical: economic growth resumed in the United States, and since the United States used an economic stimulus thanks to budget deficits, it could be believed that public spending lead to recovery. Indeed, but… it is in the sectors that did not benefited from the Federal money that new companies and new jobs were created. And in States that have reduced their public spending (as in some (...)


More Taxes, Less Revenues

The Laffer Effect Has (Also) Arrived In France
This long-debated concept by policy makers and economists is coming back. That is because the Government believes that prosperity cannot be recovered without a strict “austerity policy”. But it actually means higher taxes only. Yet, the latest concerns of the French National Assembly on a substantial fall of tax revenues for 2013 raise the question again: has France reached the top of Laffer’s (...)


Government Caring For Youth: The Path To Failure

France hosted in the November 15th week a summit dedicated to the "Fight Against Youth Unemployment." This is an excellent initiative for a country where the 16-25 years-old population reached a 26.1 % unemployment rate. Yet, France should be doing what is being done elsewhere, especially in Germany, where the rate of youth unemployment is three times lower than in France: 7.7 (...)


France: A Free-Trader President After Hollande?

According to the Harris Interactive poll for Le Figaro daily and LCP television, French President Hollande would not be reelected in 2017. His fiscal policies are highly criticized and would cost him his reelection. It seems that Holland is discovering this principle : the more taxes, the less votes. Yet, if he is not reelected, what would be (...)


Violence and Absurdity of French Anti-Wealth Ideologists

Attacks against wealthy people are still going on in spite of the fact the Welfare-State is plundering taxpayers. In a recently published book, sociologists – I should say ideologists – Michel and Monique Pionçon-Charlot are criticizing those they call "deliquents". No, wealthy people are not offenders or delinquent. They are above all those who create (...)


The Stimulus Does Not Work

The crisis of the world economy since 2008 has encouraged various governments to increase the share of public spending. This increase was a general phenomenon among the OECD countries and contributed to an unprecedented debt hike. An IREF study comparing the development of key economic indicators over the recent period (1997-2011) for some 30 OECD member countries makes it possible to update (...)


Germany : Less Welfare State, More Electoral Victories

Reforming is a path for reelection: German Chancellor Angela Merkel privatized, deregulated, capitalized. She did not reflate nor accepted deficits : she reduced taxes. For sure, there are some lessons to learn for France.


Dutch King Willem Alexander Ends The Welfare State

John Galt in The Netherlands?
"A nation with a small but strong government which gives people the space they need": this what Dutch King Wilhem-Alexander wants for his people. And it has become a domestic policy on September 17th, 2013. The King has a life-time in front of him to consider the social, economic and political evolutions of society. Unlike an elected President, he does not have only a handful of years (...)


A Greek Tragedy, Act III

While Ireland may exit its bailout program at the end of this year, Greece is far from getting out of it. Around 10 to 11 billion euros ($13.1-14.4 billion) from the second half of 2014 will be needed to keep it going next year and in 2015. This will be the Third Act of the economic tragedy unfolding in Greece. Jeroen Dijsselbloem, Dutch Finance Minister, confirmed to the European Parliament (...)


Anti Free Trade: A French Obsession

This is the transaltion of an article published by Nicolas Lecaussin on August 14th, 2013 What is the common point between Socialists as Claude Bartolone, President of the French National Assembly, Pierre Moscovici, the Finance Minister, MP Jérôme Guedj, Conservatives as Xavier Bertrand, Health minister during the Sarkozy Presidency, Environmentalists as European MP Daniel Cohn-Bendit, (...)


Better Be Insured Than On Welfare

This is the translation of an op-ed published by Jean-Philippe Delsol on August 24th, 2013 in the leading French newspaper “Le Figaro”. In France, during the last 30 years, social spending went from 21% to 33%. It is the sign of an ever growing Big Government that is out of control and unbearable. Thus, as German Chancellor Angela Merkel pointed out, Europe “gathers 7% of the world population, (...)


Bailing Out Greece For The Third Time: Useless and Illegimate?

"There will have to be another program in Greece," German Finance Minister Wolfgang Schäuble said bluntly on August 20th. The two previous bail-outs amounted to about 240 billion euros but that was not enough. According to the International Monetary Fund, one the Troika member, the estimated uncovered funding needed by Greece for 2014-2015 may amount to 10.9 billion (...)


5 Billion Euros: The Cost of Subsidized Jobs

“The youth is the utmost priority of my mandate”. Thus spoke François Hollande on January 23, 2013, when wishing a happy new year 2013. “Happy” may not have been the right term, “subsidized” should have been better. Indeed, when saying that 500 000 young people below 25 years-old do not have a job, that 25% of them are unemployed, the French President does not think that entrepreneurship is the (...)


The IREF in The Economist

Nicolas Lecaussin was quoted by The Economist (July 6th - Juy12th, 2013) about a report written with Lucas Léger on French high school economic textbooks. "The IREF study last year" said the Economist, "showed that, in one tome’s 382 pages, only (...)


Who Pays If Banks Fail

European Union finance ministers failed to reach a deal last week on this controversial issue. Germany and France are at odds about costs distribution. The Banking Union is at stake since this law on rescuing and closing banks in the EU is a key point. The problem is to know who is going to decide what will happen to a failing bank and who will pay for (...)


The Making of Tax Hell… And The Escape of Entrepreneurship

Why would you stay in a country where there are more than 200 types of taxes? And in which taxes are piled up and never removed. If French President François Hollande and his government want to fight against tax havens, French taxpayers and entrepreneurs are battling against the daily tax hell they are living (...)


7.5%: Portugal’s New Corporate Tax

Competitiveness is embedded in the private sector. Employment is created only the private sector. Wealth increases through the private sector. No public intervention can manage to replace the private sector, no Government know how to make business and money. As a consequence, the real economy of a country relies on its private sector, not on the Government. Portuguese Prime Minister Pedro (...)


Objectives, Instruments and Problems of Macroprudential Supervision

Since events related to financial, banking, and debt crises regularly make it into the news, a term that seemingly originated from the Bank for International Settlements (BIS) in the late 1970s has become more popular: macroprudential supervision. Whereas microprudential supervision relates to the oversight of individual market participants (e.g. banks), macroprudential policy relates to the (...)


The Risky Business of Protectionism For Global Value Chains

Globalization is often associated with delocalization and unfair competition with emergent countries that are flooding us with cheap goods and services regardless of good environmental practices or social benefits these populations should enjoy, like in rich countries. Beyond this spurious assessment hinge the even more fallacious concept of reciprocity that justifies a new form of (...)


American States Are Tax Decrease Laboratories

In a recent post, Nicolas Lecaussin is pointing out that tax consequences can be studied as in a lab: some American States can be observed. Taxes were lowered in thirty States. If they gather only 20% of the US population, they have created 65% of US jobs.


The Crisis is An Opportunity To Grow A Business

“A recession can be a good time to grow a business”. Thus is the opinion of Lord Young, a British cabinet minister under late Prime Minister Margaret Thatcher and still having his own office in Downing Street. Lord Young’s comments are stated in a report to be published this week and addressed to Prime Minister David Cameron. It is obvious that Lord Young stands for a “creative destruction” and (...)


School Choice Success in the US

The Friedman Foundation has published a report about the 22 American States that enforce school choice thanks to vouchers. Children’s work is better, teaching’s quality has improved and the overall cost of the school system is cheaper which is a benefit to low-income families.


The European Quagmire

The European Commission’s forecasts are gloomy: a 0.1% decrease of European GDP in 2013 as a 0.4% decrease for the Eurozone. It seems that, one after the other, all the member states are collapsing and get trapped into economical disarray. The European Commission gives more time for France and Netherlands to reduce their deficits, but Slovenia is on the edge of explosion while Cyprus, Spain (...)


European Banking (Dis)Union

Germany and Finance Minister Wolfgand Schäuble do not press for setting up a banking union and rejects a centralized authority whereas France and Finance Minister Pierre Moscovici are urging to set up the banking union through centralization. The latter position is also the Commission’s. The Eurozone financial convergence will prove to be complex: European negotiations are at a crossroad not (...)


United Kingdom: 2.8 jobs created in the private sector for 1 public job lost

These figures, calculated by the IREF, point out what is happening in the United Kingdom governed by Premier David Cameron. Since the Tories arrived in power in 2010, between 500.000 and 600.000 public jobs disappeared while the private sector (...)


Going Back to Basics: The Promotion of Free Trade

Big Governments usually do not trust people or companies to improve living conditions. That is why notions of “social justice”, “solidarity”, “equality” and above all “sharing” were hijacked by Governments and turned into an economic principle: redistribution. Since it is believed the Government is the only organization that can be fair and would share wealth without any interests of its own, (...)


The Knowledge Economy Enters GDP

Knowledge has now become a capital investment and no longer a cost of producing goods. This change has been announced by Brent Moulton, head of national accounts at the Bureau of Economic Analysis (BEA), on April 22nd, 2013. This will change the way gross domestic products are calculated. It will lead to an immediate 3% growth in the United States’ (...)


Effects of taxation on European multi-nationals’ financing and profits

The new IREF paper of Stefan Lutz, from the University of Manchester, UK, and the Universidad Complutense de Madrid, Spain, points out that if it is apparent that companies do not welcome taxation, the main reason is that taxes reduce profits: shareholders are disappointed and the prospects for investments and development are penalized. This paper, however, concentrates on how companies react (...)


The Receipt for Government Services for 2013

Richard Durana, Ph.D, director of Institute of Economic and Social Studies (INESS) has annouced that INESS released the Receipt for Government Services for 2013. The annual price of the state for Slovakia increased by EUR 322 (7.3%) and reached EUR 4,704 per citizen.


The Public Spending Trend Hampers The Economy

France is the best example of this economic truth. The French public sector is undermining the economy. It must be pointed out that in Spain and Ireland the crisis was due to a real-estate bubble. In France, the crisis is worsened by an obese bureaucracy. The trend is striking: the French public sector is growing faster than the private sector since (...)


Less Taxes and More Pragmatism Against Tax Havens

Here is a new and big campaign against tax havens. But tax exile will last as long as confiscatory and arbitrary taxes will last. It is the case in France. Should not a tax amnesty be proposed? The IREF is making the proposal that all sorting out that has begun this year should reach an agreement within a short delay and be adjusted at a standard cost of 50% of the total incomes (interests, (...)


The Iron Lady: A Transformational Premiership

“She did not just lead our country; she saved our country” said British Conservative Prime Minister David Cameron as a tribute Margaret Thatcher who died at 87, on April 8th, 2013. Tony Blair, former British Labor Prime Minister, declared: “Very few leaders get to change not only the political landscape of their country but of the world. Margaret was such a leader. And some of the changes she (...)


Small Governemnt vs Corruption

Corruption! A word that is destroying the base of the Government action. Above the “Cahuzac Case”, it is the whole public power that is stained with doubt and distrust. The clear and present danger is the rise of uncontrolled populisms seeking the collapse of a corrupt Government. But this would lead nowhere. The real solution lies in setting up a Small Government and the implementation of the (...)


A Green Economy or An Economy Painted in Green

What if the « green economy » was just a joke? It has become trendy to label every activity as green. Thus environmentalism seems to be at the heart of the economy. Lucas Léger, IREF researcher, analyzed the Happy Planet Index and reveals the trick.


France is doomed

Nicolas Lecaussin analyzed the French President François Hollande’s interview on March 28 on TV. Nothing has come out of it: no reform, no tax decreases, no incentives. On the contrary, as Nicolas Lecaussin pointed out, François Hollande "stubbornly continues on the path of tax hikes and proposals remote from economic (...)


Capital Control: A Threat on Free Markets

This is an unexpected outcome of the Cypriot “bail out – bail in”. The fact that the Cypriot Government is now able to control money transfers and cash withdrawals is a threat for the European market. Can it still be called a free market if restrictions are applied on the ability to move money? Isn’t it also a denial of property (...)


Cypriot Crisis: The Rise of the German Economic Governance

The Cypriot crisis has enthroned Germany has the leading European country. European economics are likely to be German driven from now on. Thus, fiscal profligacy or faulty business models are considered to have caused the recent crisis and the German cure to this is clear: austerity and structural reforms must be enforced. Cyprus was first on the (...)


Denmark: Corporate Tax Brought Down

Nicolas Lecaussin has pointed out in a recent article that, after Germany, the United Kingdom, Sweden and Finland, Denmark is also bringing down its corporate tax: 22% whereas France still is at 34.4%. But there is more: this measure is included in a “growth plan” aiming at giving more freedom to entrepreneurs and (...)


Pay Slips: 6 lines in Germany, 20 lines in France

6 lines against 20! In Germany, the gross salary is taxed by only few contributions (tax on salaries, solidarity, pension fee, Church). It was understood that flexibility is much more efficient with a fiscal and regulatory simplification. In (...)


Lessons Drawn From The Swiss Referendum

Jean-Philippe Delsol pointed out on a recent article the problem of democracy in Europe. Instead of having Nanny-States trying to control its people, let the people speak its own mind.The Swiss referendum on executives’ high wages is the perfect example of a people using Democracy as it should without being monitored by political (...)


Fiscal Exodus or Fiscal Competition

Gilles Hennesy, an LVMH director who is executive vice-president of commercial at Moët Hennesy, and Christophe Navarre, chief executive of Moët Hennesy, are both moving to London. Bernard Charlès, chief executive of Dassault Systèmes, declared that some Dassault’s top managers already from France to other countries for fiscal reasons. The press is talking about fiscal exodus, yet it is not (...)


Bail Out and Bail In: Two Solutions for Cyprus

If an agreement could not be found with the previous Cyprus communist-led government, negotiations resumed intensively between the Troika of European Union, International Monetary Fund and the European Central Bank and the newly elected President Nicos Anastasiades. The Euro zone is again at stake: Cyprus’ bailout would amount to 17 billion euros, equal to Cyprus’ annual economic output. But (...)


Cyprus’ Bailout

The European Union is about to bail out Cyprus but no details on how it could be done are released yet. Joerg Asmussen, ECB board member, announced that “the troika of European Union, International Monetary Fund and the European Central Bank would send a mission of experts to Cyprus on Tuesday for a technical analysis of the country’s financing needs and to get a better understanding of the new (...)


Professional Training Reform: A New Financial System

The “Personal Professional Training Account” is one of the most interesting measures taken in the reform of the professional training sector announced by President François Hollande on March 4th in Blois, France. It is the first time that the “voucher principle” would be applied for the use of public money by workers. Yet, the way the measure is to be implemented may not be satisfactory to allow a (...)


The Patriotic Tax Incentive

Diesel cars should eventually disappear in France. According to the French Court of Auditors (Cour des Comptes) the fact that gas oil is less expensive than regular unleaded gas causes a loss of 7 billion euros for the Government. Things must change. Yet, it is not that easy: 60% of the French cars are diesel cars and 80% of gas consumption is gas (...)


The Truth About Foreign Investments in France

Are there as many foreign investments in France as Arnaud Montebourg claimed in his letter to Maurice Taylor? In his article, Lucas Léger, IREF researcher, analyzed statistical data and concluded that Montebourg was wrong. The truth is that, compared to the United Kingdom and Germany, France is no longer (...)


The Civil Servants’ Working Time

The IREF figures on civil servants’ working time in the OECD countries were quoted in the radio show "Carrément Brunet" on RMC.


Taxing In and Out Of France

Fighting tax exile: this is Yann Galut’s aim. This French Socialist representative is at the head of a Committee created in the National Assembly to think out measures against tax exile. The work of this committee should end up in bills introduced in the Parliament as soon as May.


Innovations Need Companies, Not Government

In a recent article, Lucas Léger, an IREF associate researcher, pointed out that even if the research is a French Government priority, entrepreneurship and innovation are not supported and the basic research would better off without Government intervention.


A New Fiscal Trap In France

Jean-Philippe Delsol has published an op-ed in the French newspaper Les Echos on February 20th about the relationship between entrepreneurs and the French fiscal administration.


IREF Study on Free Schools in Sweden

The IREF Study on the free school system and the use of vouchers was quoted in the Italian information website Il Post. Read the article.


What’s Next On The Fiscal Trend?

The IREF’s aim is to defend and promote economic freedom and fiscal competition. Our aim goes against the OECD’s last study that was commissioned by the G20 and called “Addressing Base Erosion and Profit Shifting”. It will be presented on February 15th at the G20 Summit in Moscow. The OECD claims that “global solutions are needed to ensure that tax systems do not unduly favour multinational (...)


Bailouts, Monetary Policy and Banking: Where Is The European Union Heading?

Prof. Enrico Colombatto (Turin), IREF scientific director, has provided his update on EU policies. This month, he describes sovereign bailouts, the probable change of monetary policies, and the repayment of ECB loans. Domestic. How are the high profile struggling countries faring – Greece, Cyprus, Portugal, Ireland? Despite the January media narrative that the worst of the crisis is over (...)


A market for education: IREF study looks at the Swedish experience

The Swedish education market is one of the freest of the world. As such, it is one of the most interesting to study. Authored by Jacob Arfwedson, the IREF report “Vouchers and Free Schools: the Swedish Experience” provides striking insights into the dynamics of a budding free market in schooling.


Sweden: human development index higher in places with more immigrants

Commentators often tend to link immigration to social problems and high unemployment. But as shown by the Swedish Reform Institute in a comprehensive study published in January 2013, this is not the case, on the contrary.


IKEA: low-cost, high-end and big bucks

By Jacob Arfwedson For global capitalism to reach optimal eclosion, there are several basic conditions: > free trade: companies are allowed to sell wherever they sense a profitable opportunity; > the tech revolution: production may take place anywhere, whereas selling may be done thousands of miles from the point of production; > open communications: without a reasonably modern (...)


In France the legislative process is hijacked by those who depend on public money

Between 3 and 5 per cent of the members of Parliament, and 6 per cent of the senators: the parliamentarians with a background in business represent a tiny minority. An IREF study shows the contrast with four other countries where economic legislation is handled by people who know what it means. In France, the elected representatives are chiefly interested in tax (...)


Google vs. French taxes

By Alexandre Diehl, Lawyer and IREF research Fellow For the past few weeks, and as Google has announced “bad” results on the financial markets, the media are gurgling with strange and technical news on a possible tax audit for the company. What is going on? Has Google broken the law, or are the French yet again attacking a success story out of envy? Has the government found another (...)


Five reasons to abandon the French social dialogue

By Nicolas Lecaussin In France the national economy and the fate of thousands of employees are regularly linked to the grand “social conference”. Successive presidents have paid tribute to the ritual of “social dialogue”. Nicolas Sarkozy did so several times during his presidency with well-known results: the unions firmly opposed the timid attempts at reform and finally called for a vote for (...)


IREF wins capital victory in French Constitutional Council

A petition was submitted by French MPs to the Constitutional Council regarding the limitation on the wealth tax and the new regulations which were to take into account "virtual" incomes. On 28 November 2012, IREF and the French Taxpayers Association addressed an argumentary (see attachment in French) to the members of the National Assembly, urging them to seize the Constitutional Council in (...)


Season’s Greetings

Celebrating that the end of the world has been temporarily postponed (presumably due to government planning) the IREF Paris team wishes you Happy Holidays. In lieu of Season’s Greetings, our Swedish and German colleagues have devised Calendars, revealing both government waste and clever advice on taxes. These may be viewed online at Skattebetalarna and (...)


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