France

For the French government, it is more than ever urgent to convince everyone that the State deficit is moving in the right direction and the public debt is sustainable. In the context of an uncertain future for the French credit rating triple A note, the present debate on the budget of the State for the coming year and the austerity measures it includes became a really hot issue. The initial project of budget for 2012 has been already adopted by the Financial Commission at the French National Assembly and is now being discussed by the deputies.

This article appeared in The Wall Street Journal

In next year’s French presidential elections, it seems increasingly likely that voters will be asked to choose between two types of statism: statism of the left and statism of the right. Over the weekend François Hollande won the final round of the Socialist Party primaries, handily besting party leader Martine Aubry, and is now set to face off against France’s ostensibly center-right president, Nicolas Sarkozy.

The game of representative democracy is such that we constantly have to choose, not between policies, but between programs that are best seen as baskets of policies to be implemented if the candidate supporting that program is elected. The basket that the French President, Nicolas Sarkozy, “sold” to his electors in 2007 was, as always, made of all kinds of policies. But there was one on which he particularly insisted on during the elections and that, in my opinion, brought him the support from many voters: the promise that, if he was elected, individuals who will work more will earn more. “Travailler plus pour gagner plus”– with those words, he was promoting a move away from a society in which the extra money you make is redistributed away from you. At least that’s the way many people understood it.

In 2009, 31.3% of the French GDP has been spent on welfare payments. Those include spending by the State-managed health care system, unemployment benefits and social benefits. The government agency in charge of those payments has tripled its deficits during the past 3 years reaching a record 28 billion € in 2010. The annual amount of welfare payments reached 597,5 billion € in 2009, which is largely superior to the whole amount of the Greek debt (€328 billion).

France’s government presents a project to introduce several modifications in the fiscal law; a project to be validated by the National Assembly before the symbolic date of July 14.

The French government is considering the possibility to force companies that have paid higher dividends to their shareholders in 2010 and have more than 50 employees to pay a €…

No, this is not science fiction, but recent statistics from the most respectable Eurostat. With the exception of Cyprus and Luxembourg, France is the European country with the lowest value added by the industrial sector – 12.4% of GDP in 2009. To compare, the EU27 average is 18% of GDP and the number for Greece is reaching 13.3%, while some of the EU leading economies, like Germany, are scoring up at 22.2%. It is also interesting to notice the paradox that Germany is accounting for approximately the same number of enterprises per capita as France…

The last statistics are placing France between the OECD countries with higher number of civil servants. Despite of the decrease of their number in the last years, they are still…

After the huge increase of public deficits during the past two years, the French government is claiming the beginning of a new era and promises to limit the budget deficit to 6 GDP points in 2011 (down from 7.7% in 2010). If this 1.7 GDP points reduction of deficit is reached, it will be the first time in 50 years that such an effort to restrict public spending ends with success. But will the government reached the target this time?

Less than one month after the final vote of the 2011 Tax Law, members of the French government are revealing that there are projects for several important fiscal reforms in the following months.