Thursday, February 14, 2013
French Economic Policy
This article from the Economist reviews the confusing economic policy of France's new president François Hollande. Hollande is a socialist and not surprisingly his first few actions as president were to lower pension ages, increase family benefits, and even capped petrol prices. But Hollande is now faced with a dire situation. France's economic growth is near zero, its public spending as a share of GDP is 56%, and the high cost of french workers is making many french firms uncompetitive. It seems Hollande has recongnized the situation and the need for spending reform but the socialist party in France is opposed to many of the necessary reforms. The drawback of the French model is in full view. While good for reducing the impact of recessions the model also retards growth.
http://www.economist.com/news/europe/21571900-elected-left-frances-president-seems-be-veering-towards-centre-which-way-mr
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2 comments:
According to the article, it is very likely that France's economy would have no significant change in the next few years within the tenure of President Hollande. This is highly connected to what we learned in class in the way that distribution of equality and economic stimulation barely can go together. I guess it would be even harder for France to have a revolution for its economic performance given the fact that Hollande is playing safe and still in dilemma between slashing budget or increasing social benefits for those he once promised when elected as a left wing. I think the biggest problem right now is that France is trying to pursue two goals at the same time: being more competitive while maintaining state's control over many things. They need more gumptious President who is going either American way or Sweden way.
I'm interested to see what affects the lower government spending and higher taxes has on the already slow French economy. The contractionary policy will probably only further hurt the French businesses that were already hurt from high worker wages.
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