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France Downgraded, Hollande Whimpers


The last of the three major credit raters downgraded France on Friday, citing poor growth, rising unemployment, and projected public debt of 96 percent of GDP by next year. President François Hollande has responded by reluctantly promising to move ahead with austerity measures. The FT reports:

There would be “less spending in 2014 than in 2013”, [Hollande] said, adding that the government’s planned pensions reform would be crucial in Paris’s efforts to reduce the budget deficit. At the same time, Mr Hollande was careful to say that public spending cuts would be implemented at a rate “compatible with growth”.

Since assuming office 14 months ago, the French president has repeatedly stressed his opposition to what he calls counterproductive austerity. This has prompted criticism from some economists that the pace of reform has been too slow. On Sunday, he insisted that “the economic recovery is already there”, citing recent figures showing a rebound in industrial production and a slight rise in consumer spending. He refused to rule out tax increases but said these would be imposed “only if absolutely necessary”.

It wasn’t long ago that Hollande entered office as a left-wing firebrand, chasing a 75 percent tax on the rich to avoid having to cut any spending. When Moody’s downgraded France in November of last year, Hollande was forced to take a hard look at his country’s growth outlook, labor market, and budget scenarios. He now finds himself in the unenviable position of having to balance spending cuts with the demands of a left-wing base that thinks he’s not toeing the party line enough.

But Hollande’s dithering has only made this challenge worse. In America he’d be called a “flip-flopper,” trying at every point to placate his various detractors while accomplishing zilch and satisfying none of them.

[François Hollande photo courtesy of Wikimedia Commons]

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  • Atanu Maulik

    The best anti-dote to socialism is the actual experience of it. Hopefully the French will not want a repeat experience for a long time to come.

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