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France's New Budget Focuses on Cutting Deficit
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The new budget in France is designed around two goals. The first is to take aggressive action to bring the deficit down to 3% by 2013, not a gradual program but one intended to send a strong message to capital markets that France under a Socialist government is dead serious when it comes to the deficit and debt reduction. Every 0.1% increase in France's borrowing rate would mean $260 million going into interest payments on the debt, according to Pierre Muscovici, the finance minister. France's borrowing rate is close to Germany's 1%, and the French are determined to keep it this way. The other goal was stated by Mr. Muscovici: "I don't want a policy of austerity, hitting salaries, weakening the state and turning it into a pauper." The idea being that hitting the common man would mean decline in consumer spending and lower growth and tax revenues that would create the kind of negative spiral facing Spain of declining growth and rising unemployment, worsening deficits, and higher debt payments. The way Muscovici raised the $39 billion- beyond the $9 billion in higher taxes and savings already implemented for 2012- is through $13 billion in new taxes on corporations, and additional $10 billion from new income taxes, including a higher tax rate of 45% on incomes over $193,000. Additional $13 billion will come from a freeze in public spending, so that some ministries take cuts adjusted for inflation keeping the overall budget the same. Spending cuts could come later to balance the budget as growth picks up to 2% in 2014, is the government reasoning, softening the impact. The new budget is well received by German public opinion as showing the resolve of Germany's key partner in the EU. Part of the reason the French are able to get business and people with higher incomes to contribute is that France is unique in that there is a greater consensus than in other countries on the steps needed and a sense that austerity measures targeting the middle class would be counterproductive. The aggressive action with considerations for equity and fairness also gives France the chance for a faster turnaround and avoid the problems plaguing Spain and Italy, which French public opinion and business appears to have grasped and the government's experienced ministers for the economy have successfully presented.
France's 2013 budget and the deficit
06/23/2010
The budget has higher taxes on business and the rich to meet deficit reduction goals just as the economy is stalling.
Grouped Articles
Europe to Vote on Tougher Rules for Currency
New York Times 09/27/2011
Hollande Boosted by French Growth
Wall Street Journal 08/15/2013
France Says It Will Miss Budget Deficit Targets
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German Optimism Depends On Spanish Deficits
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France's Lagarde Forecasts Austerity
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Euro Zone Deficit Hits Target for First Time Since 2008
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Frances's president Hollande's plan for investment in education and Shiller's metaphor of "winter on the family farm"
05/19/2012
Shiller evaluates the Hollande plan using the Salant-Samuelson balanced budget theorem and shows that it would increase national income by the amount of the tax on higher incomes. It would create a more productive economy with investment of the type that occurs in winter on the family farm.
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New York Times 04/13/2013
Wall Street Journal 05/29/2013
A Proud Nation Ponders How to Halt Its Slow Decline
New York Times 08/24/2013
EU Won’t Reject French, Italian Budgets
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European Union Blinks in Budget Battle With Italy and France
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How National Belt-Tightening Goes Awry - Economic View
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Sarkozy and Hollande economic policy measures and France's economy 2012-2014
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France Goes Against the Euro-Zone Flow
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Wall Street Journal 05/29/2013
A Proud Nation Ponders How to Halt Its Slow Decline
New York Times 08/24/2013
France Says It Will Miss Budget Deficit Targets
Wall Street Journal 09/12/2013
German Optimism Depends On Spanish Deficits
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French Cabinet Is Dissolved, a Victim of Austerity Battles
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France's economic growth 2010-2013
08/12/2011
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S.&P. Downgrade Deals Blow to French Government
New York Times 11/08/2013
Wall Street Journal 08/13/2011
French Economy Ground to Halt in 2nd Quarter
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In Europe, Even the German Powerhouse Is Losing Steam
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Throwing Another Barrel of Fuel on the Euro Zone's Fire
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Gap in Competitiveness Weighs on Europe, Analysts Say
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France's boost of the minimum wage in 2012 under the Hollande administration
06/27/2012
France boosted the minimum wage in June 2012 to increase consumer spending.
Grouped Articles
California Set to Raise State Minimum Wage
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Patchwork of Local Wage Laws Fuels Debate Over Raising Federal Minimum
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Germany's Social Democrats Agree to Coalition Talks With Merkel
Wall Street Journal 10/21/2013
New York Times 12/01/2013
Australia Weighs Whether Its Minimum Wage Is Too High
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France to Lift Minimum Wage in Bid to Rev Up Economy
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The new administration of Francois Hollande in France
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Finance Minister Pierre Muscovici, was European Affairs minister in 1997-2002, Foreign Minister is Laurent Fabius, a former prime minister in the 1980's, and Michel Sapin is Minister for Employment, Labor and Social Dialogue. This gives Hollande an experienced team to implement his program and achieve a reorientation of EU policies towards growth.
Grouped Articles
Year Into Hollande Presidency, âa Sense of Driftâ
New York Times 05/04/2013
A Proud Nation Ponders How to Halt Its Slow Decline
New York Times 08/24/2013
For France, U.S. delay on Syria fuels doubts - The Washington Post
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France Tries to Tempt In More Foreign Investment
New York Times 02/17/2014
In Race to French Presidency, Hollande Sets His Own Pace
New York Times 05/05/2012
France's Hollande Replaces Prime Minister Ayrault with Manuel Valls
Wall Street Journal 04/01/2014
A warning light for Greece to exit the eurozone and return to the drachma to restore competitiveness and growth 2011-2012
05/26/2010
Greece needs to lower prices by 31% just to get to the level of Turkey, says the head of the Ifo research institute in Germany, Wener Sinn. Experts fear a breakdown in civil order inside Greece if deflation at this level occurs with Greece still using the euro. Hollande, the Socialist party candidate in France, also expressed similiar concerns, as reported in the New York Times, calling it a breakup in European governance that followed the breakdown in Greek governance. Sinn says the bondholders are overly exaggerating the risks of a breakup in the eurozone if Greece exits the euro.
Grouped Articles
Germany reaps rewards of entitlement cuts - The Washington Post
Washington Post 09/20/2011
New York Times 09/25/2011
New York Times 05/26/2010
New Attempt at French-German Amity Stumbles in Venice
Wall Street Journal 08/21/2013
German Election Overturns Political Order
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Departing EADS Chief Urges Europe to Recommit to Industry
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Air France
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Air France Plans to Cut 2,800 More Jobs
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Air France-KLM Restructuring Puts New Focus on Its Low-Cost Airline
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Paris Airports Quiet as Air France Pilots Strike
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Air France Strife Shows Challenges for European Business
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Air France-KLM’s Cuts Don’t Mean Takeoff
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Air France management
10/17/2011
Grouped Articles
Air France Plans to Cut 2,800 More Jobs
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Air France-KLM Restructuring Puts New Focus on Its Low-Cost Airline
New York Times 09/11/2014
Paris Airports Quiet as Air France Pilots Strike
New York Times 09/15/2014
Air France Strife Shows Challenges for European Business
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Air France-KLM’s Cuts Don’t Mean Takeoff
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S&P and sovereign eurozone debt credit ratings
06/24/2011
S&P debt ratings for France, Spain, Italy, Germany, Netherlands and other Eurozone countries.
Grouped Articles
S.&P. Downgrade Deals Blow to French Government
New York Times 11/08/2013
Social-Security Woes Vex France's Hollande
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New York Times 11/10/2013
Netherlands Loses Triple-A Rating, Spain Outlook Raised
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What Crisis? Big Ratings Firms Stronger Than Ever
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S.&P. Warns Euro Zone of Ratings Downgrades
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France's president Hollande's revision of the 2012 budget
06/23/2010
Grouped Articles
Wall Street Journal 05/29/2013
France Says It Will Miss Budget Deficit Targets
Wall Street Journal 09/12/2013
France's Lagarde Forecasts Austerity
Wall Street Journal 06/23/2010
France's Hollande Replaces Prime Minister Ayrault with Manuel Valls
Wall Street Journal 04/01/2014
EU Won’t Reject French, Italian Budgets
Wall Street Journal 10/28/2014
European Union Blinks in Budget Battle With Italy and France
New York Times 10/28/2014
France's economy in 2010-2014
06/23/2010
The determination in France, as in Britain, to take austerity measures, and to cut the deficit.
Grouped Articles
France Goes Against the Euro-Zone Flow
Wall Street Journal 04/18/2013
Europe to Vote on Tougher Rules for Currency
New York Times 09/27/2011
France Says It Will Miss Budget Deficit Targets
Wall Street Journal 09/12/2013
German Optimism Depends On Spanish Deficits
Wall Street Journal 09/25/2013
S.&P. Downgrade Deals Blow to French Government
New York Times 11/08/2013
Euro Zone Deficit Hits Target for First Time Since 2008
New York Times 04/23/2014
Five Rules for tackling the economic crisis and how Spain was slow to act compared to more aggressive steps in Britain and France
09/28/2011
One of the "must do" critical rules is that strong aggressive action and sound steps be taken early when borrowing rates are still favorable and there is time to respond and bring the debt situation under control. French prime minister Ayrault puts this succintly: "If we don't put a stop to this taxpayer money will keep going to pay for debt reimbursement." Britain has an extra margin of safety because of its established banking systems and experience, France because of support from Germany, a stronger economy and industry-government cooperation, Spain and Italy lack this extra margin of safety and needed even more vigilance and aggressive steps.
Grouped Articles
Wall Street Journal 09/28/2011
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In U.K. Election, It’s Jobs Boom vs. Stagnant Wages
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France Raises Taxes in Tough Budget
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France's New Budget Focuses on Cutting Deficit
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Spain Needs $76 Billion to Recapitalize Its Banks, Audit Finds
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Contrasting approaches of France and Britain in tax policies and foreign investment
07/10/2012
Higher tax rates in France and Hollande's call for the French to see this as a form of patriotism by contributing to reduce the public debt. Britain's Cameron takes a different approach by reducing taxes. Cameron's remark about a red carpet for foreign investment is taken by Hollande as a form of British humor.
Grouped Articles
Wall Street Journal 05/29/2013
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A Proud Nation Ponders How to Halt Its Slow Decline
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Tax rates in Britain: François Miliband
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France Tries to Tempt In More Foreign Investment
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In U.K. Visit, Hollande Urges Unity to Cut French Debt
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Francois Hollande of the Socialist Party as President of France
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French Economy Minister, Arnaud Montebourg, Was Often Out of Step With President
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French Candidate Hollande Assails European Policy on Greece
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French Front-Runner Pledges 75% Tax Bracket
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Ireland becomes a test for E.U. crisis remedy - The Washington Post
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Sarkozy Challenger Lucks Into Election Bid
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France's austerity plans and pension reform 2010-2014
06/16/2010
Grouped Articles
New York Times 11/10/2013
Hard times force French to work longer -- to age 62
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France's Lagarde Forecasts Austerity
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French Unions Protest Pension-Age Overhaul
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French Senate Passes Pension Bill
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French Cabinet Is Dissolved, a Victim of Austerity Battles
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France's tax policies- 2010-2013
08/26/2011
Grouped Articles
Hollande Boosted by French Growth
Wall Street Journal 08/15/2013
New York Times 11/10/2013
France Tries to Tempt In More Foreign Investment
New York Times 02/17/2014
Wall Street Journal 08/26/2011
French Front-Runner Pledges 75% Tax Bracket
Wall Street Journal 02/29/2012
French Presidential Election Stokes Investor Concern
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France's higher taxes on large incomes to reduce income disparities and promote fairness
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Grouped Articles
French Front-Runner Pledges 75% Tax Bracket
Wall Street Journal 02/29/2012
French Presidential Election Stokes Investor Concern
New York Times 04/17/2012
Wall Street Journal 04/19/2012
France's New Budget Focuses on Cutting Deficit
New York Times 09/28/2012
France Assembly Approves Europe Budget Treaty
New York Times 10/09/2012
Ratings of France, UK, Spain and Italy by Moody's Investors Service 2012-2013
01/17/2012
Moody's continued France's tripe A rating with stable outlook in contrast to S&P's downgrade to AA+ in January 2012 and the triple A with negative outlook by Fitch Ratings.
Grouped Articles
The Key to Italy's Rating Is Kept in Canada
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Moody's Is Assessing its Outlook on France
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6 European Nations Get Downgrades
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Spain, Pursuing Austerity, Still Waits for the Payoff
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For Italian Banks, Future Is Cloudy
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France Eludes the Bond Market Sheriffs
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Spain's banking officials, lack of prudent oversight over the banks and bad loans from the real estate bubble
02/22/2011
Jaime Caruana, Rodrigo Rato and Vinals are senior Spanish banking officials who worked for the central bank and at the IMF. Caruana is head of the Bank of International Settlements in Bases (BIS), and Vinal heads a department at the IMF. Rato resigned from Bankia bank after its takeover by the government. Experts say they failed to exercize proper oversight of Spain's banking system and in their positions at the IMF failed to draw early attention to the problems.
Grouped Articles
Investors in Bankia to Sue Bank of Spain Over Losses
New York Times 05/09/2013
Wall Street Journal 09/28/2011
Spain's Bankia Returns to Profit
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Rodrigo Rato Resigns as Executive Chairman of Bankia
New York Times 05/07/2012
Spanish Officials Hailed Banks as the Crisis Built
New York Times 06/26/2012
Spanish Woes Cast Rescue in New Light
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President Hollande's declining popularity in France after only 6 months in office
09/28/2012
A $26 billion tax rebate for business and a budget that pushes quickly for reducing the deficit to 3% of GDP in 2013 lead to growing unpopularity across the spectrum of opinion from the left, centre and right for France's new president Hollande.
Linked Articles
France’s Hollande struggles to regain popularity - The Washington Post
Washington Post 11/15/2012
France's New Budget Focuses on Cutting Deficit
New York Times 09/28/2012
The slow response of Spain compared to the more aggressive aproach of France
07/18/2012
The contrast between Spain's lack of strong and quick action for its banking problems and France's aggressive approach to its debt problem. Spain's problems come from the housing bubble and bad loans in parts of the banking sector especially the cajas savings banks. The lack of strong and early action by bank supervisors at the central bank and the government to cleanup the banks created conditions requiring a bailout. The problems in France which did not experience a housing bubble were the result of slow growth, rising debt and deficits. France took an aggressive approach to tackle these problems, with shared sacrifices, and setting a goal of bringing the deficit down to 3% in 2013 with its 2013 budget.
Linked Articles
France's New Budget Focuses on Cutting Deficit
New York Times 09/28/2012
Spanish Official: Slow Reaction to Crisis
Wall Street Journal 07/18/2012
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