Can France support these new economic initiatives? What effect will his victory have on the rest of Europe?
From a BBC profile of Hollande:
Mr Hollande is generally viewed as a moderate.
“I don’t want a hard left,” he said during a debate with Martine Aubry, his main rival for the socialist presidential nomination.
He may come across as a moderate but Mr Hollande chose to fight his campaign on some hard-hitting economic policies, with proposals for a 75% top rate of tax and the recruitment of 60,000 new teachers. He has also vowed to renegotiate the EU’s fiscal growth pact, signed by President Sarkozy.
The idea of a 75% income tax rate for earnings above 1m euros (£820,000; $1.3m) appeared to take his colleagues by surprise and was widely condemned by his rivals. The head of Mr Sarkozy’s UMP party, Jean-Francois Cope, labelled his proposal for thousands of extra teachers as “crazy”.
Hollande’s proposal to hire 60,000 new teachers seems to be a rollback of Sarkozy’s cuts to teacher levels. It seems teacher strikes were held in 2008, 2009 and 2011 to protest cuts of 11,200 and 13,500 and 14,000. There may have been additional strikes and additional cuts to teacher levels, but those news articles I found right off the bat.
Hollande’s proposal to lower the retirement age from 62 to 60 would also be a rollback of a change made during the Sarkozy presidency.
The win by Hollande is a sign that France’s older voters are resistant to change. They want to keep generous retirement benefits and have early retirements, even though they did not pay enough money into these entitlement programs.
There is not enough wealthy individuals to pay for the government France wants. The rich could be taxed 100% and it would not be enough money.
In the end, the group that will be called upon to sacrifice more is youth. Young workers will be asked to pay higher taxes and have even fewer opportunities in order to finance the older generation generous benefits. That is not going to work out well though. As with much of the west, the birth rate in France has been dropping over the past few decades.
Something that would help France is to grow her economy.
“French Voters to Establishment: Apres Nous Le Deluge”
…France’s economy grew (a relatively dismal) 1.7 percent last year, but this was better than in 2010. The economy still remains the dominant concern of the French and well it should. But there’s a problem: the French don’t like their economy the way it is, but they also don’t want the changes that could make it work better. While France isn’t a Greek or Italian style monstrosity of licensing, closed professions and obscure anti-market labor regulations, it is very far from being an easy place to do business.
Its economic sclerosis and its angry youth problem are, of course, connected. Young workers are the ones hurt most by protectionist labor policies; employers are very reluctant to make new hires when that hiring involves a lifetime commitment to a new employee. Imagine if you got tenure working at Starbucks and couldn’t be fired; France, like much of the rest of Europe now has a two tier labor market of tenured older workers and young ‘gypsy’ workers on temporary contracts — or simply unemployed…
There is no doubt about that. None of us would be discussing this if it were not for teachers.
I admit that I am not familiar with the situation in France. My sense is that the cuts to teacher staffing was made as an austerity measure. Whether that helped France’s financial situation, or whether it hurt student learning I don’t know. But it seems clear that, at least from his campaign rhetoric, that Hollande wishes to undo the changes which Sarkozy made to get their country on a better economic footing.
This isn’t a real surprise. Sarkozy was pretty unpopular, both politically and personally. Actually, as I understand it, his personal unpopularity was rather unusual; I think that some polls showed that people would have been more likely to vote for Joe Schmoe with the exact same positions than the rather abrasive and unpleasant Sarkozy (not enough, though, to beat Hollande).
One of many reasons but considered a major one was the fact that Sarkozy was portrayed in the press as Merkle’s little 'French Poodle…he is only 5’5". Every time Merkle of Germany yanked her leash, Sarkozy would follow along. That is why the French right wing ended up with 20% in the first round.
The far right wanted France to drop out of the EU, end immigration, reestablish the Franc, and end the EU passport. They wanted Germany to stop dictating policy to the rest if the EU. Merkle wanted all of the EU nations fiscal and monetary policy be controlled by the central EU government. It would eliminate national sovereignty of member states in the EU. It would be like the UN telling the U.S. how to govern its citizens. I don’t believe too many people would be open to that idea.
Hollande opposed Germany’s Merkle poposal as being against French ecocnomic and sovereignty interests. Now Greece and Italy are considering about leaving the EU because of Merkle’s austerity measures.
As we learned in the 1930’s Great Depression, the only way to get out of a depression is not to cut back but to spend your way out with such programs as major public works programs. The more you cut back, more people become unemployed, the tax base becomes less, consumers stop spending creating further lay offs as the economy spirals downwards into a death spiral.
I think you are going to see a lot of people who are earning above $1.3 million leave France for Monaco which has 0% tax or some other country with lower tax. I think you are going to see slow, stagnate or declining job growth in the private sector because the job creators will leave.
Well, we can add France to the PIIGS nations (Portugal, Italy, Ireland, Greece, Spain) that are going to drive the EU into insolvency. Its only a matter of time before the only generally solvent, productive country, Germany, decides that it is in their national interests to stop funding the entitlement programs of the rest of Europe.
The only reason why this “spend your way out of debt” program seems to have worked is because at the end of WW2, America was the only game in town. At the Bretton Woods Conference, the dollar was adopted as the global reserve trade currency, and in an agreement with Saudi Arabia, Nixon took us off the gold standard if the Saudi’s promised to only trade oil for US dollars.
France is not in any position to make these types of agreements with anyone. noone is going to adopt the Franc as the international trade currency or the Petro-dollar.
Now, I’ve got nothing against Monaco, it’s a nice place and certainly nicer than places like Villefranche (which can be even more expensive as a day out) and it has an awesome train station but three bedroom apartments cost 20 million euro.
So, while ‘many who are in the 75% tax bracket’ might be able to afford to live there, it’s not Paris and it’s not a nice-chateau-in-the-country world.
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