Friday, December 5, 2008
Le Monde solicits the reactions of economists to Sarko's stimulus plan. Jean-Paul Fitoussi is generally pleased. Philippe Aghion is more critical. He thinks the boost to firms to encourage investment will not do the job in the absence of a boost to households to push consumption. He neglects, however, the problem that households may choose to save rather than spend, or may choose to spend on foreign-produced goods, which does nothing to help French employment. He also ignores the accelerated funding of public-works projects, which will channel wages to households that may then spend. Still, the implicit basis of his critique, that the size of the stimulus to investment is probably too small to compensate the anticipated fall in output, is echoed by other economists cited in the piece, one of whom suggests that there had better be a stimulus plan B already in the works.
A correction: I said yesterday that Eric Woerth was going to be promoted to the post of "minister of stimulus." Le Monde reports this morning that the job is going to Patrick Devedjian, who is being kicked upstairs from his position as head of the UMP, from which his departure has long been anticipated. This is a surprise, since Sarkozy had supposedly been unhappy with Devedjian's performance. It has to be said, as well, that he hardly brings to the post the stature of a Larry Summers or Tim Geithner. So either Sarko doesn't attach much importance to the ministry of relance or Devedjian will be a figurehead while someone like Woerth, more of a numbers man, does the work. I leave it to you to decide which option Sarko has chosen.