Thus, unless we believe that the long-term real borrowing costs for western Europe as a whole will be more than 5% per year – that nominal borrowing costs will be more than 7% year – spending cuts now to reduce the deficit are likely to erode rather than bolster the overall fiscal situation. They damage rather than restore confidence. They raise rather than lower the riskiness of the outstanding bond stock. And so they reduce rather than raise employment and production in the economy.
Credible plans and programs for long-run fiscal balance, yes.
Structural reforms to free-up enterprise and increase opportunity, yes.
Reworking the social-insurance state to make it cheaper and less wasteful, yes.
But spending cuts now to lay sacrifices on the altar of credibility in the hope of improving confidence and reducing the riskiness of the outstanding bond stock? No. The arithmetic simply goes the wrong way – unless you believe that Eurozone nominal bond yields will soon normalize to levels above 7% per year.
Sunday, April 8, 2012
To hear Nicolas Sarkozy today, candidate of the clash of civilizations, one would not think of him as a leader who once considered the integration of French Muslims to be a top priority of government. As minister, however, it was he who promoted the idea of making the UOIF, the group representing French Islam, into a privileged interlocutor of the government for France's plural Muslim communities, much as the CRIF, the organization representing French Jewry, is the privileged interlocutor for France's several Jewish communities. But Mohamed Sifaoui, who is no friend of the UOIF, reminds us of a different Sarkozy:
Il est nécessaire de préciser que l'UOIF a gagné en respectabilité et en légitimité grâce à Nicolas Sarkozy, le ministre de l'Intérieur, mais aussi grâce au même Nicolas Sarkozy, élu président de la République. Celui qui semble découvrir, en pleine campagne électorale, le caractère intégriste de cette organisation s'était rendu "en ami", en avril 2003, au congrès de la même association pour faire un discours devant des femmes séparées des hommes légitimant ainsi, par une telle présence, le caractère sexiste du mouvement intégriste.At the time, I supported Sarkozy's move. I thought it was essential to integrate the Muslim voice into the French chorus. The history of the UOIF has not been placid, and I don't know enough about it to contest Sifaoui's point that the group has always been "intégriste." My memory is that there was, and probably still is, an internal contest among a number of different factions. And no matter what the dominant coloration, I think Sarkozy was right to engage the group, speak to it about republican values and expectations, and begin a dialog that needed to continue but has now, apparently, been broken off. In any case, it's good to recall this "other" Sarkozy of the ancient past--2003! (h/t Arun Kapil)