Sunday, May 5, 2013

Straight Talk on the French Economy from Daniel Cohen

Here. He pretty much agrees with what I've been saying in numerous recent posts.


FrédéricLN said...

Sure. But Blanchard's point on "structural deficit" (rather than the 3% threshold), which I share, implies that the deficit should be cut by 10 more (not less) than the present forecasts of the Hollande administration.

And regarding German wages, their increase (2008-2009) has already been faster than in France (+3% above inflation, agains +2% in France).

Regarding all ideas of sharing debt, or recapitalization costs, between European States, I would be happy to learn about the States of the USA: is their debt shared? Does the FED lend directly to them? In short, who pays for the bailouts? (I searched on the web but did not really find synthetic information about that). Of course our European states, which take much more own decisions (esp. in spending and borrowing!) than yours, cannot share as much as the United States do. But lessons should surely be learnt from your experience.

FrédéricLN said...

oops, 10 "billions" more. (0.5% GDP).

Art Goldhammer said...

In the US, most states are required to run a balanced budget. When they don't (as in California recently), they are punished by the bond markets, just as in Europe. Nevertheless, there are ENORMOUS transfer payments between states via the federal government. Our social security system and military procurement ensure that some states, mostly poor, are permanently subsidized by other states, mostly rich. Something like this needs to happen in Europe. In addition, the federal government pays out huge amounts to the states in subsidies for education, health, welfare assistance, etc. These kinds of transfers are necessary to maintain a single currency across a diverse continent. Europe's failure to realize this is one of its major shortcomings in institutional design.

FrédéricLN said...

Oh yes. I fully agree Europe should go in this direction. Curiously, the basic principles of the European budget are "don't replace what the Member States should do, but add value": Europe as an institution is an additional "project-based" layer over existing hierarchical institutions. And as is often the case for transversal projects, only a few people really care about them; under this specific respect, they are not "democratic".

Having European common budgets on specific topics, for example health procurements, or basic education, would greatly change the deal. That could easily rise around 4 to 8% of European GDP (as opposed to the present 1%).

That would give some content to the motto "Europe sociale".

It would be a change in the substance, re the way Europe is run.

A democratic debate on European policies would be harshly needed then — which we completely miss, esp. because we don't speak the same languages and don't look at the same TV channels.

Common, democratic decisions on education or health budgets, that would be the exact opposite of the present suggestions that country A should be allowed to borrow money that country B would have the duty to reimburse — which is as anti-democratic as possible. Under this respect, I felt the decision by the Karlsruhe court very relevant and "to the point".