Saturday, January 10, 2009

Stimulus to Date

Libé attempts an accurate accounting of French bailout and stimulus measures to date and reduces Patrick Devedjian's incredible figure of 428 billion euros to a more plausible 50-60 billion, including both loans to banks and new investment.

Which is still a lot of money--3 percent of GDP--but it's not all "stimulus," a point that Libé fails to make clearly. Sarkozy himself seems intent on obfuscating this point. He has been extolling the state for making "a good investment" by lending to banks at 9 pct. "Is there anyone here whose savings are invested today at 9%?" he taunted his audience.* Well, on the one hand, he's counting his chickens a bit soon: the loans haven't been repaid, and in the nature of things the risk of default is not insignificant. On the other hand, banks borrowing from the state at 9 pct must need the money pretty badly, and they're not likely to be lending it on at a higher rate. This is a backstop in the form of emergency bridge loans, not a stimulus.

*Mais surtout, c’est 10,5 milliards placés à 9%. Je demande : y-a-t’il un seul d’entre vous qui aujourd’hui a placé ses économies à 9%?

1 comment:

MYOS said...

Sarkofrance, a blog that does not like Sarkozy, offers this take on the French stimulus package v. the American stimulus package:
http://sarkofrance.blogspot.com/2009/01/sarkozy-interpelle-obama-par-orgueil.html

You're right: banks are not lending. Many small businesses are about to be bankrupt, even if they have work and orders.
The Gamelin story is a sad example that made the news: this shining example of a profitable business created in a rags-to-riches story was refused a bridge loan after 20 years with no-default, even though the company would collect payment and thus be able to repay it after its product was delivered and paid for. The business owner committed suicide around Christmas; his 23-year old daughter started a SOS on FaceBook to get enough money to at least pay the 120 workers who kept on working even though they were not paid.

Apparently, 3/4 French small business owners are concerned/worried right now, many more than in the US. I guess that's another Obama effect.