Wednesday, September 4, 2013

French Fiscal Outlook Improves

France will have a primary budget surplus this year. The government has achieved this goal by raising taxes rather than cutting spending. EU Commissioner Olli Rehn thinks it should have been the other way around. Simon Wren-Lewis and Paul Krugman argue that Rehn is revealing the true aim of EU-enforced austerity: to pare back the welfare state. Both would prefer a counter-cyclical rather than pro-cyclical fiscal policy, but given that France has agreed to the latter, they think that a government elected to raise taxes rather than cut benefits should be permitted to do so without interference from the EU.

1 comment:

FrédéricLN said...

Thank you for the point. But it only looks like France will have "an underlying" primary budget surplus this year, and a real-life primary deficit? So, pro-cyclical growing debt ;-)

(With which we can live, that's sure).