Wednesday, April 16, 2014

Valls Turns Into Hollande

Well, I think Manuel Valls can kiss goodbye to that 58% approval rating. He has just done what François Hollande did on taking office: immediately dashed the hopes invested in him. Just as Hollande promised to renegotiate the TSCG, raising hopes across Europe that he would lead an anti-austerity coalition, so did Valls' initial announcements suggest that he might at last put some additional money into the pockets of people who would spend it, encourage firms to hire by reducing payroll taxes, and in the meantime fend off demands from Brussels and Berlin for drastic spending cuts. But today he announced that the promised €50 billion in spending cuts would not be delayed but would phase in starting in October of this year. These include a freeze on civil service pay hikes, cuts in family allowances, and reduction of other social benefits. At least he had the courage to own the cuts rather than blame them on Brussels. But he also used the false argument of austerians everywhere, that deficit reductions are intended to "help the children" by not overburdening them with debt. The children won't be helped if the economy stagnates for another two or three or four years because of fiscal drags. Worst of all, the prospect of a change of policy direction in the wake of the drubbing the Socialists took in the municipals is now ended. It will be more of the same for the foreseeable future--which may be no longer than the drubbing the Socialists will now surely take in the European elections. Valls may style himself after Tony Blair, but the British leader he now most resembles is David Cameron: he has become the leading exponent of "expansionary contraction."


Mitch Guthman said...

Well, considering the IMF's warning on deflation, I think the French should count themselves very fortunate indeed if a few extra years in the economic doldrums is the worst that comes of this.

This politics of this is very confusing, however. The €50 billion in spending cuts will totally dwarf the proposed stimulus. In fact, spending cuts of that size will be so contractionary that the effects of the proposed stimulus could be compared to peeing in the ocean even assuming that these cuts don’t make its implementation impossible. So, what was the point of raising hopes with the anemic stimulus plan if it was only going to be sabotaged or killed today?

Seriously, can anybody explain this? Valls giveth and Valls taketh away?

FrédéricLN said...

"cuts in family allowances, and reduction of other social benefits" -> I do not read that in the plan , but it is actually fuzzy under this respect.

Anyway it has been made clear that many social allowances would be freezed during at least one year.
I can't see the value of that: when the inflation rate is so low (0.6% in one year), the freeze does not change much, I understand it as a useless provocation. Perhaps as a "biscuit" for negotiation: the Prime Minister can cancel the freeze and that would not cost much more. But I don't think the Ministers and "cabinets" think that way; they were probably looking for something simple that would bring some missing billiion in order to reach the figure of 50.