France’s Socialist Experiment Has Collapsed Its Economy

France’s Socialist Experiment Has Collapsed Its Economy

France’s Socialist Experiment Has Collapsed Its Economy

  • “This is going to be a real bloodbath for the state and the public services,”

French President Emmanuel Macron’s government must tackle social spending in the next wave of its reforms even though France will face a weaker growth outlook in next year.

Prime Minister Edouard Philippe said in an interview in Le Journal du Dimanche Sunday the government would press on with its reform drive in the face of record unpopularity after little more than a year in office.

President Macron has so far largely turned a deaf ear to criticism of his reforms, with detractors dubbing him the President of the rich after cuts in capital income during his 1st year in office which he said encouraged investment.

His government has sold its pro-business reforms on promises they will boost growth and jobs, but Mr. Philippe said growth would be weaker than expected next year.

Mr. Philippe told Le Journal du Dimanche that the Y 2019 budget would be based on a growth forecast of 1.7%, instead of the 1.9% forecast in April.

The PM acknowledged that that was likely to weigh on the public budget deficit, which was already under pressure due to plans to make a payroll tax credit scheme permanent.

“But that does not prevent us from sticking to our commitments on reducing taxes while reining in public spending and debt,” he added.

The French government has been under pressure from EU and the International Monetary Fund (IMF) to detail plans to rein in public spending, which is among the highest in the world.

Mr. Philippe said that the government wanted to reduce spending in particular on what he described as ineffective policies like housing or subsidized jobs.

He said that housing allowances, family welfare benefits and pension payouts would increase only 0.3% in Ys 2019 and 2020. That is far less than the 1.5% average inflation rate economists polled by Reuters expect next year and the 1.8% expected in Y 2020.

Meanwhile, the government will consider reducing unemployed people’s jobless benefits over time as part of a reform of unemployment insurance, Mr. Philippe said.

Criticisms of President  Macron’s aloof leadership style and a Summer scandal over his top body guard beating May Day protesters helped push his approval ratings to a record low of only 34% in August, according to an Ifop poll for Le Journal du Dimanche.

Mr. Philippe responded to criticism saying that the government’s policies were designed to reward workers and discourage unmeasured increases in welfare handouts.

Mr. Philippe said that tax on overtime pay would be axed as of September 2019 on top plans do away with worker contributions jobless and health benefits and housing tax.

Meanwhile, he said that efforts to shrink France’s vast public sector would be maintained with plans to cut 4,500 state jobs in Y 2019 and more than 10,000 in Y 2020.

“This is going to be a real bloodbath for the state and the public services,” far-left leader Jean-Luc Melenchon told reporters, responding to Mr. Philippe’s comments.

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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