The FT is on a roll

In an otherwise unremarkable editorial about the upshot of the elections, the FT comes up with this quite remarkable statement:

The only viable path for France is to press ahead with tax cuts and spending reductions that can sustain growth.

Is the FT really saying that in a Keynesian short run, such as we find ourselves in just now, the balanced budget multiplier is negative? Really? Or that the spending multiplier is negative? Or is it perhaps denying that the Eurozone currently finds itself in such a Keynesian short run, in which a lack of demand is the key constraint on growth? (Let’s not even get into the debate about the long run relationship between growth and the size of the state in Europe, although I can’t help writing down one word: Scandinavia.)

And is the FT really claiming that continuing with this programme would make all those FN voters switch to the socialists and UMP?


22 replies on “The FT is on a roll”

Now and then I get the sense that the FT’s marketing advisers are urging them to chase the VSP niche. The How to Spend It supplements may be part of the strategy. There can’t be too many economists in the market for Rolexes and Breitlings and such.

Forgive for this question, but I’d understood Keynsian stimulus was only indicated when the ‘business cycle’ was out of kilter ? Whereas most commentators appear to agree the business cycle is right now…I.e. a correction is inidicated ?

Kevin –

The problem is not the level of the French deficit, it is the overall level of both tax and spending – both need to come down. This translates into a political problem not unfamiliar in Ireland – it’s much easier to get people to agree to lower taxes than to lower spending on things that affect them directly.

Hollande’s difficulty is that he counted on restoring some political calm and sense of common political purpose after the polarising experiment under Sarkozy to then move to a structural reduction in the role of the public sector. Up to now he has singularly failed to create that poltical consensus.

France would benefit from the kind of national agreement that worked in Ireland in the 1990s – but the subsequent experience in Ireland doesn’t provide much encouragement!

If you think as the tax cuts/budget shrinking as part of a political project it makes perfect sense to push these “reforms” now.

You have a policy you deeply want to implement but it has no popular support – most voters disagree with the idea and the policy lacks democratic legitimacy (quaint, I know).

The policy is also clearly counter productive for the well-being of the majority of people now and arguably would not have been a good idea even in the recent past. How do you force that policy on the people? It is either not a good time practically or not a good time politically (you have no leverage).

In the case of the Fiscal Compact and the periphery it was good old threats and bullying but for tax cuts for the rich in France you need another route – the lack of alternatives. The idea is that the French government can either do nothing to try and improve the economy or take a punt on tax cuts and commensurate budget cuts. Again its the EU neoliberal politcal/legal ratchet – the only way is to the right.

It still may not fly – Hollande now has nothing to lose and waiting for sanity to break out in Germany looks a loser. He may have no choice but to fight the elite consensus.

Hollande in his post-election TV interview had this to say;

“Europe has become unreadable, distant, incomprehensible even for [member] states. This can’t go on. Europe must be simple and clear, to be effective where it is expected to be, and withdraw from where it is not necessary.”

In short, Europe must change. The implication might be that France does not have to. However, in the same TV broadcast he said that there would be no change in the mandate which he has given the new French PM (who is at several times his popularity in the polls) which is, in fact, to do exactly that and on the lines advocated by Merkel.

Sarkozy, in an op-ed published conjointly by Le Figaro and Die Zeit on 21 May had this to say;

“No less than half of the current [EU] competences must be abolished and be seized by the member states in future. Europe’s competences [must] be condensed in less than ten priority basic policy areas: industry, agriculture, competition, trade policy negotiations, energy, research…The [European] Commission should no longer have legislative competences because there’s a European Parliament, and it is only for it to have legislative capacity.” He adds, “During its development, Europe has created an administrative labyrinth, with the Commission and all its departments, which must keep themselves busy. The result is hundreds of directives about the most various and often the silliest issues.”

This is sheer nonsense. The items he lists are the core competences of the EU. The Commission has little or no legislative capacity other than a delegated one in the context of framework legislation. It has a right of proposal with the Council (of Ministers) and the EP acting under co-decision being the EU legislature. The rest of what Sarkozy says is the usual euro-sceptic line emanating, mainly from the UK, regarding needless legislation, attributing the blame to the Commission when it is the member states – through their representatives in the Council and the Parliament – that are pressing for and adopting it.

Both of the cited quotations above are courtesy of Open Europe, the most active euro-sceptic think-tank. (It is doubtful, however, if it ever had in mind a development as extreme as that now represented by UKIP).

As Barroso put it in a post-election speech, politicians cannot spend the week criticising the institutions of the EU and expect them to be popular on Sunday.

Meanwhile, back in Hibernia, the third secret of Fatima may be about to be revealed.


John Major’s administration got to the point in 1996 when the most useful way I could sum them up was to observe “they have passed the point where anyone wants to listen”.

Your guys seem to be approaching that point.

@ grumpy

But listen to what? The ersatz version of the EU as peddled by the political pygmies I cited above or the reality?

The moderate centre-right and centre-left parties still hold the reins in the European Parliament which suggests that the electorate are not, in fact, totally swayed by the ersatz version even if the attempt to peddle it by said politicians – trying not to lose power to either the left or the right extremes – is intensifying.

The French have to get their act together. There is nobody else to do it. The EU is already that institutional contradiction; a “federation of nation states” that have retained practically all of the core sovereign powers that go with their retained status. They all, in or out of the euro, got into difficulties in their own way. Blaming the institutions of the EU, which politicians across Europe are doing, is a political cul de sac.

@ grumpy

Two FT links of interest.

The script almost writes itself. And confirms that Merkel is head and shoulders above any of the other European leaders, especially Cameron who has failed to grasp that there is no concession on Europe that can be made to UKIP that will stop it seeking more.


John Major’s administration got to the point in 1996 when the most useful way I could sum them up was to observe “they have passed the point where anyone wants to listen”.

Our problem is that even if we stop listening to those making excuses for the failure of EU policy making and German thuggishness (and its long past time for that) there is nothing we can do about getting rid of the current crop of EU panjandrums or curtailing Germany’s influence over EU institutions and particularly the ECB.

Major was gone a year later but its hard to see the current EU changing for the better until the Germany economy finally suffers the fate of the rest of the Eurozone or a meteor takes out Brussels.


To almost any pro-EU institution or pro-EU argument.


Hence UKIP…


Citing Diane Abbott as a political strategist looks like scraping the bottom of the barrel.

@ grumpy

It is not about Diane Abbott but the behaviour of Miliband. If the main-stream political parties in the UK continue their present approach to UKIP, there is trouble ahead. Fortunately, there is a very good chance that Farage will implode beforehand.


It is decades of euro-arrogance and sophistry that has created the space for UKIP and the rubbish that DA has generally spouted for 20 years is about as in-tune with British public opinion.

But of course, the British are unsophisticated and stubborn, and we should just laugh at them…. As for the French, who needs them?

France through the FT lens is quite distorted. Les Echos and Le Figaro have much more accurate coverage of French business affairs. Le Monde has good political coverage.
I have been watching the Alstom, Siemens, GE negotiations and the involvement of the French Gov’t , which is covered in detail (factually) in the French business press. It is a good example of how the French Gov’t is protecting intellectual property and building strong EU enterprises.

Watch what they do not what they say they will do.


But of course, the British are unsophisticated and stubborn, and we should just laugh at them…. As for the French, who needs them?

I think you’ll find that on my side are the serious thinkers in touch with the political realities and institutional limitations of the situation while on yours there are merely a ragtag assortment of uncouth monolingual short sighted intellectual pygmies (of the extreme right and left) who are totally unaware that even if what they wanted to do was sensible (which I must stress it is not) it is certainly not legal (and nor should it be). Why I could quote you chapter and verse on the topic, in German, and Google translate will do an adequate version of the translation for you. We all signed up to these treaties and obligations and the issue of duress is neither here nor there. Treaties are for ever – abrogation is not even a word. Pacta sunt servanda. The plain people of Ireland are coming to understand this thanks to the Troika.

Ever closer union.

@ grumpy/MH

Europe is not very popular at the moment. That is a fact. But those attributing all the woes of the world to it at the moment are still in a minority and will remain in that position.

The UK is, however, unique and its uniqueness needs to have our full attention for obvious reasons. It has always had an ambiguous and half-hearted relationship with Europe quite at odds with the situation in Ireland (and, possibly, now in Scotland). It has not adopted the euro, retains controls of persons at its frontiers, with Ireland in tow, and has opted out, with Ireland again in tow, of most areas of security and police cooperation. When Cameron speaks of reform, he means that the EU should follow the UK example, halt its progression and go into reverse and become the simple free trade area which the UK thought it should be from the beginning. He will be disappointed.

He has, however, blundering into creating a scapegoat in UK public opinion, an opinion over which he now seems to have lost control; witness the fate of Nick Clegg!

Two links pertinent to the earlier discussion.

Mark Hennessy has it right IMHO as to the bottom-line positions of both Cameron and Milliband. However, the British establishment must be seriously worried at this stage. Only a rejection by Scotland of the possibility of independence is likely to lighten its mood.

“England’s UKIP difficulty is Ireland’s opportunity” ?. At least when it comes FDI?


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