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Friday, August 29, 2014

Paul Krugman: The Fall of France

Why didn't François Hollande reverse austerity policies in France?:

The Fall of France, by Paul Krugman, Commentary, NY Times: François Hollande, the president of France since 2012, coulda been a contender. He was elected on a promise to turn away from the austerity policies that killed Europe’s brief, inadequate economic recovery... But it was not to be. Once in office, Mr. Hollande promptly folded, giving in completely to demands for even more austerity.
Let it not be said, however, that he is entirely spineless. Earlier this week, he took decisive action, but not, alas, on economic policy... Mr. Hollande ... was focused on purging members of his government daring to question his subservience to Berlin and Brussels.
It’s a remarkable spectacle. To fully appreciate it, however, you need to understand two things. First, Europe, as a whole, is in deep trouble. Second,... France’s performance is much better than you would guess from news reports. France isn’t Greece; it isn’t even Italy. But it is letting itself be bullied as if it were a basket case. ...
Why ... does France get such bad press? It’s hard to escape the suspicion that it’s political: France has a big government and a generous welfare state, which free-market ideology says should lead to economic disaster. So disaster is what gets reported, even if it’s not what the numbers say.
And Mr. Hollande, even though he leads France’s Socialist Party, appears to believe this ideologically motivated bad-mouthing. Worse, he has fallen into a vicious circle in which austerity policies cause growth to stall, and this stalled growth is taken as evidence that France needs even more austerity.
It’s a very sad story, and not just for France.
Most immediately, Europe’s economy is in dire straits. ... Meanwhile, Germany is incorrigible. Its official response to the shake-up in France was a declaration that “there is no contradiction between consolidation and growth” — hey, never mind the experience of the past four years, we still believe that austerity is expansionary.
So Europe desperately needs the leader of a major economy — one that is not in terrible shape — to stand up and say that austerity is killing the Continent’s economic prospects. Mr. Hollande could and should have been that leader, but he isn’t.
And if the European economy continues to stagnate or worse, what will become of the European project — the long-term effort to secure peace and democracy through shared prosperity? In failing France, Mr. Hollande is also failing Europe as a whole — and nobody knows how bad it might get.

    Posted by on Friday, August 29, 2014 at 04:26 AM in Economics, Fiscal Policy | Permalink  Comments (127)

          


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