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Budgetary Tricks

by Jerome a Paris Thu Jan 26th, 2006 at 06:08:35 AM EST

This could be an occasion to crow, as France has unexpectedly managed to lower its budget deficit this year and to bring it back to the Maastricht Treaty-mandated 3% of GDP, while the UK is being scolded by the EU for its excessive deficit.

But alas, this will not happen, as Le Canard Enchainé provides in loving detail an insight on the various tricks that were used by the Villepin/Breton duo (PM/Minister for Economy) to artificially lower the deficit, which would have otherwise reached 3.8% of GDP, or EUR 12 bn more than announced:

  • thanks to a discreet budgetary amendment, some company taxes due on 31 March were brought forward to 31 December. To make sure it would be applied, the ministry wrote to the biggest companies to cough up. Total paid up EUR 350 M (which of course it won't pay in 2006);

  • Similar pressure was put on the mobile phone operators to pay before the end of last year the EUR 534 M fine they received for cartel behavior;

  • Even better: the government included in its 2005 income a lump sum payment of EUR 7.7 bn from EDF, meant to compensate the transfer of EDF's pensions obligations to the national pensions scheme. This is allowed under normal budgetary rules (of course, it will increase public spending by several hundred million euros every year in the future) but what is more unusual is that EDF actually paid only EUR 3.3 bn in 2005, and has until 2025 to pay up the rest - but the government counted the full amount neverheless (it's legal, but very enronesque);

  • in a similar vein, the government has pushed onto 2006 a number of expenses. For instance, government subsidises zero-interest home purchase loans to poor families. This used to be done via direct payments to banks. Now, instead, it will be done via tax credits to the banks, and thus deducted from tax income in the future... The same has been done for a number of other similar programmes.

I am sure similar "massaging" of numbers takes place elsewhere, but it is rare to get such an explicit description. Why are there so few newspapers like Le Canard Enchainé (which, it deserves to be noted again, is employee-owned, carries NO ads whatsoever, is thus totally independent, and yet is insanely profitable)?


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thanks to a discreet budgetary amendment, some company taxes due on 31 March were brought forward to 31 December. To make sure it would be applied, the ministry wrote to the biggest companies to cough up. Total paid up EUR 350 M (which of course it won't pay in 2006);

I've heard that one before: the Irish government have done this several times with various taxes.

by Colman (colman at eurotrib.com) on Thu Jan 26th, 2006 at 06:17:30 AM EST
Sorry to start the thread with a contribution slightly OT, but here my rant:

The Journalists of the Canard Enchaine should be ashamed of themselves.
With the money they win, if they were really independant, instead of limiting the staff to the same old signatures dividing together big checks at the end of the month, they should pay for some knowledgeable specialists (accountant - fiscalist - detectives?) and uncover some big scandals out of their OWN initiative.

But they are not so hungry anymore, they are too well fed with gossip by the power inside the périphérique during their turf war. Their mascot should be a canard au grand bassin du jardin du Luxembourg.

I do not deny having been thrilled by the newspaper the 3-4 first years I read it -as every politically interested french young people coming of age, I guess.
But now, I mainly read in it what is missing: autonomous, long-breath inquiries.

Ok, maybe it wouldn't help, because nobody else  in the media really follow up - Crédit Lyonnais, Helicoptere for judge-alpinist, corporate scandals anyone?
But nevertheless, I maintain they are well on the way of becoming the "ronds-de-cuir" of the inquirying reporting.

La répartie est dans l'escalier. Elle revient de suite.

by lacordaire on Thu Jan 26th, 2006 at 06:29:52 AM EST
There's a bit of both.

Some of their articles are extremely well informed (like this one on the budget), and some are little more than rants or "Café du Commerce" style commentary. On some technical issues, they could certainly do better with specialists writing (and not just being interviewed by journalists).

As to your point about them being lazy, I am sure there is some of that (they do have a "rente de situation" now, as the place for insider political gossip), but there is also the fact that they are largely ignored.

In almost every single issue, you have a story that could (or should) be a major scandal in its own right, but it's never picked up anywhere else.

The AMF/Breton story is typical - they unearthed (or were informed of) a cover up in an enquiry that could potentially embarrass Breton, and it was totally ignore in France - despite being picked up on the front page of the Financial Times! (This week, they comment that Breton apparently called the FT to accuse them of anti-French bias...)

And yet they have broken most of the big scandals of the past 25 years in France. It's more an indictment of the rest of the media than anything else.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Thu Jan 26th, 2006 at 06:38:11 AM EST
[ Parent ]
Sounds like the same budget tricks Spain's autonomous communities play with the central government. Do they offer courses in creative accounting at the university, or are all these tricks invented in-house? If they applied their wits to improving the economy instead of massaging their data they might actually do a good job.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jan 26th, 2006 at 06:34:43 AM EST
What do you think all those "fact-finding" missions are all about?
by Colman (colman at eurotrib.com) on Thu Jan 26th, 2006 at 06:35:35 AM EST
[ Parent ]
Repeat after me: the intelligence and facts are being fixed around the policy.

A society committed to the notion that government is always bad will have bad government. And it doesn't have to be that way. — Paul Krugman
by Migeru (migeru at eurotrib dot com) on Thu Jan 26th, 2006 at 06:36:27 AM EST
[ Parent ]
Is there an index that messures compliance and transparency for each member state?
by Samir on Thu Jan 26th, 2006 at 08:11:32 AM EST
Who said accounting is boring? It's a very creative art! I wonder to what degree this kind of enronesque number play is pervasive in other EU states. Do analysts sit around and categorise budget deficits by level of creative accounting? I would image that there is some knowledge of which deficits are more or less "accurate".
by Alexandra in WMass (alexandra_wmass[a|t]yahoo[d|o|t]fr) on Thu Jan 26th, 2006 at 11:28:44 AM EST
As I understand it, what happened in Britain's case was that Brown originally put a huge amount of PPP (or Private Finance Initiative) schemes "off the books" only to be told by the National Audit Office that they properly belonged in the PSBR. That liabiity bumped the deficit over the 3%.

By the way, does anybody know the comparable figure for the USA? If, as I suspect, the EU figures include local government, I presume the States' deficits would have to be included.  

by Londonbear on Thu Jan 26th, 2006 at 10:06:01 PM EST


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