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Sarkozy's plan: Reaganomics with a French accent

In a recent interview with Le Monde, Mr Sarkozy presented his plan in some detail. I would categorise it in terms of four planks. First, on the labour market, he wants to provide financial incentives for people to work more hours. (...)

Second, on corporate governance, he has come out against high executive salaries that do not reflect an equivalent degree of risk. (...)

Third, on taxes and spending, the most important measure is to exempt all but 5 per cent of the population from inheritance taxes. He wants to reduce the general tax ceiling on income from a current 60 per cent to 50 per cent; (...)

Fourth, on monetary policy, he said that the European Central Bank should actively use interest rates to stimulate growth.


This is Reaganomics with a French accent but Mr Sarkozy operates in a different economic policy environment from Ronald Reagan, the former US president. Taxes are high in France for the simple reason that the French state sector accounts for 54 per cent of GDP. In my view, there is nothing wrong with a strong state sector in principle, if this is what a country wants. But it requires some honesty about the tax level. If Mr Sarkozy wanted US-style taxes, he would need a US-style state sector.

In any case, the European Union's stability and growth pact puts severe limits on Mr Sarkozy's room for manoeuvre to increase the deficit. (...) That suggests to me that he will either not be able to implement his proposals for fiscal policy or, if he wants to implement some of them, he will have to introduce new taxes, cut spending or both. In other words, he is either lying or else gearing up to do real damage to the economy.

His proposal number four - changing the mandate of the ECB - is dishonest. (...)

Mr Sarkozy's mild form of ECB bashing on one level reflects a valid concern that the economic governance of the eurozone is far from optimal. At another, more alarming level, it reveals a self-delusion about economic autonomy among the country's political elites.

While I like what Mr Sarkozy has to say about working time and corporate governance, he presented an inadequate economics plan. Ségolène Royal still has to present hers and I bet it will be even more alarming. The coming showdown between the two candidates may well turn out to be great political entertainment. But from an economic point of view, it is depressing.

Royal is a French socialist, so doubly bad by definition, but Sarkozy does not generate enthusiasm there, to say the least... there are pretty harsh words above. His Frenchness overwhelms his pseudo neoliberalism, I guess...

But his probram is called Reaganomics - which should be played on as much as possible.

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

by Jerome a Paris (etg@eurotrib.com) on Tue Jan 30th, 2007 at 06:03:39 PM EST
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