François Hollande’s fiscal puzzle
- The new Socialist government tackles its budget deficit, but with more taxes than spending cuts
Jul 7th 2012 | PARIS | from the Economist - print edition
And the conclusion of the paper reads:
On public spending, it could be that Mr Hollande is waiting until the autumn to take the hard decisions. By then, he will have made plenty of gestures, such as taxing business and the rich, that afford him cover for broader and more painful measures. His government will also have begun what it calls “social democracy”, or talking to the trade unions about change. Even by Mr Hollande’s own calculations, he will be up against some unpleasant choices. He has promised to create 60,000 new teaching jobs without increasing the overall public-sector payroll. With job cuts in the police service, security and justice ruled out, this means much bigger cuts somewhere else.
The puzzle for Mr Hollande is how to carry out all this as a Socialist president elected to end excessive austerity in Europe who did not warn voters about the fiscal shock ahead. Many Socialists had hoped to be able to blame the previous government for leaving a greater budgetary mess than expected; yet, to its credit, the auditor explained that the gap was mostly down to disappointing growth and over-optimistic forecasts. Mr Hollande is running out of options. The stark choice was best summed up by Mr Migaud. “Better to make an effort now than tomorrow,” he said, “because tomorrow it could be heavier, more painful, and, above all, imposed from outside.”