Wednesday, October 01, 2014

A ray of sense in befuddled European economy


In a move contrary to all the bad economic ideas being forced on Europe by Germany and its economic allies, France has revealed a budget without austerity.
France intensified a showdown with its European Union partners on Wednesday by unveiling a “no austerity” budget that aims to bring its deficit within European guidelines two years later than previously promised. Moving any faster to satisfy the bloc’s budget rules, the government said, would weaken the country’s already feeble economy.

“No further effort will be demanded of the French, because the government — while taking the fiscal responsibility needed to put the country on the right track — rejects austerity,” the government said in a statement accompanying the budget.

The announcements amounted to a new challenge of Germany and the austerity movement at a time when France’s new economy minister, Emmanuel Macron, has admitted that the eurozone’s second-largest economy after Germany’s is “sick.”

The French budget detailed 50 billion euros, or about $63 billion, in spending cuts to be made over the next three years, which President François Hollande’s critics say does amount to an austerity plan. But as Mr. Hollande tries to walk a fine line between promoting economic growth and appeasing European officials who want countries to reduce deficits, less than half of those cuts will be unrolled in the next year.

France is demanding leniency from Brussels to meet European Union deficit targets in a bid to avoid slipping into an outright recession, after Paris already missed two deadlines in the last three years.

“We have taken the decision to adapt the pace of deficit reduction to the economic situation of the country,” Finance Minister Michel Sapin said.

Any additional stagnation or slowdown in the French economy could weigh on a European recovery, which has been alarmingly slow in the wake of the Continent’s lengthy debt crisis.

Growth in the 18 countries that share the euro ground to a halt in the last quarter, and the region's unemployment rate remains stuck at 11.5 percent. By contrast, the American economy appears to be recovering from one of its worst downturns since the 1930s, and unemployment has declined to around 6 percent from about 10 percent at its recent peak.
German sponsored austerity continues to pillage the other members of the European Union and this move by France, while not enough to reverse the damage so far, is a glimmer of hope for the other economies as well as a symbol of resistance to economic stupidity.

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