quinta-feira, 24 de novembro de 2016
France’s would-be Thatcher is short on reform
France’s would-be Thatcher is short on reform
François Fillon’s economic platform is lacking in growth boosters.
By PIERRE BRIANÇON 11/23/16, 3:17 PM CET Updated 11/24/16, 5:54 AM CET
PARIS — François Fillon is the rare politician who doesn’t mind being called a name that has long been an insult in French politics: “Thatcherite.”
The conservative presidential candidate was this week shown a front-page montage of him wearing a wig that made him look like former U.K. leader Margaret Thatcher. “Always glad to be compared to someone who saved her country,” Fillon shot back.
Yet a close look at his economic platform reveals that apart from catchy headline numbers on spending and tax cuts, Fillon’s plan fails to address the French economy’s fundamental flaws or put forward the type of structural reforms economists have long said were needed for growth to pick up.
His platform has been subjected to increased scrutiny in the last few days after he emerged as the surprise winner of the first round of the conservative presidential primary on November 20. Fillon beat Alain Juppé, who will challenge him for the conservatives’ nomination in the second round on Sunday.
Critics tend to use one word to describe the program of the new favorite to win next year’s presidential election: “archaic.”
Fillon’s program seems “devoid of any sense of economic strategy,” said Alexandre Delaigue, a professor of economics at Lille University. “Its underlying narrative is the old moralistic tale: We have sinned, with the deficits, public debt, the 35-hour week; we must expiate; and the only way to redemption is suffering — in this case, massive cuts in the public service ranks.”
“The only Thatcherite thing about his platform is that it looks 30 years old,” quipped another detractor, an adviser to Juppé who asked not to be named because the former frontrunner has chosen to campaign on the supposed “brutality” of his rival’s proposals.
“Fillon’s is not a market-friendly liberal program. It’s just a platform to please the French business lobbies” — Economics professor Marc Ferracci
The critics have focused on Fillon’s plan to cut 500,000 public sector jobs — which Juppé, who advocates half as much, says would be “impossible.” But Fillon’s stated readiness to take on France’s public sector unions seems to please his supporters.
While the public sector job cuts make for good soundbites, critics also point out that Fillon has been mum on one of the most crucial problems plaguing the French economy: its ingrained lack of competition.
“Instead of obsessing about public debt, where are the proposals to create jobs for the youth, to break monopolies in protected professions? He doesn’t even mention the digital economy, and seems to have no idea about how to foster a better business environment for startups,” said the Juppé adviser.
“Fillon’s is not a market-friendly liberal program. It’s just a platform to please the French business lobbies,” agreed Marc Ferracci, an economics professor and an adviser to independent presidential candidate Emmanuel Macron, the former economy minister under President François Hollande. “There’s nothing on globalization and its challenges, on how best to improve labor relations in France, or on public investment.”
Fillon has suggested some €100 billion in spending cuts over the five years of the next presidential term, and has pledged to reduce taxes over the same period by some €50 billion.
But “if you want to have a strong right-wing, growth-friendly program, you should look to Ronald Reagan instead,” Delaigue said, adding Fillon should aim for massive tax cuts, and minor spending cuts.
“He could also eliminate all the tax deductions that professional lobbies have accumulated over the years, then use it to, say, lower the corporate income tax to 10 percent — even lower than the Irish — and play tax competition. You could argue for or against from a political viewpoint. But at least that would be a true right-wing, growth-friendly policy.”
Critics argue that Fillon avoids the tough choices that his supply-side policy would entail by sticking to generalities and headline numbers, such as the 500,000 public sector job cuts.
He has not said where the cuts would happen, simply announcing they would be spread among the central government, local authorities and the large public health care system.
In France, education accounts for almost 60 percent of the central government’s payrolls, while armed forces and security services make up the bulk of the rest. But Fillon has refrained from saying whether he would consider cutting the number of teachers or policemen.
Doing away with the wealth tax won’t stimulate the economy, Delaigue noted, because it’s paid by people who will save and not spend the proceeds.
The conservative frontrunner is also advocating cuts to payroll taxes — which help finance welfare spending such as family and health care benefits. To make up for the cuts, he would raise the VAT by some 2 percentage points.
“Raising taxes while there’s no inflation is a brain-dead measure,” the Juppé adviser said. “That means you cut real wages and you’ll have a recessionary effect in the next two years.”
Meanwhile, Fillon wants to repeal the controversial “wealth tax” that has been a topic of fierce debates between the Left and the Right ever since it was created by François Mitterrand’s Socialist government back in 1982.
Subsequent conservative governments have refrained from abolishing the tax for fear of being accused of favoring the rich; even Nicolas Sarkozy, who repeatedly labeled it “stupid,” only reformed it slightly during his presidency.
Doing away with the wealth tax won’t stimulate the economy, Delaigue noted, because it’s paid by people who will save and not spend the proceeds. Fillon doesn’t suggest any cuts in income tax rates, which would help boost growth faster.
The major risk in Fillon’s plan is that its recessionary impact would alert financial markets that France’s debt situation could deteriorate fast — which would only work against his stated aim to shrink it.
For now, however, it seems Fillon is telling his right-wing supporters just what they want to hear.