The transitory view of the current inflation episode is getting more support from the evidence.…
Friday lay day – The Stability Pact didn’t mean much anyway, did it?
It’s my Friday lay day blog and I am spending most of today reading French documents from the 1960s. The French theme is appropriate given recent statements by the ‘new Napoleon’ a.k.a. François Hollande this week about his intentions to ignore the rigid fiscal rules imposed on Eurozone Member States and expand the fiscal deficit to allow him to employ a significant number of extra workers in various areas of policing and security. While abandoning the “Stability Treaty” to use Hollande’s own words, by which he means the Stability and Growth Pact and its associated and pernicious fiscal rules and oversight, is an admirable display of leadership, the fact that he can only see to do this by engaging in more machinery to entrench the ‘war on terror’ more deeply is disturbing. It would have been much better if he just admitted that fiscal rules governing the Eurozone Member States are unworkable and prevent a government from fulfilling its responsibilities to advance the well-being of its citizens. He is now open to debate in France was the Conservatives who clearly favour more state police, security and military expenditure, such is their xenophobia, but are now demanding that such expenditure is done within the narrow limits of the fiscal rules and are therefore calling for reductions in spending on health and public services. I doubt that even this new Napoleon will be able to sale free of the fiscal straitjacket that is the Eurozone, major security threats notwithstanding.
I don’t wish to comment specifically on the context of the French President’s comments. I am not qualified to make professional assessments of what went down in Paris this week. I have opinions as a private citizen but that is not what this blog is about.
Suffice to say I would be providing significant economic aid with guaranteed employment and educational advancement opportunities in areas where I thought young people might be being persuaded to strap bombs on their bodies with the aim of killing themselves and as many others that happen to get in the way.
On November 16, 2016, the French President François Hollande made an impassioned speech to the French Parliament – Discours du président de la République devant le Parlement réuni en Congrès.
Quite remarkably he declared that “La France est en guerre” which I am sure doesn’t need my translation.
He then said that the attackers:
… constituent une agression contre notre pays, contre ses valeurs, contre sa jeunesse, contre son mode de vie.
(“constitute an aggression against our country, against its values, against its youth, against its lifestyle”).
Before he makes pronouncements of groups who undermine the youth of France he might like to remember that France currently has a youth unemployment of 24.2 per cent and a failing education system which excludes those without adequate resources.
He might like to reflect on the long-term unemployment rate of 43.9 per cent (and rising).
But worse, a report from January 14, 2015 – Is France failing its Muslim youths? – wrote that:
In the suburbs of Paris, where millions of first- and second-generation Arab and African immigrants live, unemployment is over 50 percent.
Between 2012 and 2013, the independent group – Collective Against Islamophobia in France – which is part of the “European Network Against Racism” reported that islamophobic acts had risen by 47 per cent.
An October 2014 Report from the Migration Policy Institute – Shifting Focus: Policies to Support the Labor Market Integration of New Immigrants in Franc – noted that the French “government has not made a policy priority of getting newcomers into jobs” despite this cohort facing “a number of challenges to entering and advancing in the French labor market, including discrimination, foreign qualification recognition, and limited professional networks” and enduring chronic unemployment rates.
The Report also found that:
… migrants are excluded from the more prestigious elements of France’s workforce development system …
Immigrants … have higher unemployment rates … And gaps between natives and immigrants appear to be widening.
These poor employment outcomes have been linked to a number of socioeconomic factors, including lower educational levels, difficulties getting foreign skills and experience recognized … limited language proficiency, coupled with a labour market that is not open to foreign-language speakers, poor social networks, and discrimination by employers. Moreover, immigrants and ethnic minorities are more likely to live in is disadvantaged urban areas, where jobs suited to their skills are rare …
About one-fifth of the French labor market is off-limits to migrants from outside the European Union because of nationality requirements.
There are many other dimensions to the disadvantage that immigrants face in trying to make it in France and other Eurozone countries.
The harsh austerity that has been inflicted on all of the Member States of the Eurozone which has rendered millions of workers unemployed and pushed many of them into increased poverty impacts disproportionately on the disadvantaged groups in the labour market, which includes the immigrants who have sought a better material life for themselves and their families.
So whatever François Hollande might say now about other factors that are clearly undermining the position of migrants in France, especially the youth, he should reflect on his own role in this regard, as one of several political leaders who have deliberately used fiscal austerity and other pernicious social programs associated with the austerity.
With that said François Hollande’s speech to the Parliament was rather extraordinary, it’s Napoleonic overtones notwithstanding.
He told the Parliament that:
Ma volonté est de mettre toute la puissance de l’Etat au service de la protection de nos concitoyens.
“My will is to put the power of the state to protect our citizens”.
He went onto outline his Napoleonic intentions to destroy IS and called on the other Member States of the EU to honour Article 42-7 of the EU Treaty, which says that if one state is attacked, all Member States are severally responsible for the defence of the attacked state.
He also signalled that he wanted legal changes within France that would reduce the freedom of its citizens.
They are matters the international lawyers can discuss.
The interesting part of the speech as far as I was concerned, given my interests, was that Hollande proposed a significant increase in public employment in France.
Alors, 5,000 emplois supplémentaires de policiers et de gendarmes seront créés d’ici 2 ans afin de porter le total des créations d’emploi de sécurité à 10,000 sur le quinquennat. Cet effort qui est considérable et qu’assume le gouvernement dans le contexte budgétaire que chacun connait permettra simplement de restaurer le potentiel des forces de sécurité intérieure au niveau qu’elles connaissaient en 2007.
So over the next five years there will be 10,000 new jobs created in the police and security areas in addition to new technology and equipment and “d’investissement nécessaires à l’accomplissement des missions” (“investments necessary to implement the tasks”).
He also said that 2500 additional jobs will be established in the judicial services area and the customs administration will be strengthened by 1000 new positions.
Further, the army would be strengthened, in that there be no reduction in staff levels until 2019 and supplementary investments in Army reserves will be made.
With an unemployment rate of 10.6 per cent (higher than the Eurozone average), these measures, while small in magnitude will be beneficial to the ailing French economy.
François Hollande then made the significant statement that:
Toutes ces décisions budgétaires seront prises dans le cadre de la loi de finances qui est en ce moment même en discussion pour 2016. Elles se traduiront nécessairement, et je l’assume devant vous, par un surcroît de dépenses mais dans ces circonstances, je considère que le pacte de sécurité l’emporte sur le pacte de stabilité.
Which means that “All these budgetary decisions will be made as part of the Finance Bill, which is currently under discussion for 2016. It will result necessarily … by additional spending, but in these circumstances, I consider the security pact outweighs the stability pact”.
SECURITY PACT OUTWEIGHS THE STABILITY PACT!
At present, the European Commission – Autumn Forecasts 2015 – France – expects the Government deficit will be 3.8 per cent of GDP in 2015, then 3.4 per cent of GDP in 2016 and 3.3 per cent of GDP in 2017.
It is also expecting the public debt to GDP ratio to rise to 97.4 per cent by 2017 up from 95.6 per cent in 2014.
The so-called structural deficit is also expected to be close to the upper fiscal limits allowable under Eurozone rules.
By any stretch of the imagination, France was already on a collision course with the European Commission under the Excessive Deficit Mechanism procedures.
The further stimulus measures now proposed in response to the attacks in Paris will clearly push the public deficit well beyond the fiscal rule limits and it is hard to see France being compliant for the next five or eight years at least.
So is this the game-changer for the Eurozone. How are the mandarins in Brussels and Frankfurt going to cope with one of the major nations declaring that their attention to the fiscal stability agreements takes a lower priority to matters of national security?
I thought that the response of Bruno Retailleau, who is President of the “groupe Les Républicains” (the conservative right-wingers) was interesting.
He gave an interview to the liberal-oriented French news daily – l’Opinion – on November 18, 2015 – «Cette idée d’un pacte de sécurité contre un pacte de stabilité, c’est une facilité».
He made the conservative position clear. The extra spending on defense and police proposed by French government should not be at the expense of maintaining the so-called “financial recovery of the country” (“ne doit pas se faire au détriment du redressement financier du pays”).
He supported the extra spending claiming that the current defence budget is incapable of ensuring the safety of the French people.
But François Hollande’s claim that the “security pact outweighs the stability pact” is opposed by the Conservatives.
Retailleau said thata security spending would have to be incorporated in the current austerity framework and suggested that the government should cut medical assistance spending, reduce public services, and take other measures which will reduce government spending overall by €5 billion in the coming year.
On reflection, one wonders what François Hollande thought was the emergency that required him to become a vehicle for austerity which has obviously undermined growth and prosperity in France, and arguably, contributed to some of the discontent of its migrant youth, now that in a single speech, he doesn’t actually think the stability pact is a priority.
So things on the economic front in the Eurozone will continue to be interesting, one thinks.
Finland – also about to become interesting
There was a Reuters report this week (November 16, 2015) – Finnish parliament will debate next year leaving euro zone – which suggests things in Finland might also destabilise the Eurozone.
Apparently, “a citizens’ petition” has been lodged with Finland’s Parliament demanding that a parliamentary debate be held in 2016 to introduce a “referendum on euro membership”.
With Finland now approaching basket case status within the Eurozone, given the latest national accounts data, there is growing sentiment that the euro might be the problem.
We will follow this with interest.
Music – Chapter One: Latin America
This is what I have been listening to while working this morning. Last night I was rehearsing with my band and we were working on a breakdown and an instrument reintroduction section of a piece. It reminded me of this great album by Gato Barbieri which I bought when it came out in 1973 – Chapter One: Latin America – released by Impulse! Records.
This track – To be continued – was recorded at Odeon Studios im Rio de Janeiro.
The album has been called “one of the all but forgotten masterpieces in 1970s jazz”. I have never forgot it and play it regularly.
What a collection of great players this is!
Gato Barbieri on tenor sax is joined by a host of Argentinean jazz greats to create this magic reprise … The whole album is excellent.
The Saturday Quiz will be back again tomorrow. It will be of an appropriate order of difficulty (-:
That is enough for today!
(c) Copyright 2015 William Mitchell. All Rights Reserved.
This Post Has 12 Comments
Politics is not only poor theater it is a bastion of the unimaginative, the hidebound to orthodoxy and the cravenly addicted to power. It’s sickening.
The floundering of the EU and the constant stream of self contradictory statement reminds of of a remarkable insight of the late and great physicist David Bohm who gave a talk entitled: Problem and Paradox in which he examines how we pretend paradoxes are problems and thus keep tripping ourselves up-worth reading here: https://books.google.co.uk/books?id=MGGF_oF_aY0C&pg=PA70&lpg=PA70&dq=Bohm+Problem+and+paradox&source=bl&ots=XL8d_D_YG6&sig=OA9M0Cz1IDZGQNzvNdJwc-k7shs&hl=en&sa=X&ved=0ahUKEwjttIHbt57JAhWBnhQKHZaECcYQ6AEIPzAF#v=onepage&q=Bohm%20Problem%20and%20paradox&f=false
Hollande will never be a Napoleon. Bonaparte,despite (or maybe because) being a short arse,had some cojones.
Francois is merely a pretty face,just like a lot of left wing apparatchiks – our very own Shorten to name just one.
I do have some time for the French tribe. But like Australia,their leadership have done them down. Importing squillions of rug sniffers is no way to improve community relations in a Western Christian nation,to put it mildly.
“Bonaparte,despite (or maybe because) being a short arse”
That’s a propaganda myth. France used its own feet and inches which are bigger than the imperial units.
Bonaparte was above average height for an early 19th century Frenchman.
These sort of lies persist and Mythbusters is ending. We really are heading for a new dark age 🙂
Good ole Neo-liberal mythology. Care not for the poor or the sick or unemployed. Care only for the rich.
By using austerity to cut economic performance joblessness becomes a vast stain on the country and creates inevitably the seeds for discontent boiling over into terrible consequences. Europe is reaping the whirlwind and changing tack to deficit spending is not now going to stop it.
A couple of corrections:
“On November 16, 2016” should read “On November 16, 2015”.
“La France est une guerre” (literally, France is a war) should read “”La France est en guerre” (France is at war).
“Stability Pact” merely an unfortunate spelling error
It was supposed to be “Fragility Pact”
Of course, the Freudian-like-slip may have been intentional. 🙁
Yes, for instance the paradox of thrift is actually simply the refusal to acknowledge that the economic system is basically disequilibrated by a continual and dynamic scarcity of total individual incomes in simultaneous ratio to total costs/prices, and that a continuing supplement to individual incomes would resolve the individual aspect of that problem and a discount to prices to consumers by retail merchants that was rebated back to them would resolve the cost/price aspect of the problem.
Perhaps they meant the ‘utility compact’; the greatest benefit for the least portion. A daring reinterpretation of enlightenment thinking.
Stab it ill pact.
I do not wish to hijack your comments section with a comment full of external links, but I chose to do things this way rather than send your readers to my blog. If this comment is problem, please just delete it.
However, since you raised the issue of the SGP, I have recently included a bit of info on this subject in one of my recent posts. Perhaps some of your readers would be interested to look at the links as a follow-on from your post:
“Once a country became a member of the EU, it undertook to abide by the Stability and Growth Pact (SGP). The purpose of the pact was to ensure that fiscal discipline would be maintained and enforced in the EMU. The fiscal discipline of the SGP required each Member State to implement a fiscal policy that ensured that the country stayed within the convergence criteria. All EU member states are obliged, each year, to submit a SGP compliance report for the scrutiny and evaluation by the European Commission and the Council of Ministers. The report presents a country’s expected fiscal development for the current year and the subsequent three years.
These reports are called “stability programmes” for Eurozone Member States and “convergence programmes” for non-Eurozone Member States, but despite having different titles they are identical in regards of the content. If a Member State breaches the SGP’s outlined maximum limit for government deficit and debt, the surveillance and request for corrective action will intensify through the declaration of an Excessive Deficit Procedure (EDP); and if these corrective actions continue to remain absent after multiple warnings, the Member State can ultimately be issued with economic sanctions.
(See here http://europa.eu/rapid/press-release_MEMO-15-4971_en.htm and here http://europa.eu/rapid/press-release_MEMO-15-4511_en.htm for examples of how this is done [or not done]…..is this a joke?)
Just to see how well the SGP is working and to see how close the EU countries have been sticking to the rules, have a look at these:
Price stability (CPI) – this graph: https://smithpeter999.files.wordpress.com/2015/11/eurostat_graph_teicp000.pdf
Government deficit – this graph: https://smithpeter999.files.wordpress.com/2015/11/eurostat_graph_teina200.pdf
Government debt – this graph: https://smithpeter999.files.wordpress.com/2015/11/eurostat_graph_teina2252.pdf
Long term interest rates – this graph: https://smithpeter999.files.wordpress.com/2015/11/eurostat_graph_teimf0501.pdf
Not an economist but a follower of BB – I wonder why no one has commented Peter Smith’s stats?