The Great Debate UK

Hollande’s programme marks return of the Ancien Régime

Photo
-

By Laurence Copeland. The opinions expressed are his own.

Seeing the dewy-eyed kids at the post-election celebrations in Paris, I couldn’t help thinking how crazy it all was. The youngsters were plainly convinced they had a president to take their country forward into the new dawn -  after all, he campaigned under the slogan  “Le changement, c’est maintenant”. In reality, Francois Hollande’s programme is unambiguously regressive, with its stop-the-world-we-want-to-get-off determination to go in the opposite direction to every other country, its refusal to countenance any erosion of the country’s ruinously expensive welfare state and its complacent confidence that there is nothing to stop France carrying on as before. What better place to greet the return of the Ancien Régime than the Place de la Bastille?

Of course, the new President promises that he is going to balance the budget in 2017 with the familiar prayer of tax-and-spend governments the world over: “Oh Lord, make me solvent! – but not yet…” Now, even allowing for the fact that France’s deficit is only 5 percent of GDP, it still means he is going to keep on borrowing until the national debt is more or less as large as GDP. (Remember: a balanced budget means no need for more loans, so the national debt is constant. To start paying off its debts, a country needs a surplus, something France has not managed for more than forty years).

Then, of course, the biggest question of all: how on earth is this fiscal miracle of a balanced budget going to be achieved, given the raft of spending commitments which so delighted Socialist voters? It’s rather like listening to someone promising to lose weight while he tucks into a large plate of chips.

However things work out, you can be sure that the burden of paying for France’s public sector will not be borne entirely by today’s taxpayers, given that France is already one of the most heavily taxed countries in the Western world and that a 75 percent tax on the super-rich will probably raise very little revenue (at least for France – it may end up raising tax revenue for Britain, of course, if the rich move to London).

Rating agencies as powerful as ever

Photo
-

By Kathleen Brooks. The opinions expressed are her own.

Some people assumed that after the debacle over the 2008 mortgage-backed security crisis in the U.S., the credit rating agencies would be discredited. However, here we are three years later and the focus is still on the same rating agencies, waiting with bated breath to see whether they move the ratings of some of the world’s most important economies.

Within the last six months rating agencies have played a big part in shaping the direction of financial markets. First, there was Standard & Poor’s downgrading of the U.S. at the start of August, which caused a wave of risk aversion and turmoil on financial markets. Europe has also been the focus of concern.

from The Great Debate:

How to prevent a depression

By Nouriel Roubini
The opinions expressed are his own.

AMSTERDAM – The latest economic data suggests that recession is returning to most advanced economies, with financial markets now reaching levels of stress unseen since the collapse of Lehman Brothers in 2008. The risks of an economic and financial crisis even worse than the previous one – now involving not just the private sector, but also near-insolvent sovereigns – are significant. So, what can be done to minimize the fallout of another economic contraction and prevent a deeper depression and financial meltdown?

First, we must accept that austerity measures, necessary to avoid a fiscal train wreck, have recessionary effects on output. So, if countries in the eurozone’s periphery are forced to undertake fiscal austerity, countries able to provide short-term stimulus should do so and postpone their own austerity efforts. These countries include the United States, the United Kingdom, Germany, the core of the eurozone, and Japan. Infrastructure banks that finance needed public infrastructure should be created as well.

from The Great Debate:

Does the euro have a future?

By George Soros
The opinions expressed are his own.

The euro crisis is a direct consequence of the crash of 2008. When Lehman Brothers failed, the entire financial system started to collapse and had to be put on artificial life support. This took the form of substituting the sovereign credit of governments for the bank and other credit that had collapsed. At a memorable meeting of European finance ministers in November 2008, they guaranteed that no other financial institutions that are important to the workings of the financial system would be allowed to fail, and their example was followed by the United States.

Angela Merkel then declared that the guarantee should be exercised by each European state individually, not by the European Union or the eurozone acting as a whole. This sowed the seeds of the euro crisis because it revealed and activated a hidden weakness in the construction of the euro: the lack of a common treasury. The crisis itself erupted more than a year later, in 2010.

from Breakingviews:

The way to end the Greek farce

By Hugo Dixon
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

The Greek crisis is fast descending into farce. The position of Germany, the euro zone’s main lender, is increasingly absurd. It is adamant that there will be no restructuring of Greek debt -- at least, until 2013. And yet it is equally insistent that Athens' private-sector creditors should contribute up to 30 billion euros to a new, 120 billion euro bailout. That would effectively amount to a half-cocked restructuring.

from Breakingviews:

Letter to the Greeks

By Hugo Dixon
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Dear Greeks,
The anger you feel about your plight is understandable. You are staring at several unpalatable alternatives, all of which will involve big cuts in living standards for years to come. But the options you face are not all equally bad. You must avoid an emotional reaction that leaves you in an even worse state -- and you must ostracise those who resort to violence.

  •