Everybody breathed a sigh of relief after
successfully managed their default (not to be called a default) and replaced billions of bonds with bonds worth far less. Greece has also been stabilized, thanks to a change in government (and yes almost any change would have been an improvement). But as Italy France heads towards its two stage Presidential election this month and next, The Economist documents how all is not right in . France
|France and the U. S. Are the Extremes|
Not Good for Either Country
Exports are stagnating while they roar ahead in
. Germany now has the euro zone’s largest current-account deficit in nominal terms. Perhaps France could live on credit before the financial crisis, when borrowing was easy. Not any more. Indeed, a sluggish and unreformed France might even find itself at the centre of the next euro crisis. France
the problem is that under Conservative pressure and governance, government is abdicating its role in economic society, and the economy will ultimately be far lower than it otherwise could have been. In United States the opposite is occurring, the French people are looking for more and more “free” government goods and services in a country where the role of government is already too high. France
And with a Presidential election and its excessive pandering to the voters (no the
is not unique in that regard) things could get worse, not better. U. S.
If Mr Hollande wins in May (and his party wins again at legislative elections in June), he may find he has weeks, not years, before investors start to flee
’s bond market. The numbers of well-off and young French people who hop across to France (and its 45% top income tax) could quickly increase. Britain
|Mr. Sarkozy and Mr. Hollande|
Pictures That Do Not Inspire Confidence
The optimists argue that all the fear is misplaced, that after the election things will revert to a rational process.
The last time an untried Socialist candidate became president was in 1981. As a protégé of François Mitterrand, Mr Hollande will remember how things turned out for his mentor. Having nationalised swathes of industry and subjected the country to two devaluations and months of punishment by the markets, Mitterrand was forced into reverse.
But The Economist has this warning of an almost unprecedented event.
Besides, there is a more worrying possibility than insincerity. The candidates may actually mean what they say.