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Friday, November 16, 2012

France: debt sustainability and the euro

Friends and neighbours, things are getting grimmer and grimmer.
France, still below the radar of the markets, will most likely prove to be without a swim-suit as the tide recedes, will probably join the "naturalist" PIIGS
A leader of The Economist , and its Special Report, are grim reading indeed.
Even as other EU countries have curbed the reach of the state, it has grown in France to consume almost 57% of GDP, the highest share in the euro zone. Because of the failure to balance a single budget since 1981, public debt has risen from 22% of GDP then to over 90% now.
...and growing! M."Normal" has some sleepless nights ahead.

Things are getting really serious with the EZ. Perhaps, the EE/EZ policy makers should start getting flexible in their thinking and heed to advice coming from across the Atlantic., such as Simon Johnson's Congressional Report

Returning to France per se, one should check out Jacob Funk Kirkegaard's column at the RealTimeBlog of The Peterson Institute for International Economics
Hollande faces a basic political choice in the coming months. Will he be a preemptive center-left reformer in the mold of former Chancellor Gerhard Schröder of Germany, who set Germany on the path to economic and political dominance following his election victory in 2002 over the center right candidate, Edmund Stoiber? (Schröder’s action broke with ten years of German economic ossification after reunification a decade earlier.) Or will Hollande be forced to take the role of center-left reformer like former Spanish Prime Minister José Luis Zapatero, who for years had denied that anything was wrong in the Spanish economy and banking system, until market forces (and the European Central Bank) convinced him otherwise?

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