George Irvin ponders whether newly-elected French President Francois Hollande will be able to turn France around, much less the entire eurozone.
.
Will newly-elected French President François Hollande be able to turn France around, much less the entire Euro Area (EA)? Professor George Irvin investigates
At the moment, the EA is stagnating, unemployment is rising and the entire banking system is dangerously fragile – in Nouriel Roubini’s phrase, we are watching a slow motion train wreck. How far genuine change is possible depends essentially on three factors: the reaction of the financial markets; how Hollande manages the new relationship with Germany and, more generally, whether ‘austerity’ is ditched and the EA goes for growth.
How will financial markets react to a socialist government in France? The knee-jerk reaction is to invoke Mitterrand’s experience in 1981-3 when financial turbulence forced the social-democratic left to change course within two years and into ‘cohabitation’ within five.
What is easily forgotten is that Mitterrand’s policy failed largely because inflation rocketed to double figures in 1983, a phenomenon unlikely to be repeated today.
True, Hollande has committed himself to a number of policies which will prove difficult to deliver: Generating growth and reducing unemployment and ‘sanitising’ public finances – significantly reducing the budget deficit over the next five years.
Equally, his rejection of Angela Merkel’s ‘Stability Pact’ – the pact requires a legal commitment to budget balance on the part of signatories – appears to put him on a collision course with Germany.
• Vive Hollande! M. Normal wins the day 8 May 2012
Nevertheless, a number of factors suggest Hollande’s government may succeed. For one thing, it is increasingly obvious that deep expenditure cuts lead back to recession, making unemployment and public indebtedness worse – as we see in Greece, Portugal and Ireland and will soon see in Spain too.
The message is simple: in a recession, fiscal rectitude is achieved through state-led growth – it is higher national income that generates higher savings, not the other way around. Even the IMF appears to agree.
For another, the Treaty is deeply unpopular – and not just in Greece, Portugal and Ireland. In Italy, prime minister Mario Monti has made it clear he thinks it foolish and that jointly-backed eurobonds constitute a better solution; Belgium’s Guy Verhofstatd agrees and even European Commission President Jose Manuel Barroso appears to support this position; while new Spanish prime minister, Mariano Rajoy, has already warned Spain will not meet next year’s fiscal targets.
In demanding the Treaty be changed, Hollande will have the support not just of the EA periphery but of some of its major players and many of its economic experts. One should bear in mind poll indications for Italian Parliamentary elections to be held next spring suggest a centre-left coalition will emerge.
Whether the Germans and their right-wing Dutch and Austrian allies could long hold out against a majority of the larger EA economies is doubtful. Federal elections must be held in Germany before next September; the polls point to the SPD entering power, and the right-wing Free Democrats (FDP) being annihilated.
There is a new twist too. In anticipation of the changed political conjuncture, Hollande and Merkel have finally agreed on the details of a Euro Area transactions tax (a form of ‘Robin Hood’ tax). A 0.01% tax on all financial transactions – approved by European Parliament 10 days ago – would raise €120 billion per annum, providing the financial basis for launching a huge EA infrastructure investment programme.
Merkel knows she needs to avoid market panic if Hollande wins, and further details of the new growth plan can be expected this week. In short, Sunday’s election result is crucial not just for France but for reviving Europe’ economic and political fortunes. Watch this space.
72 Responses to “Will President Hollande be able to turn France – and the Euro Area – around?”
Anonymous
Median is of course an average. Your knowledge of statistics is showing. And once again, you’re using wikipedia as a link on serious statistics.
NO, YOUR calculations are claiming 19k a year. Prove it! It’s completely out of line of even the whackoid Libertarians in America’s claims.
And your proposal did NOT state in any way that NI was going to be removed. Not to mention the fact you’re proposing stripping every single current pension element.
The scam is of course yours, attempting to divide actual likely income by over 80%, and backstabbing members of your own caste shows your morality clearly.
Liz K
Will President Hollande be able to turn France – and the Euro Area – aroun http://t.co/n5P0stDQ by @gwi40 #France #Holland #euro
Anonymous
Median is of course an average. Your knowledge of statistics is showing. And once again, you’re using wikipedia as a link on serious statistics.
===============
No, median is not necessarily the same as average or mean. For a normal distribution it is the same. For a Pareto distribution, which is a power distribution, the median is not the same as the average.
The median wage is the wage where 50% earn less than or equal to that wage.
The average is the sum of the wages earned divided by the number of wage earners.
The two are not the same, as a simple example will show.
Consider 10 people. 9 earn 20K a year, 1 years 220K.
The median wage is 20K. 5 people earn 20K or less, 5 people earn more.
The average is (20 * 9 + 220) / 19 = 40K.
The median is completely different than the average.
For example, the average wage would go up if Bill Gates came to live in the UK. The median wage is highly likely not to move since other wages wouldn’t be affected.
Don’t forget, your saying that the 19K figure is wrong. In order to say that its wrong, you must have your own figure. Care to put that up?
Now, I’ve posted the figures for historical average wages, and the median wage in 2011.
Do you accept they are correct, or do you have some other figures?
I’ll lead you step by step through the numbers.
Anonymous
Hmm, my first reply seems to have vanished into the ether. Let’s try again…
Mean, Median and Mode are all averages. Your lack of basic mathematical knowledge is all you’re railing against here.
YOU are proposing “26k”, you need to prove it.
Moreover, it is of course misleading since you also need to show the spread which will occur; The spread of the state pension is zero for anyone who qualifies, but under your system there can be an extremely large amount of spread.
As I said, doing figures with earning on the poverty line is far more likely to be accurate, and of course there also needs to be taken into account average unemployment periods, part-time work and the like.
You also have NOT provided primary figures for any statistics, but ones with no providence. There’s a reason that the ONS exist…
Anonymous
Mean, Median and Mode are all averages. Your lack of basic mathematical knowledge is all you’re railing against here.
———–
Far from it.
Can you have a distribution where the mean, median and mode are different? I can think of several standard distributions where that is the case.
You are making yourself look like a plonker by claiming otherwise.
I’ve already posted a counterexample for you to consider.