How France’s left-wing government learned to love austerity

Hollande’s ‘new start for Europe’ turned out rather like the old one

10 May 2014

9:00 AM

10 May 2014

9:00 AM

For years, George Osborne cut a rather lonely figure on the European stage. He was portrayed as the only major statesman who advocated austerity. But finally he has some company. Another European leader has burst away from the pack and is promising to freeze all welfare benefits for a year, cut health spending, cut taxes — and to be honest with the people by saying that ‘we cannot live beyond our means’. The Chancellor can derive much pleasure from the fact that his new ally is François Hollande.

Until now, the French president has been the great hope of Keynesians the world over. He revelled in this celebrity. He was out to prove that, with just one more push from the government, the economy could be launched upwards. He promised ‘a new start for Europe’ — indeed, ‘a new hope for the world’. If the world’s eyes were on him, so much the better. ‘I’m sure in a lot of European countries there is relief, hope that at last austerity is no longer inevitable,’ he declared.

Ed Miliband was full of such hope, and rushed to Paris to become the first British politician to meet Hollande at the Elysée Palace. Miliband solemnly announced that the centre-right axis between Cameron and the defeated President Sarkozy had failed. ‘The tide is turning against an austerity approach,’ he said. A Labour spokesman briefed about ‘failed Camerokozy economics’.

Miliband emerged from talks saying he and Hollande had found common cause: ‘We are in agreement in seeking that new way that needs to be found.’ The great experiment was about to begin.

Hollande’s ‘new way’, however, turned out to be the same old profligate way that had caused the debt crisis in the first place. Mr Hollande’s spending succeeded only in stimulating the French national debt. He promised to introduce 75 per cent tax rates, and at the outset his approval rating stood at 63 per cent. But the economy did not move, unemployment surged and his popularity plummeted.

All this had led to a volte-face not seen since François Mitterrand was forced to perform the same manoeuvre 30 years ago. A new orthodoxy is now enlightening M. Hollande’s government. Michel Sapin, his finance minister, is quite frank about the relationship between austerity and growth: ‘One does not go without the other… Without the control of our public spending, there can be no sustainable recovery.’ The new Prime Minister, Manuel Valls, has declared that he owes ‘the French people the truth’. Namely, ‘We must break the train of debt that, progressively and stealthily, is tying our hands.’

And how to break that train? Here is Christian Eckert, secretary of state for the budget: ‘We prefer €50 billion expenditure savings to €50 billion additional taxes.’

George Osborne could not have put it better himself. Indeed, in some regards, the Chancellor is being outdone by the French. A saving in health spending of €10 billion means that M. Hollande can claim to be a more thorough-going reformer than Mr Cameron or his Chancellor, neither of whom have dared to rein in the NHS budget. Valls explains that treating more people out of hospital would deliver savings ‘while improving the quality of healthcare’. Such political leadership on health reform would be a wonderful French import.

And as for Mr Miliband? He does not compare himself to Hollande so much nowadays, having seen that the alternative to austerity is national misery and political obloquy. His shadow chancellor, Ed Balls, is less bullish than he used to be. He now promises ‘iron discipline’ and a review of the effectiveness of public spending down to the last pound. To use Mr Miliband’s metaphor, the tide certainly is turning. But it is turning away from the fantasy economics of the deficit deniers, and towards the colder truths that Cameron’s government was advocating four years ago.

It’s not that M. Hollande has abandoned the doctrine of solidarity. He has just given it a new definition. ‘The state is our common asset,’ declared Valls last month. ‘It has a duty to be efficient and never to waste public money.’ He will tell the people the truth about austerity, he says, because ‘truth will lead to success’. After all, as France knows to its cost, dishonesty leads to disaster.

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  • Terry Field

    Socialism has been proven to fail for another French generation.
    WHY did they not learn from Raymond Barr and avoid this current idiot?!?!?!?!

  • Jamie

    Economic illiteracy.

    Austerity during a depressed economy stifles growth and reduces tax revenues. Growth in the Eurozone is non-existent and they are entering a depression. Growth in the UK arrived 3 years late, and only after austerity was toned down.

    This is the worst economic recovery in recorded history.

    Economics is surely supposed to be evidence based – five years ago Keynesians made a series of predictions about austerity and growth – and they turned out to be correct in every single one of their predictions.

    Let’s not forget either that Keynesians do advocate austerity – when the economic sun is shining. An important difference.

    • mnemos

      Keynesians do advocate “austerity when the economic sun is shining”, but only when the economic sun is not shining. Once the economic sun is shining, Keynesians lose the will to advocate austerity because there are so many things the government should be doing. It is exactly the inability to advocate austerity in times of economic growth that requires austerity during times of depression – the money runs out. You are correct about the theory, but the question is not about Keynesians economic theory, but their economic actions which are not consistent with the theory.

    • MrVeryAngry

      Deep sigh. Oh, I can’t be aresed any longer to argue with such tripe.

  • John Smith

    Not many trust Hollande, he has not rescinded all those income & property taxes he imposed, when he came to power. Never trust a socialist

  • rodger the dodger

    Nonsense! tractor production quotas are up, and bread queues are lengthening as I write!

    Only capitalist running dogs don’t realise this is the way forward to a better world, to Utopia!

  • willybach

    Don’t hold your breath. It is one thing for François Hollande and Manuel Valls to do a volte face on the policies on which he was elected – the same 2-year time lag as with François Mitterand in the 1980’s. But will the public sector unions buy into it? Having lived in France since 1981, I have my doubts.

  • derekemery

    Perhaps the EU should bring back the Flagellants in a new form to repel poor economics?
    Groups of EU political zealots formed from the top political elite and the commission could atone for their failings by whipping themselves in public displays of penance. They could roam the EU in bands dragging heavyweight copies of the EU symbol whilst whipping themsleves into a political frenzy.
    Might work if their political belief is strong enough. Plenty would watch it on TV as a second course after Euro-vision.

  • White Army

    Ultimately, preserving liberty is up to each of us: http://www.amazon.com/dp/B0094KY878