French Political Turmoil a Harbinger of Unrest Roiling Eurozone During Their New Depression

By David Dayen, a lapsed blogger, now a freelance writer based in Los Angeles, CA. Follow him on Twitter @ddayen

I don’t know that I’d go so far to say it was Paul Krugman-induced, but the French government has been dissolved, primarily because two senior ministers dared speak the unspeakable and criticize Francois Hollande’s continued commitment to austerity, in the face of evidence of its failure. Forgive the WSJ business bias here:

The government shake-up—the second in less than five months—underscores the difficulties Mr. Hollande has had in rallying Socialist Party heavyweights, as well as his parliamentary majority, to a new, pro-business platform aimed at reviving France’s stagnant economy. The divisions come amid growing discontent in France and elsewhere in the currency bloc with belt-tightening measures pressed by Brussels and Berlin to meet deficit targets and repair public finances.

The open discord came to a head over the weekend after Economy Minister Arnaud Montebourg —who hails from the left wing of Mr. Hollande’s Socialist Party—said that budget cuts backed by the French president were choking both French and broader euro-zone growth. He called on France to reject the “trap of austerity” he said Germany was imposing across the Continent.

Mr. Hollande responded to the dissent by asking current Prime Minister Manuel Valls to form a new government that is “coherent with the direction he himself has defined for the country,” the Élysée presidential palace said in a statement.

Specifically, in the comments to Le Monde that set this off, Montebourg did cite Krugman, who said that “The news that industrial production has ground to a halt raises the prospect of a new recession in Europe – its primary cause, austerity.”

Hollande has a 17% approval rating in France, and this rebuke of the entire left wing of his party could easily lead to further fracturing. The ambitious Montebourg is quite openly splitting with Hollande to position himself for the next election. Valls, the choice of the right wing of the Socialists, did his duty for future positioning as well. More on this from French politics-watcher (and translator of Piketty’s Capital) Art Goldhammer.

But this really speaks to the larger reckoning (entirely too late) within the entire Eurozone, of the tragic consequences of their fiscal policies. Mario Draghi, head of the ECB, devoted his Jackson Hole speech to acknowledging the desperate need to increase aggregate demand. It was polite, dressed-up central banker-speak, but also a red flashing warning light.

The euro is at an 11-month low, economic indicators show depression-like conditions, and deflation rather than inflation is the key price stability concern. Even German GDP dropped last quarter. Draghi isn’t completely blameless – his moves have been sclerotic at best – but basically the vast majority of the European policymaking apparatus has engaged in counter-productive measures for the better part of half a decade now.

That cannot help but bring political unrest like we’re seeing in France. Hollande and Valls are desperate to hang on to the status quo, where only lip service gets paid to a change in policy regime. And it’s a function of the entire structure of the Eurozone, as Simon Wren-Lewis points out:

Whatever the politics of what just happened in France, the economic logic is with Montebourg rather than Draghi and Hollande. Once you acknowledge that fiscal consolidation is a problem, you have also to agree that the Stability and Growth Pact (SGP) is also a problem, because that is what is driving fiscal austerity in the Eurozone. The best that Draghi could do to disguise this fact is talk about an “anchor for confidence”, to which the response has to be confidence in what? He must know full well that it was his own OMT that ended the 2010-12 crisis, not the enhanced SGP.

So why has the European left in general, and the French left in particular, not learnt the lessons of the 1920s and 1930s? Why do most mainstream left parties in Europe appear to accept the need to follow the SGP straightjacket as unemployment continues to climb? … the political story of the early 1980s associates fiscal stimulus and demand expansion with ‘socialist policies’, and their failure and abandonment is associated with Mitterrand staying in power until 1995. When the markets again turned on fiscal excess in Greece in 2010, perhaps many on the left thought they would once again have to subjugate their political instincts to market pressure and undertake fiscal consolidation. Unfortunately it was not the 1980s, but events over 50 years earlier, that represented the better historical parallel.

Indeed, the immediate upshot of this is a French government in lockstep with Hollande’s austerity-lite path. But that’s a temporary condition, in France and throughout the Eurozone. The question is how long the consolidators can hold out; the fact that Germany experienced benefits from the suffering of the southern countries kept them strong, but even their economic fortunes are running thin. It’s not that Mountebourg managed to criticize austerity; it’s that he considered it good politics. That’s the new insight for the political elites in Europe. Hopefully it will continue to flower.

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About David Dayen

David is a contributing writer to He has been writing about politics since 2004. He spent three years writing for the FireDogLake News Desk; he’s also written for The New Republic, The American Prospect, The Guardian (UK), The Huffington Post, The Washington Monthly, Alternet, Democracy Journal and Pacific Standard, as well as multiple well-trafficked progressive blogs and websites. His has been a guest on MSNBC, CNN, Aljazeera, Russia Today, NPR, Pacifica Radio and Air America Radio. He has contributed to two anthology books, one about the Wisconsin labor uprising and another on the fight against the Stop Online Piracy Act in Congress. Prior to writing about politics he worked for two decades as a television producer and editor. You can follow him on Twitter at @ddayen.


  1. John

    Austerity is the elixir for all things that ail us, kinda like medieval medicine — leeches and all.

    Economists keep looking into the history books to shed some sanity on austerity. You can forget the history lessons because these are not pragmatic folks. What economists fail to see is European politicians are not objective when the euro is at stake. Politicians cannot admit the euro is a failure. They would rather fall on their sword than to admit to making a huge blunder.

    A major reason for this is because of neoliberal thinking on the part of the politicians. They see the world leaving them behind so they have the idea — bigger is better. Big can provide better dividends. Politicians proudly tout the huge size of the single market economy to outsiders in order to draw in salivating corporate interests. Our leaders have plans to compete globally on almost every frontier, particularly with the USA — satellite, currency, aircraft, automobiles, etc…. In their mind, the euro is what gets them there.

    So what if a few million people are unemployed? Audi and other will continue to enjoy record exports in spite of the social ills.

    Anyone not toting the company line of austerity, like Montebourg, are hammered.

    1. FederalismForever

      @John. But then the question is: how did life-long die hard socialists ever get seduced by “neoliberal thinking”? Even to the point of sticking to a “neoliberal” austerity agenda while their approval ratings are stuck in the toilet and when the public has turned against them?

      1. Yves Smith

        The public to the left has turned against them.

        In case you missed it, Eurozone nations are no longer operating as democracies and are run by technocratic elites. Or perhaps more accurately in the case of France, it has long been run by a technocratic elite, but it was more responsive to notions of the public good and popular will. Now the prime directive is to preserve the banks out of fear that exposing their losses will blow up the economy.

        TARP was massively unpopular here and it still passed. Same deal.

        1. FederalismForever

          Point taken. But I’m still curious why a life-long socialist like Hollande would rather suddenly reverse course and embrace the austerity agenda. No one involved in passing TARP had a similar life story, or made such a turnabout. If the best reason for Hollande’s recent volte face is the fear that big bank losses will destroy the economy, the question then is how the (relatively) more enlightened and progressive French technocratic elite ever allowed France’s economy to be placed at such risk.

          1. Calgacus

            But I’m still curious why a life-long socialist like Hollande would rather suddenly reverse course and embrace the austerity agenda.
            No reversal of course. Permanent austerity mania goes back to the faux-socialist Mitterand, later father of the Eurocide, and his absurd Tournant de la rigeur This snatched defeat out of the jaws of victory of his earlier Keynesian/expansionist program and was of real importance outside France. It was the last time a major “developed” state returned to successful postwar policies instead of marinating the nation in neoliberal Kool-Aid. But in order to discredit them, the French political class aborted the policies as they were succeeding. Hollande was there then, cheering it on. It is difficult from an American perspective to fathom the absurdity of left-wing Europolitics, although similar things have occurred here. Basically, much mainstream “Marxism” or “socialism” or even “communism” became far to the right of Keynesian / New Deal / American liberalism or De Gaulle in France , and essentially indistinguishable from neoliberalism. The right, the plutocracy intones TINA as a tool, a club to bludgeon the 99%. This kind of “leftist” “socialist” can actually believe it.

    2. jgordon

      Just to be clear here, since this seems to be missing from all of the ideological/political ideas being thrown around in these sorts of discussions, bad policy and corruption are only exacerbating people’s misery. The root cause is the actual fact of dwindling resources, pollution, and collapsing ecosystems–and as a historical fact, those things incidentally also are a fundamental driver of corruption and inequality.

      Just to drag things out from the ivory-tower realm of economic ideologies to the real world for a bit.

      1. tejanojim

        Word! Totally agree. It’s all being driven by availability of resources. That situation is vastly different between now and 1920, so what worked then may well fail today.

    3. ree

      I remember in high school, the propaganda pushed through by the history text people was that the depression was mostly related to governments increasing tariffs, and lowering trade, in the wake of the 29 crash. Though there is some truth to this, the overriding reality is the usual: hyper speculation, hollowing out the real economy and impoverishing the masses.

  2. OpenThePodBayDoorsHAL

    Europe needs to act like a startup and ask the question: what is their “differentiated value proposition”? China’s is obvious, unlimited quantities of low-cost labor and non-existent environmental rules. The US for their part has unlimited fat consumers, Hollywood and Silicon Valley, can print their own free money, and has an endless capacity to squeeze the poor to benefit the ultra-rich. Europe is a fine Old World museum, is very good at “le luxe” (as Montesquieu pointed out 3 centuries ago), but they really need to stop thinking they can do “low cost” or social media or tearing up the social contract nearly as well as America does. The Cote d’Azur is already a giant Disneyland caricature of itself…maybe they just need to start charging admission.

    1. different clue

      Unlimited fat consumers? Endless capacity to squeeze the poor? Would you bet your own future survival on that?

  3. proximity1

    “So why has the European left in general, and the French left in particular, not learnt the lessons of the 1920s and 1930s? Why do most mainstream left parties in Europe appear to accept the need to follow the SGP straightjacket as unemployment continues to climb? … the political story of the early 1980s associates fiscal stimulus and demand expansion with ‘socialist policies’ “,….

    Once the reader understands that F. Hollande is not really a socialist other than by misnomer and that Valls is the same as Hollande, the mystery here evaporates. The policies which are failing France are boiler-plate “Reaganomics,” sheer economic mumbo-jumbo. As for “the European left in general, and the French left in particular” they have “learnt the lessons of the 1920s and 1930s” and, more to the point, the lessons of the 1980s through to the present. But these people are not and haven’t been in power and, thus, they are in no position to implement the lessons they well understand.

    1. vlade

      Hmm.. Given that the large part of the Front Nationale and similar voters are attracted to them by the hostility to EUR/EU policies, if the left had learned the lesson I’d say it’s their fault they are in no position to implement them. The only left parties going that way are the far-left, which are, in general, less palatable to the public en large than far right (beats me exactly why, but…).

      An often heard argument that there’s no fight against the established political parties is, I believe rather defeatist these days, as UKIP in the UK, FN, and probably the best, Mr. Grillo’s movement in Italy were far from established and are viable threats to the establishment.

      In fact, Mr. Grillo’s movement is a rather nice example, how one can get large popular support when run well.

      1. proximity1

        “if the left had learned the lesson I’d say it’s their fault they are in no position to implement them. ”


        Well, consider what your next remark indicates–

        “The only left parties going that way are the far-left, which are, in general, less palatable to the public en large than far right (beats me exactly why, but…). ”

        As long as you are at a loss for an understanding of that matter (just above), you’re not going to be well placed to grasp the mistake in your remark cited above it. What you describe as “the far-left” was merely the garden-variety Left in politics when I was growing up. Things only veered off seriously with the multiple catastrophes which, having long brewed, finally blew up during and after the administrations of Lyndon Johnson, principally in foreign affairs–though those cancers took little time to “blow back” and devastate domestic politics as we saw with Nixon’s terms in office. By the way, significant parts of Nixon’s legislative initiatives are arguably a good deal more like what the traditional Left used to be and represent than what we have seen from “leading” democrats since Nixon : Jimmy Carter, Bill and Hilary Clinton and Obama. And, like the UKIP, the Front National in France is the manifestation of factional fighting within the political Right-wing, not a fundamental disagreement about capitalist fundamentals or the primacy of privately-held money, property and political power at the expense of and to the detriment of a publicly-held common good and set of general interests. In other words, UKIP and the FN aren’t so much opposed to the basic archconservative tenor of all manifestations of the practical public political world as they are where those power players should be located. For these nationalists, the answer is and must be at the nation state level and not “above or beyond” it. Thus, they object to the supranational organization of the same set of basic archconservative “princples”. The reality then is not a broadening of the general politial landscape but simply a narrowing in which the Left is first marginalised and then simply cut out entirely. The result is a phony democratic system in which a so-called mainstream Right is rival to what are only more extreme varieties of Right-wing politics.

        1. vlade

          If you consider (say) Italian Worker’s Communist Party a garden-variety of left, then I have no idea what the “true” left of your growing up was.

          1. vlade

            I’d remind that we’re talking EU politics, where Tories in the UK (seen as one of the rightmost parties in Europe) would be likely left of Democrats in the US, and parties like the WCP I mentioned above can get 0.5% of the vote (and would get more if the Italian left wasn’t literally a tens of small parties each getting its sub 1%)

        2. EoinW

          Two different issues are being mixed up. One is economic capitalism, which the majority of voters in the West are happy with, thus the Left has limited electoral appeal. Whether they should be happy with it or not is another matter. I’d even suggest the middle class used to be supported by wealth but in recent times that wealth has been replaced by debt. This has led to people supporting the status quo even though the system is gradually making them poorer. But until that debt bubble pops voters will not be looking for an economic alternative.

          Two is the nationalist response to the EU. This is the Right’s domain with parties like UKIP and FN. Going back to Marx, socialism has had a multi-national view of itself, therefore it is ill suited to oppose the EU as the elimination of national borders has often been a goal of the Left. Given the USSR experience, should we be surprised the EU was created by an elite of economic Bolsheviks?

          1. Banger

            Good point about the middle class support of capitalism. Most people believe that we can solve our collective problems with more capitalism and that is a problem for the left which is why I’ve supported moving on from socialism to something more basic. The left needs to emphasize not socialism but the return to reason, health and conviviality. We know, for example, quite a lot about how people learn but those findings are seldom used in classrooms. We know quite a lot about generating and conserving energy but we don’t implement those techniques because those who currently deliver and transmit that energy block all attempts not only by buying politicians and judges but by repressing technology (buying up patents or threatening people that come up with new ideas) this is also glaringly the case in health care both in its practice and delivery. In short, most every sector of our lives is ruled by groups of oligarchs who believe power and wealth is best if it is not shared.

            As I commented today in the links section, all the left has to do is propose using reason to solve collective problems.

            1. different clue

              Perhaps the Left could experiment by saying “what we need is a good French Enlightenment”. Those people who are curious to know what a “French Enlightenment” is and why we need a good one might be thought-capable enough
              to be reachable and teachable. And recruitable.

          2. Ed

            A key tenet of the Left, dating at least to the Rights of Man, is that human rights are universal, the implication of this is that people are not be left vulnerable to their local tyranny. So the right will always be stronger on defending borders and sovereign institutions.

            Still, there is room for the Left to position itself as the defender of local solutions vs. globalization, and this is what they should be doing.

    2. Gerldam

      Only trouble with your remark is that there has been absolutely no auterity in France in the last 8 years.

      1. proximity1

        “Only trouble with your remark is that there has been absolutely no austerity in France in the last 8 years.”

        Do you speak from personal experience? I do. I don’t know –and you don’t tell us– on what basis you found such a claim but I suggest that you try telling it to the unemployed, to the homeless and to people who depend, when they’re lucky, on soupes populaires and handouts of clothes and who sleep in parks and under bridges. For the 0.1% and above, there has been absolutely no austerity but for much of the rest of the population there certainly has. Public-fee hikes have been joined to public-service cuts again and again, pushing people in need to the wall.

        1. beene

          proximity1, since it seems you are in France. You might like to learn about debt currency. It is always what central banks con society’s into using. What this always produces is austerity and debt. In the end central banks always depends on the nation’s taxpayers to pay for its debts (mistakes). I have never found a society that central banks did not bankrupt the nation that they resided over time.

          There is the beginning of public banking here in the USA. The only state in the USA that did not suffer from our central bank acts was a state that has always had a public bank.

          1. financial matters

            Yes, it can depend a lot on how the ‘central banks’ dole out this ‘taxpayer money’ or ‘public funds’. As she points out in the public banking book China has millions of TVEs (township village enterprises) which can be used as a model for co-ops. These are essentially centrally funded at their core but run through a public banking system which creates the leverage rather than a private banking system.

            This funds most of their enterprise with the ‘stock market’ only funding about 3% so it is relegated to the ‘plaything of investors’ status that it deserves.

            China chooses to use its ‘quantitative easing’ to fund this sort of local enterprise rather than a private banking system that is extractive and that doesn’t seem to want to bother with local enterprise.

          2. proximity1


            The references are fine–as far as they go but nothing I read at your links comes as news to me. There is a problem, however and that concerns who manages the proposed public banks as a solution to the current private banking system. Since E.H. Brown is sharp enough to recognise that the Federal Reserve is a creature of private wealth’s interests, the question remains: who could and should, in our thoroughly corrupt world financial system, manage so-called public banks in the public’s interests as opposed to the way they are currently managed. Surely she must spend some significant effort on explaining and answering that problem but so far, under the prevailing circumstances, I don’t see how she or anyone else can “get there from here” without the economist’s famous “first, we assume a ….” followed by a totally unrealistic picture of the world. We need not only better, more public-spirited people in positions of authority, we need a more informed and politically sophisticated public which could recognise such people when it sees them. Or, as the saying goes, ” If we had some eggs, we could have ham and eggs–that is, if we had some ham.” Many of our problems spring from the same deep roots which are principally socio-political in character. Superficial reforms have been tried and circumvented for generations. We need root-and-branch reforms which, themselves, presuppose a degree of political sophistitcation which doesn’t exist today in the general public.

        1. MyLessThanPrimeBeef

          It’s also possible to have improved welfare for all of us with less government spending.

          That is, it’s possible we can be better off without requiring more government spending.

          For instance, it happens if we decrease military spending more than we increase social spending.

    3. FederalismForever

      @proximity1. “Once the reader understands that F. Hollande is not really a socialist other than by misnomer . . . ”

      Oh, please! One of his first major pieces of legislation was to hike tax rates up to stratospheric levels which were far higher than any other eurozone country. He gave every indication of being a “true” socialist back then, to the extent allowable within the EU confines. (No “true” Scotsman! . . . etc.)

      But let me ask you instead: if Hollande’s early agenda was not enough to convince you that he was a “true” socialist, what would a “true” socialist agenda have looked like (again, operating within EU constraints, as he must)?

      1. Ned Ludd

        • Capitalism: investor ownership of workplaces.
        • Socialism: democratic control of workplaces.

        High taxes are completely orthogonal.

        1. FederalismForever

          High taxes, for some, are one possible (albeit indirect) route to “democratic control of workplaces.”

          1. Ned Ludd

            Well, maybe, but high taxes would still be an independent variable. You could have high-tax socialism, but you could also have high-tax capitalism or high-tax fascism. Or low-tax socialism. Or even no-tax socialism: get rid of the state entirely.

      2. proximity1

        Maximum effective income tax on personal revenue in France is currently 45% on incomes of
        151 201 € or higher.

        You’re probably referring to the “impôt de solidarité sur la fortune”
        See link for recent history :

        At its recent lowest (2012) , the ISF was levied at a rate of 0.25% beginning at fortunes between
        1 300 000 and 3 000 000 euros. At the upper end of the levy, from a high of 1.8%, only imposed on fortunes of 16 790 000 euros or higher (those paupers with less than 800K were exempt from this tax) in 2011, the top rate was reduced to 0.5% (that’s right, one half of one percent!) on fortunes of 3m Euros or more. Under that rate, fortunes of less than 1.3m Euros were exempt from the levy. In the latest adjustment (2012), under Hollande, the bottom rate of 0.5% applies again only above 800K Euros and the current maximum rate ( 1.5%) begins at forutnes of 10m Euros or more.

        So, if you have 10m Euros, you’re liable to pay 150K Euros. That’s your idea of “stratospheric” ? Then you could divest yourself of such a fortune and pay the effective income tax rates which ordinary mortals in France pay : the top rate being 45%. So who’s stopping you, huh?

        1. FederalismForever

          @proximity1. I was referring to the sharply increased tax rates which Hollande (advised by Picketty) proposed shortly after coming into office. See:

          The 60% tax on capital gains is (or was) higher than any other capital gains tax rate in the EU. Among other things, it killed a burgeoning tech start-up culture that had emerged in Paris. See:

          1. proximity1

            ” Among other things, it killed a burgeoning tech start-up culture that had emerged in Paris.”

            So you say. High-tech Start-up investments fell over certain months following Hollande’s election and it’s easy to allege (by post hoc ergo propter hoc argument) that it was due to this real or imagined increase in capital gains tax on the sale of a business. It appears that the primary effects of french capital gains tax concerns real estate rather than corporate enterprises. In any case, all we have here is a coincidence in the fact that there was discusssion of raising tax rates soon after Hollande was elected and that involved Piketty as one of the participants in the discussions. What actually transpired wasn’t in the end all that people raised a hue and cry about and Hollande’s tax “bark” proved–as usual–far worse than his “bite.” This stuff is weird: you say you’re for equality before the law, and yet you don’t mention anything about the vast advantages which wealthy people enjoy in tax avoidance through the use of off-shore tax havens and foreign domiciliation. That, however, is only the tip of the iceberg. The undeserved advantages of wealth in France (like nearly all of Europe and the U.S.) are as numerous as they are scandalous. What I see you doing here is paying lip-service to lofty principles which, in practical life, amount to leaving open the way to the cruelest kinds of predation by privileged classes on those who, through accidents of birth or life’s unlucky turns, are made the most vulnerable prey.

            Who, when, where and how is this legal equality of rights between all people. regardless of the station in life at which one begins to be vouchsafed? You don’t explain that. Rather, like an economist, you simply posit it as a starting presumption. In reality, however, it doesn’t exist and never has existed and, rather than offering us any real-world example of how it is to be realized, you promote it and propose it here for us as a fictive object to which we’re supposed to pay homage. Meanwhile, the world goes on as it has, heaping lavish undue advantages on the wealthy and powerful at the expense of the rest of us. To redress that, we have only one realistic possibility– genuine effective democratic governance. But your political principles neuter that remedy by championing a so-called “natural law,” by which no individual owes any duty whatsoever to another or to the society as a whole; nor may the society impose its will by legislation on any individual who happens to object to the terms imposed. Everything, it would seem, is supposed to be at once completely unanimously consensual as well as, miraculously, egalitarian in rights and responsibilities.

            Get back to us when that is more than your pipe-dream.

      3. proximity1

        RE: …”what would a “true” socialist agenda have looked like ?” …

        See, e.g Ned Ludd’s replies. Or, take as examples, Vermont’s Bernie Sanders or, from history, Canada’s Tommy Douglas or Wisconsin’s Robert M. LaFollette Sr.

        By the way, a genuine socialist president would have France leave the E.U. as it currently operates unless he could reform its present archconservative neo-liberal nonsense. The E.U. is an archconservative financially neo-liberal project designed to ensure that democratic principles are thwarted and private wealth’s interests remain sacrosanct. But, since Hollande is a thoroughgoing neo-liberal technocrat of exactly the sort that Yves has previously described he’ll have no intention of either leaving the E.U. or trying to insist on any serious reform of it– and all his ministers have reflected this or they’ve either resigned or been sacked.

  4. The Dork of Cork

    The simple hard truth is that the powers behind the curtain want to impose a American like consumption trajectory on the old continent.
    Even if it kills the lot of us.
    Be it via fiscal or bank credit / capital dumping means.
    Local purchasing power is to be avoided at all costs.
    Coke must be cheaper then table wine
    Cars must fill driveways.
    We must all rejoice in this epic capital goods dumping feast even if we have no tokens to buy this corporate shit
    Meanwhile health fascists run amok as simple old means of living are dumped for the burb lifestyle and yet no inherent contradiction is seen.

    Consider this strange tale of American football replacing the All Ireland football semi final.
    From the GAA point of view (which is in the process of dumping the amateur ethos ) irish people no longer have the purchasing power to engage with its systems.
    It must seek external (in this case American capital / money) so as to build more empty stadiums…..

    its quite funny in a sick way.
    Euroland has been built on concentric rings of deflation and inflation
    There is no real domestic economy / society in France ,Ireland or anywhere else in euroland.
    Its a conduit society / economy designed by and for the financial and national capitals of eurotrashland.
    And yet yee guys at Naked Capitalism give Draghi the benefit of the doubt when he and the people behind him has built this Euro Americana nightmare.

  5. EoinW

    There is nothing wrong with austerity in principle. With individual cases a person gets into too much debt so they cut their spending until they are earning more than they spend. Eventually they return to economic well being.

    The problem with the austerity we face today is that it’s dishonest. Just smoke and mirrors to distort reality while the elites use their “austerity” to plunder national resources for their Country Club buddies. Thus you have austerity with ever increasing debt. A wonderful scenario as the problem is never solved, meaning more austerity is needed until everything not nailed down has been stolen.

    I’m skeptical that the alternative to austerity is to print more money. I’m sure smarter economic people can argue for this route, and they may be correct, however common sense tells me that if the problem is too much debt then how can it be solved by more debt?

    I’d like to see real austerity tried. That begins by nation states defaulting on their debt, eliminating one of the biggest expense burdens, owed to the financiers. No tax dollars to debt and none to interest payments. Instead paying the Shylocks their “pounds of flesh” is taboo to current austerity. If default leads to a financial collapse, well doesn’t that actually eliminate the people responsible for the financial mess we’re currently in? Yes I know it means immediate pain and Baby Boomers have been consistent that they must never pay for anything while future generations get to pay for their excess.

    I’m sorry but there’s, in my view, a great deal of moral hazard with the easy money crowd. Yet the biggest problem is such people want to replace austerity with money printing but within the current system, which will still be run by the same financial criminals. You can never fix a problem if you won’t address the actual problem.

    1. Banger

      There are any number of rational approaches to making good public policy but there’s no political structure or movement to implement any of them. There is certainly virtue to your suggestion but the current set-up exists because the oligarchs believe it insures their power and wealth and they are right, it does–the ball is in their court, they can continue to run the current system for their exclusive benefit or not. The average person has very little chance against corporate forces unless that person can organize with his/her fellows into a corporate structure of some kind.

    2. david lamy

      This paragraph is logically incoherent to me:
      “I’d like to see real austerity tried. That begins by nation states defaulting on their debt, eliminating one of the biggest expense burdens, owed to the financiers. No tax dollars to debt and none to interest payments. Instead paying the Shylocks their “pounds of flesh” is taboo to current austerity. If default leads to a financial collapse, well doesn’t that actually eliminate the people responsible for the financial mess we’re currently in? Yes I know it means immediate pain and Baby Boomers have been consistent that they must never pay for anything while future generations get to pay for their excess.”

      I guess that you project a currency collapse as a way to shaft the 0.1%. How thoughtful!
      But there are some Baby Boomer constituents of that 0.1% so let’s have at it!

      1. EoinW

        You make it sound like I created the currency collapse. Could it not be that the currency collapses because there is too much money/debt in the system? If that isn’t the case then it won’t collapse. All I suggested is to stop using the majority of tax payer funds to pay interest on the debt. If the financial system collapses due to this action then isn’t that proof as to how rotten the system is?

        The proposal is not a vindictive one. Finance is monopolizing too much wealth – to the disadvantage of everyone else – and this looks unsustainable. It’s simply common sense to use that wealth to benefit all of society, not a select group. If financiers must settle for less and cannot keep the economy going then that’s a basic flaw in the system.

        The shafting is going on all the time. I guess a little shafting is better than a whole lot of shafting. But will we reach a point a whole lot is unavoidable?

  6. Bam_Man

    France’s budget-deficit-to-GDP ratio will almost certainly be well in excess of 4% this year. Once again exceeding the original treaty “limit” of 3% – by more than a third!. Where is this “austerity” that you speak about?

    1. guest

      This just in: Austerity found to be self-defeating!

      Yes, a growing deficit is exactly what happens when
      a) You slash deductions for children, for school costs, increase deductions to social security, raise VAT, increase deductibles for health care, and increase taxes on the middle to high brackets; all which reduce disposable income for the vast majority of the population, hence reduce consumption, ultimately taxable profits and therefore the income of the State.

      b) You suppress taxes on the lowest income brackets, reduce taxes on the resale of secondary residences, reduce taxes on the transfer of shares, reduce a variety of social contributions and taxes levied on corporations; all of which further cut down the income of the State.

      An identical scenario plays out in every country affected by austerity: VAT and social security deductibles are being raised, unemployment insurance, pensions and family subsidies reduced, and taxes for corporations slashed. The result are growing deficits everywhere. Why are you surprised?

  7. Chris in Paris

    Increased taxes on the middle class (including more VAT!) in the midst of a depression in order to satisfy the Brussels/Frankfort confidence hyenas has heavily impacted consumption here. Remember that French income taxes are not withheld – so you are hit a year later and if you’re recently unemployed, you have to pay taxes on what you made while you were working, meaning that you hesitate to spend any disposable income in the meantime. Tax bills come next month and August is either a month of leisure or fear. This was highly visible in Paris over August when, if you walked about the “quartiers chics” it was obvious that everyone was out of town on vacation. However, if you went to the 18th, 19th, 20th and east suburbs, street life was the same as any other time of year.

  8. Roy Price

    The French expression for all this is “dialogue des sourds” or a conversation between two deaf people.

    Even Frau Merkel probably knows that austerity alone is self-defeating. But she and most Europeans want to maintain the euro, and this requires a much greater degree of convergence of the Euroland economies.
    If Hollande and his natural allies in Italy and Spain were true leaders, they could negotiate a commitment to structural reforms over a very long period (10-20 years) against a German commitment to allow an ECB-financed stimulus. “Whatever it takes” to quote Sr Draghi. He clearly understands what is needed as does Mme Lagarde although they can only say so in coded language.

    Why will it take so long? In today’s France close to 15% of working age people are officially unemployed or have stopped seeking employment. A further 15% are collecting generous pensions. Yet another 15% are surplus workers in a grossly overmanned (and overwomaned) public sector plus a plethora of overly protected cartelized sectors (energy, transport, banks…down to retail pharmacies and driving schools. With the best political will imaginable, 3 x 15% cannot be reduced to 3 x 5% in one electoral cycle.

    The situation is marginally worse in Italy and the proportions are very different in Spain. But the bottom line is much the same throughout southern Europe: almost half the working age people are not working productively. Austerity, as currently practiced, will not cure the disease. It may not even relieve the symptoms sufficiently to prevent a political blow-up of the euro or even the EU.

    As in the 1930’s, Europe is led today by short-sighted, nationally-focussed politicians when it badly needs statesmen (or stateswomen) as in the 1950’s. Will they emerge in time?

  9. Matthew G. Saroff

    I expect Marine le Pen to make the runoff in the next presidential election, and if Sarko runs on what used to be called the Gaullist ticket, I expect that she would have a good chance of winning.

  10. ewmayer

    Maybe we can kick-start a drive to get PK appointed as the new French econMin — let him put his theoretical models and “understanding of economies and banking” into practice and see how it works out. Wonder if “other side of the Atlantic” will be a sufficient minimal safe distance, though.

  11. mrtmbrnmn

    Zoot Alors! How many times must the French surrender to a German blitzkrieg before they learn the lesson of the Maginot Line? Or rather the Imagine-o Line. Germany is re-fighting WW 2 and this time getting a better result. Sacre Bleu!

  12. different clue

    These European policy makers/imposers must know enough economics to understand that imposing enough austerity will eventual create a depression. They probably know the details of how deep a depression can be produced through how much austerity for how long. So it seems likely to me that a depression is exactly what they are engineering on purpose with malice aforethought for whatever goal their hidden masters hope to achieve in the long run.
    Perhaps a Yeltsin-era style privatization of every last public thing everywhere throughout Europe?

    1. Park Nihrs, La Woebegone River, USA

      Different clue, I suspect you are correct. Depression intended. Slows global warming and peak oil and prepares the middle class for more subservience.

      Though I doubt they have it calculated and engineered to such a fine degree; economies being complex systems and all; nor do they quite understand how the society might flip at some breaking point.
      But then I remember the right-wing lunacy about FEMA camps and my own nightmare about Ebola “patients” (sorry, “medical consumers” – how does one produce a strikethrough in these comments?) getting released by genuine terrorists or our false flag saboteurs and major cities going on Boston-style lockdown.

      Really, the major economic moves today still aim at profits from some kind of capitalist-led growth, and make no sense if TPTB really want a population-culling breakdown, but the Police State moves make plenty of sense if they believe societal breakdown is a real possibility. Hedge your bets.

      And if the problem is climate change, engineered depression sparking street protests, or peak-oil-post-fracking-scam economic collapse (i.e., depression/inflation) then a poorly trained federalized police force can just do what is already does in places like Ferguson, MO and Zuccotti Park, Wall Street (embarrassingly formerly called Liberty Plaza Park).

      If the problem is biological terrorism, well then even I would agree with a FEMA camp for half of Atlanta, and shutting down the airlines. I’d suspect a false flag, but fear the real thing.

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