France: the "Big Loan" and chronic deficit

The Trouble With Sarkonomics


The first sign of trouble: the Big Loan, a multibillion-euro super-bond to finance long-term investment, to be adopted in December, that Sarkozy says will help prepare the economy for the future in a country where a chronic deficit (run since 1974) leaves little room for forward-thinking investment. Critics say the loan will just dig France a deeper hole with no clear payoff.


But in economics, such whimsical indifference to long-term consequences is dangerous. Sarkozy's first problem is a lack of follow-through. He has managed to launch reforms at a pace never before seen in France. The Brussels-based Thomas More Institute has charted progress on Sarkozy's 490 campaign promises and the 732 measures he has announced since his election. It has found that on an impressive 80 percent of these, action has at least been initiated. But it has also found that many of these initiatives were hastily prepared and haven't been vigorously pursued, "as if the surface given to reform frustrated its depth." Sarkozy's big pre-crisis effort to trim public-sector waste, for example, yielded a miserly €7 billion in savings. And most of his so-called Marshall Plan for France's notoriously troubled housing projects never got off the ground. "The president likes surprises," the institute reports, "generally when he finds himself in difficult situations." But those surprises have lasting costs for taxpayers.

Comment: France's Big Loan is like Obama's stimulus package!

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