What would happen if France swallowed the potion Greek
May 4, 2010
Blood and tears. This program requires that the Papandreou government in Greece for years to come, to avoid bankruptcy in the country. He promised to markets to reduce the deficit from 14% of GDP in 2009 to 3% in 2014. A huge effort, obviously very painful socially, which requires an increase in VAT, a drastic reform of the pension system, or a decrease in emoluments. That 2010 will be the toughest period: Athens has promised, this year alone, a decline in the deficit to six points of GDP. To fully appreciate what it represents, has made his lexpansion.com small stones on the scale of France. Six points of GDP for France, this represents some 120 billion euros.To approach such a sum, it would combine the following:
– Doubling the income tax, which would bring 50 billion euros of additional revenue
– Triple or quadruple the solidarity tax on wealth, to garner a little more than ten billion
– Cut the salaries of civil servants by 20%, thus resulting in a saving of around 40 billion euros
– Increase the VAT by two percentage points, enough to increase revenues to 15 billion euros
One program necessarily unpopular. And very unrealistic. The deficit reduction program passed by France to Brussels expects a decline of 1.7 percentage points of GDP per year between 2011 and 2013. But this effort is already three times greater than those achieved in the past, as shown in the table below, produced by the OFCE for lexpansion.com.The effort to Greece, applied to France, would make three times more than what should be done, and six times more than what has already been done. What government would be prepared to endorse such a burden?
Period when France's public deficit was reduced annual Magnitude of reduction,% of GDP annual growth rate observed during this period, as% of GDP 0.6 3.9 1986-1989 0.5 1975-1979 1993-2000 3.7 0.7 2.6 0.6 2.2 2003-2006 1.7 2010-2013 2.5% (forecast)
Sorry, comments for this entry are closed at this time.