Tuesday, October 19, 2010

Rachman on How France Ignores Its Fiscal Reality

Here's an extract from a Financial Times article by Gideon Rachman on how hard it is for the French government to make the French welfare system more sustainable and to turn it into less of an economic burden for future generations and for the French economy through the reduction of entitlements:

The French seem to enjoy strikings. Last week there was a slightly festive air – with flags, drums, torches, chants and even fancy dress on display. There is something faintly ridiculous about schoolchildren striking to protect their pensions, which makes it tempting to dismiss all this as street theatre and to assume that the real decisions will be made elsewhere. But that would be a mistake. The French strikes are causing serious disruption to the economy, with a threat that the country could soon run short of petrol...

The French people ... still do not seem to realise the potential gravity of their situation. Their government’s proposal to raise the retirement age from 60 to 62 is an extremely mild reform – certainly compared with the cuts in wages, pensions and services that are being forced through in other debt-stricken European countries such as Greece, Spain, Ireland and even Britain. And yet France’s proposed reforms have brought millions of demonstrators on to the streets.

It may need a genuine fiscal crisis finally to persuade the French that, as Margaret Thatcher once put it: “There is no alternative."

It's interesting to notice however that while France is at least fighting its way back into long-term solvability, the US continue to develop an entitlement culture and to do all they can to bankrupt their own welfare system.

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