You might say, “Well, that’s just Cyprus”. No it isn’t. There is a sympathetic story in Monday’s New York Times about France’s new finance minister, Pierre Moscovici, and the many difficult challenges he faces. The headline is “Steering France’s Economy, and Attacked From All Sides”. The headline should be “Socialism Meets Deflation”.
Mr. Moscovici’s boss, Francois Hollande, was elected on an anti-austerity agenda. The French people, confronted with a choice between “reform lite” and “no reform”, chose no reform. They voted to maintain the French social model, and to avoid the structural changes being imposed on the other members of Club Med. However, this won’t in practice be possible because France’s fiscal deficit exceeds the limit set by the eurozone’s “fiscal pact” which requires all eurozone countries to bring their deficits to 3% or below. Despite Hollande’s comforting election promises, France’s budget is on the chopping block.
*Correction: Mr. Moscovici was a communist as an adult, but not a stalinist. The RCL was Trotskyite.