Ahead looms a problem that could dwarf any of the eurozone’s current struggles, says The Economist: France. It could be the next debt domino to fall.
Its debt pile has reached 90% of GDP, and it hasn’t balanced the budget since 1981. The economy is set to tip into recession and the odds of France growing fast in future, thus reducing debt rapidly, are worsening. It is over-regulated and uncompetitive, with Europe’s highest social charges on payrolls, very high taxes and rigid labour and product markets. All this has hit investment and enterprise. No wonder ratings agency Moody’s has removed France’s triple-A credit rating.
President François Hollande has said he will cut the social charges on business and make the labour market more flexible. But his reform drive seems “half-hearted” and recent “leftish” moves, such as a 75% top income-tax rate, hardly inspires confidence. Investors have been “indulgent” so far, but “you cannot defy economics for long”.
Still, Hollande has “more power than any other European head of state to implement his policies”, says Agnes Poirier in The Guardian. His Socialist party holds both chambers of parliament and most regional councils. He is also the first French president to have a business degree.
Moreover, “a socialist is probably better placed to persuade the unions of the need to change than a conservative president”, says Hugo Dixon on Breakingviews.com. “So the question really comes down to how much courage Hollande has.”