Monday, 16 July 2012

Ralentissement de la France


What’s great about the French language is almost everything sounds better in it. Parisian romances to exciting red wines are remembered when French is spoken, the main reason why you see younger North American women try to incorporate it in their speech without the slightest clue what they’re saying.

However, the title’s meaning is not so great. It means Slowdown in France, as the country is continuing is economic fall. Newly elected Francois Hollande has seen his popularity fall by 7% since being elected, and it is doubtful if there will be an increase on the way. The socialist president has made grand promises of increasing the amount of jobs, increasing wages of low income jobs, and lowering the retirement age back to 60. All these were made at the same time as lowering the budget deficit to zero by 2017.

Hollande’s solution is increased taxation of the wealthier citizens of France. With a proposed 75% taxation rate for anyone who makes a million euros annually, while at the same time merging the General Social Contribution and the Income Tax.

I know, some are already lost – what’s a General Social Contribution? Well, France does love its taxes. Basically, to finance social security the General Social Contribution Tax was created as separate from the income tax. With 7.5% of all incomes from work taxed along with 8.2% from income from investments, the General Social Contribution collects quite a bit of cash. Additionally, a half percent is taxed on all forms of income (well I’m generalizing – most forms), to repay the social debt. 

This is all federal and does not include the large amounts of local taxes paid, housing tax, professional tax, land tax or taxes on gifts/succession. Basically, paying taxes can become quite complex due to the amount of governmental organizations that demand a payment.

Hollande also wishes to increase the L'impôt de solidarité sur la fortune, or solidarity tax on wealth. And taxes those with assets more than 1.3 million euros. To be honest, very little tax is collected – totals around 2% of annual French taxes. It’s more symbolic of France’s more socialist society.

Even if increasing taxes does bring in a substantial amount of revenue, Hollande already has plans to spend it. The President wishes to hire 60 000 new teachers for technical, experience based training while adding 5000 new police and judges. The green bug has bit the President as well, as he hopes to drop France’s reliance on nuclear power from 75% to 50% by investing in green energy. Lastly, he wants a European rating agency that would most likely raise European debt ratings from typical debt rating organizations such as Moody’s, and artificially lower bond interest rates. Lastly, he plans on creating an investment bank for small to medium enterprises and lowering their tax rates.



To be honest, most of these ideas are great if you have a lot of money to spend. Unfortunately, France does not. Hollande should look at green government subsidization around the world and view the colossal failure it has been in terms of Return on Investment. If Hollande can figure out a superior economical method to increase green power, more power to him. Additionally, supporting a new bonds rating agency is ridiculous, it will just amount to more European money flooding into another organization that doesn’t do anything productive. Lastly, returning the retirement age to 60 is quite absurd, seeing as life expectancy is much higher than when the mandatory government pension for retirees was introduced.

Currently, the jobless total in France has hit a 13 year high and another 75 000 industrial workers are expected to be the newest members of the unemployment statistic.  The current outlook by many economists is bleak for France, adding to lower market confidence.

If Hollande wishes to reform France, a lot more work has to be done than firing the tax-the-rich cannon and using the shrapnel to create more governmental programs. 

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