Wolf Richter www.testosteronepit.com
France is mired in a stagnating economy. The private sector is under pressure, auto manufacturing is heading into a depression. Unemployment hit a 13-year high of 10.2%, leaving over 3 million people out of work. Youth unemployment of 22.7%, bad as it is, belies the catastrophic jobs situation for young people in ghetto-like enclaves, such as the northern suburbs of Paris. The “solution”—fabricating 150,000 jobs for the young at taxpayers’ expense—has been tried before, with little success. Gasoline and diesel prices are hovering near record highs. So there are a lot of very unhappy campers.
In a BVA poll, 55% of the respondents were dissatisfied with President François Hollande’s efforts to tackle the economic crisis. By comparison, only 31% were dissatisfied with Nicolas Sarkozy in 2007 at the end of his honeymoon. Devastatingly, for a socialist: 57% believed that he didn’t distribute the “efforts” equitably—same as Sarkozy, the president of the rich.
The problem with voters is Hollande’s “inaction,” after some initial half-measures, such as the partial reinstatement of retirement at 60 and raising back-to-school aid for families. Now people “seriously doubt his ability to change things.” They believe that the government spends its time trying to “unravel Sarkozy’s legacy” and “sitting around in meetings,” rather than making decisions.
In an OpinionWay poll, satisfaction with the job Hollande is doing crashed a vertigo-inducing 14 points from 60% in July to 46% in September—compared to the 64% satisfaction score voters heaped on Sarkozy in 2007. And 58% believed Hollande, after four months in office, is already going “in the wrong direction.”
People have the “strange impression” that the government is “only now becoming aware of the crisis,” and they’re worried that the government lacks “clear vision” and “a war plan” to combat it, said Bruno Jeanbart, deputy general director of OpinionWay. Anxiety is engulfing the middle class, and it pummeled Hollande with a 19-point drop in the satisfaction score. During his campaign he’d promised that he’d demand “efforts” from the rich and from large corporations, but now the middle class fears that it will be asked to step up to the plate and pay even more in taxes.
It gets worse. Only 34% are confident that Hollande can tackle the unemployment fiasco, 33% are confident that he can control budget deficits, and 29% believe that he can maintain purchasing power (a formula based on inflation and a slew of other factors, such as social payments). Prime Minister Jean-Marc Ayrault got knocked down by 13 points to 46%. Luckily for Hollande and his ilk, the entire classe politique, including the opposition, got hammered, and even right-wing Marine LePen was knocked down 10 points to 21%.
To turn things around, Hollande addressed the nation on Sunday night TV (TF1) ... and lowered growth expectations for 2012 from the already measly 1.2% to 0.8%. To keep the deficit in line, he’d have to come up with €33 billion in new measures. He’d “save” €10 billion in public service—though he’d already committed to hiring more civil servants for education, law enforcement, and the decrepit justice system. Deep unnamed cuts would have to be made elsewhere. A mystery, because the resulting strikes would paralyze France for weeks.
And he outlined tax measures, some of which he’d already proposed during his campaign, to extract another €20 billion from households and businesses—the 75% top income tax bracket among them. Once again, he emphasized to his incredulous middle-class compatriots that these taxes would hit only the largest corporations and richest households.
Hence the explosive impact of the “affaire Arnault,” as it has come to be called. Bernard Arnault, richest man in France, fourth richest man in the world, top honcho at luxury retailer LVMH, and close associate of Sarkozy, has applied for Belgian citizenship.
France gasped. Liberation ran a front-page article, “Hit the Road, Rich Idiot.” It lambasted him for his tax-avoidance strategy and called him a “deserter.” Arnault decided to sue the paper. Economy Minister Pierre Moscovici said on BFMTV that he was “shocked” and called for renegotiation of the tax treaties with Belgium, Luxembourg, and Switzerland (unlike Americans, who are taxed on their worldwide income, French citizens are not taxed in France if they don’t live there).
In November 2011, Arnault called Armand De Decker, the mayor of Uccle, a swank French-speaking community in the Region of Brussels, to let him know that he’d buy a residence there and apply for citizenship. Arnault had explained to him that his decision was based on the current tax climate in France—”If certain tax measures are implemented,” De Decker said, “that would mean for him that the taxes he’d pay would exceed his income.”
But Brussels isn’t a hot tax haven—we used to live there, and there are lots of reasons to live in Brussels, but you pay taxes out of your nose for almost everything. Yet it’s 1 hour 22 minutes by train from Paris; and there are some tax advantages over France, including inheritance taxes. Hence, the dominant group of the many French escapees, the 45-60 year-olds, want to protect their moderate fortunes. But the super-rich tend to go elsewhere. If nothing else, Arnault’s move is a deft slap in Hollande’s face.
“Outright Monetary Transactions,” is what Mario Draghi called the ECB’s strategy to buy “unlimited” amounts of Spanish and Italian bonds. It’s supposed to repair “monetary policy transmission” and be a “fully effective backstop removing tail risk.” Impressive nomenclature ... for a classic scheme to bail out bondholders and fund governments. And it’s illegal. Read.... The European Central Bank Thumbs Its Nose At The Law, by Blankfiend.