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The French Government Gets Whacked, Even The Left Is Angry, And Hollande Gets Slapped In The Face

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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.

 


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Tue, 09/11/2012 - 11:39 | Link to Comment ParisianThinker
ParisianThinker's picture

Most would rather be in France than in the states if they had a choice, but they don't and never will. Most can't afford a vacation.

Taxes here have paid for the best health care in the world for all, a great transportation system, faster internet than those who live in the states are burdened with, free international phone calls, good food (no GMO here), civil behavior, and great vacation time. The French will enjoy it as long as possible. 

In addition, there are no homeless French children or adults on the streets decorated with flowers and trees. 

 

Tue, 09/11/2012 - 12:15 | Link to Comment Urban Redneck
Urban Redneck's picture

Screw the sarcasm, how about all those huge zoos surrounding Paris where you keep all the coloreds on display, they might have slightly different take on the current state of the Republic-

Tue, 09/11/2012 - 10:33 | Link to Comment TSA gropee
TSA gropee's picture

Concerning the French, Patton summed it up best. "I'd rather have a German division in front of me, than a French one behind me."

About all I feel like contributing today.

Tue, 09/11/2012 - 09:30 | Link to Comment EvlTheCat
EvlTheCat's picture

To bad the French ignored Georges Bernanos.

Tue, 09/11/2012 - 07:22 | Link to Comment orangegeek
orangegeek's picture

A world with a diminished France will be a much better place.

Tue, 09/11/2012 - 06:53 | Link to Comment Arthur Borges
Arthur Borges's picture

The last half of the Libération headline actually translates as "Rich Asshole": the original term is "Con", which is literally slang for "vagina" but "cunt" doesn't quite work because a cunt has a despotic side (and perhaps even a higher IQ) while an "asshole" is usually sooner more stupid than despotic.

At all events, it's way stronger than "Idiot" (same word, same spelling in French).

 

This all reminds of the Italian daily the day after the death of H.H. John Paul I, who died after only 33 days on the papal throne following the death of H.H. John XXIII. Anyhow, the frontpage lead was: "Pope Dies Again".

Tue, 09/11/2012 - 06:41 | Link to Comment falak pema
falak pema's picture

this guy Wolf is standing on his head on the French tax issue.

Seen from France the sentiment is just the opposite. Hollande is playing his cards beautifully using mirrors and sleight of hand to keep the Right medused and the Left confused. After all he is up to his neck in Euro dead-duck soup. But that is a first world conundrum.

Just take the example of the 75% marginal income tax to clobber the rich; iconic promise from electioneering agenda now "hard wired" into new fiscal policy reform in France

All smoke and mirrors! 

WHy ? 'Cos as every entrepreneur knows, I am one of these, if you own a company to make money, which is true for 99.9% of the rich, including the football players; they do have tax consultants; you can EITHER transfer money to yourself as company dividend OR as executive salary.

SO if you are in that category, 3000 people according to Hollande are in France, (not much), then you make sure you pay yourselves more dividends and less salary. Period. Game over!

'Cos dividends today are taxed at around 33%...So the marginal tax rate for a guy with a 5 Million salary will NEVER be applied to his earnings above the 1 million limit. He will bring it down to 1 million, thus pay marginal tax of around 45% for the highest tranche over 250 000 EUROS, and receive the rest as company dividend and pay 33% on THAT!

Smoke and mirrors and electoral promises.

That rich guy B Arnault has left 'cos he wants to avoid inheritance tax. Big deal. There are 1000 of those in France and its marginal to the 33 Billion tax increase that Hollande will impose, for TWO years, in principle, from 2013 to bring down the french deficit to Maastricht 3% by 2013. He has pledged he will continue to pay taxes in France as long as he exercises executive power; aka before he retires and hands over company to children.

The real slap on France's face is the coming reset and its a slap on everyone's face. That's capitalism reset in first world. 

So WOlf, stop barking up a tree with nobody sitting on it. 

 

Tue, 09/11/2012 - 09:52 | Link to Comment InjuredThales
InjuredThales's picture

If France is like most developed nations, I doubt you save yourself tax paying dividends if you are already paying tax personally at the highest marginal rate.  Reason being is that you likely paid tax on the money you use to pay the dividends at the corporate level.  Salaries are tax deductible, so the money is only taxed once.  My guess is they will net out about equal.

Tue, 09/11/2012 - 10:25 | Link to Comment falak pema
falak pema's picture

salaries are tax deductible at corporate tax level; aka 33% in france. When you pay it as dividend it gets taxed again as personal income level at a much lower rate than the 75% marginal rate. It works out better IMO, although it is around 60%.

But most people at these levels of income hedge thair corporate earnings and get paid some of it; bonuses and dividends, by intercompany type mechanisms in other countries that feed numbered accounts. So no personal tax.

Only works for people with connections and intercompany outlets. 

Tue, 09/11/2012 - 10:48 | Link to Comment slightlyskeptical
slightlyskeptical's picture

And people are bitching about tax rates in the USA???

The answer to all this BS is to get rid of fractional reserve money creation and just have the damn governments print what they need and eliminate all income and corporate taxation alltogether. Since the central banks are ultimately buying what money is printed at this point, we really aren't too far away from this scenario. I think we just need to make it official. Perhaps they are just waiting until the biggest money can off load their bonds before doing so.

It's going to be fun around here over the next couple of years!

Tue, 09/11/2012 - 11:20 | Link to Comment Urban Redneck
Urban Redneck's picture

Since I took today off anyway, I started a food fight in another thread with the notion that the more unpleasant side effects of the Fed`s continued existence could be turned against the more nefarious intentions of the Fed`s creators and puppeteers, and used to develop a workable solution to the current turd polishing red herring filled debate over taxation.

http://www.zerohedge.com/contributed/2012-09-10/dc-finalizing-plan-assault-metro-nyc#comment-2780969

Tue, 09/11/2012 - 10:03 | Link to Comment Urban Redneck
Urban Redneck's picture

Crossing borders and converting the dividends to inter-company is the usual PTB bypass for that trap.

Tue, 09/11/2012 - 05:07 | Link to Comment Urban Redneck
Urban Redneck's picture

The Socialists are rumored to have already cut a deal so that the entire rentier class is spared from the "millionare" tax and it will fall entirely on the wage serfs successfully tying to climb the corporate ladder.

If the Socialist frogs are incapable of actual Socialism, as opposed to Corporate Facsim, then the whole ideology needs to relegated to the dust-bin of history.

So much for the sophistication (intellectual or otherwise) of the French.

Tue, 09/11/2012 - 08:02 | Link to Comment falak pema
falak pema's picture

its called crony statism and its become an art like making the Roquefort cheese. 

You are expected to say Cheese, smile at the lens and then add; thank you please, you benefactors of humanity. 

Ain't that Enlightenment meme as good a selling point for absolutist statism as God and Crusade were before it for Divine rights?

We will never learn. 

Tue, 09/11/2012 - 07:03 | Link to Comment Arthur Borges
Arthur Borges's picture

Laurent Fabius was prime minister when France enacted a new tax on net wealth -- his family has been a major league antique dealer for ages -- and, after all the exemptions, it turned out that one of France's wealthiest champagne families only had to fork over FRF 10,000 the first year (about USD 1,300 at the time).

The folks who took a hit were mostly small businesses with cheap bookkeepers instead of sharp tax consultants.

Tue, 09/11/2012 - 04:52 | Link to Comment Tommy Gunner
Tommy Gunner's picture

Picture Ben Bernanke strutting down  the champs elysse strumming a banjo while hanging his giant donkey carck (viciously stolen from a donkey in the Ghan somewhere near Kabul) and spliced on the Bernankes area of carck - for all to see.   Les belles filles murmur in shock and awe 'mais oui zat is a big carck on zat fat old man' And Ben, always one for the spotlight beams with pride in his giant carck.

Tue, 09/11/2012 - 03:50 | Link to Comment Zero Govt
Zero Govt's picture

"The French Government Gets Whacked..

what great news

..Even The Left Is Angry..

more wonderful news

...And Hollande Gets Slapped In The Face"

I'm in a state of euphoria with all this good news

triple helpings of popcorn today, yippee

Tue, 09/11/2012 - 03:33 | Link to Comment THE DORK OF CORK
THE DORK OF CORK's picture

If almost all of the remaining capital going into the French automobile sector was put into their light rail and tram sectors they would not be in this pickle today.

The railway cuttings closed just before the war , soon after and the final closed lines such as this 

www.nantes-chateaubriant.paysdelaloire.fr/

 

 in 1980

 to pay for its TGV lines can be brought back for less capital then people expect.

There is tens of thousands of such old cuttings in France.....

200 million for 60+ Km of elec. track ?

7,800 milllion for the Tours Bordeaux line ?

39 * 200m  : 7,800 milllion  = 2,340 Km ?

Tue, 09/11/2012 - 02:48 | Link to Comment Walt D.
Walt D.'s picture

Why do people move from New York to Florida?

Tue, 09/11/2012 - 08:03 | Link to Comment GeezerGeek
GeezerGeek's picture

I think that those who move south just want to spread the misery around. After years of being overtaxed in NY and seeing their relatives in Florida enjoying lower taxes, they move there to vote for politicians who will raise taxes and generally abuse the longer-term residents.

Or maybe they just want to enjoy the thrill of a category 4 hurricane.

Tue, 09/11/2012 - 12:43 | Link to Comment g speed
g speed's picture

I can't stand those assholes -- when they give me the "Jersey bullshit" I just wanta slap em in the face. 

Tue, 09/11/2012 - 00:04 | Link to Comment honestann
honestann's picture

The bad news:  The rich eat middle-class first.
The good news:  The rich eat themselves too.
Not much consolation.

Since the predators-that-be leave no other way, vote with your feet.

Tue, 09/11/2012 - 02:21 | Link to Comment Poor Grogman
Poor Grogman's picture

It's pretty clear now that the next stage of socialism will involve checkpoints, barbed wire, capital controls, dobermans, and militarized police.

All for your own protection from those horrid libertarians and capitalists of course.

Tue, 09/11/2012 - 07:55 | Link to Comment DocinPA
DocinPA's picture

Communism:  When they stick a gun in your face at the start.  Socialism:  When they stick a gun in your face at the end.

Mon, 09/10/2012 - 23:55 | Link to Comment steve from virginia
steve from virginia's picture

 

People aren't aware of the crisis ... fancy that!

 

War between humans and automobiles ... HEY! It looks like both the stupid humans and the automobiles will lose! Particularly in France ... risking trillions on useless toys is never good economic planning ... but ... why stop the fun?

 

Whoo boy! Wait until the car manufacturers in Germany and China collapse, wait until millions of factory workers are milling around wondering about the 'crisis'!. Then what?

 

At least the Europeans have towns people can get around on foot. Meanwhile, the market call is 'short Peugeot' and 'long carpenter's hammers'.

 

Bon voyage suckers! I hope you enjoyed the ride ...

 

 

Mon, 09/10/2012 - 23:53 | Link to Comment Atlantis Consigliore
Atlantis Consigliore's picture

excuse me monsier, is that your tax dog? does it bite?

mondieu, le moether bit me in the arm,

what i thought you said you tax dog does not bite,

mondieu Idiot,  that is not your dog?

 

Mon, 09/10/2012 - 23:44 | Link to Comment jwoop66
jwoop66's picture

europeans are smart. If this socialist can't fix it, they'll find another socialist that can.  If that doesn't work they'll get another better socialist.  Works every time.

Tue, 09/11/2012 - 04:04 | Link to Comment No Euros please...
No Euros please we're British's picture

And no one fixes it better than a Goldman Sachs socialist.

Mon, 09/10/2012 - 23:44 | Link to Comment Walt D.
Walt D.'s picture

Vote with your feet.

Mon, 09/10/2012 - 23:26 | Link to Comment Anusocracy
Anusocracy's picture

The hunter-gatherer left's nostrums don't work any better than the pharonic right's nostrums do.

The beliefs of the left and the right developed before the advent of the modern technological world. Either one will only cause harm to economic growth.

Mon, 09/10/2012 - 23:20 | Link to Comment bigwavedave
bigwavedave's picture

Heads up. CNBC Asia mentioned that rumor is the KKK will 'delay' ESM decision to account for Draghi SMP revamp and hear new challenge. Oops.

Tue, 09/11/2012 - 05:15 | Link to Comment boogerbently
boogerbently's picture

"CNBC Asia mentioned that rumor is the KKK will 'delay' ESM decision to account for Draghi SMP revamp and hear".....

What Uncle Ben does tomorrow!

Tue, 09/11/2012 - 05:09 | Link to Comment Rip van Wrinkle
Rip van Wrinkle's picture

It's called 'news management'. And if CNBC report it, you can guarantee it's bullsh!t.....or should that be bullish??

Mon, 09/10/2012 - 23:17 | Link to Comment Everyman
Everyman's picture

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, .................... Anxiety is engulfing the middle class,.............

 

Apparently there is a lot of that going on around the globe, meaning a lot of "strange impressions" abound in all countries.  It seems as if ALL of the POLITICIANS and ECONOMISTS and FINANCIAL ASSHOLES are all clueless, incompetent, corrupt, and are berift of good judgement, knowledge and leadership.

Well I guess it doesn't "seem"; it is the way things are.

 

Tue, 09/11/2012 - 01:04 | Link to Comment FreedomGuy
FreedomGuy's picture

I was copying the same quotation, Everyman. The problem is that the government is not aware that IT is the problem. Government is the source of the problem and not the solution. However, the entire Western world is now conditioned to believe in government planning.

Mon, 09/10/2012 - 23:06 | Link to Comment monad
monad's picture

I like Mr. Arnault more every day.

Tue, 09/11/2012 - 06:11 | Link to Comment Christophe2
Christophe2's picture

I don't see what there is to like about Arnault.

 

What a BS-meister, for one: based on the article he claimed “that would mean for him that the taxes he’d pay would exceed his income.” - I would appreciate knowing how exactly someone could pay more in taxes than they receive in income (tax is a % on income), unless you include payments for back taxes, which are a separate matter altogether.

 

In any case, evidently I am against paying taxes to a corrupt and satanic oligarchic system, but please note the vast difference between Arnault and the common man:

- common man: can't avoid taxes yet has no say on how the money is spent

- multi-billionaire elite: easily avoids most taxes yet has a deciding say on politics and policy, if desired (bribes, ownership of mainstream media outlets, funding 'think-tanks' and political parties, etc.)

Tue, 09/11/2012 - 08:13 | Link to Comment i-dog
i-dog's picture

 

"I would appreciate knowing how exactly someone could pay more in taxes than they receive in income"

Wealth taxes (http://en.wikipedia.org/wiki/Solidarity_tax_on_wealth) ... paid on top of income taxes. Used to have the same effect on many in the Netherlands...who now live elsewhere....

Tue, 09/11/2012 - 09:29 | Link to Comment Christophe2
Christophe2's picture

Gimme a break: the highest rate for that 'wealth tax' is 1.8%.  And it's not like the French tax system doesn't allow deductions...

 

In any case, although I am all for tax avoidance now that I realize how corrupt and evil our Western societies are, I still hold our satanic elites responsible and therefore feel that the ONLY people who should be paying taxes are the treasonous elites.

 

To celebrate this guy's ability to stick it to the tax system is to fundamentally fail to recognize how he and his ilk are laughing all the way to the bank while they grossly profit from a rigged game.

 

And P.S.: France's elites are truly treasonous, as was made evident by their well-documented complicity in making France fall so fast to the 3rd Reich's predictable advance (c.f. Annie Lacroix-Rix's work on the subject).  The French have very well-founded reasons for despising their elites...

Tue, 09/11/2012 - 04:33 | Link to Comment bank guy in Brussels
bank guy in Brussels's picture

Another theory with Arnault is that, after becoming Belgian, he plans to live in income-tax-free Monaco.

Monaco has a treaty with France, so French citizens who move there don't escape tax ... but no such treaty with Belgium

---

Wolf Richter errs re 'Uccle, a swank French-speaking community in the Region of Brussels'

Uccle is also called Ukkel - it is, like all of the Brussels region, bi-lingual (French and Dutch)

Tue, 09/11/2012 - 08:49 | Link to Comment andrewp111
andrewp111's picture

Nice. He can move to Monaco and be taken hostage by Islamic terrorists. They will squeeze more out of him than any French government ever would.

Tue, 09/11/2012 - 12:38 | Link to Comment Steaming_Wookie_Doo
Steaming_Wookie_Doo's picture

Haha! Straight out of the Simpsons episode: "Why does Princess Grace live in such a dump?!"

Tue, 09/11/2012 - 11:29 | Link to Comment hoos bin pharteen
hoos bin pharteen's picture

*Monaco*, not Morocco.  Monaco is pretty sweet. 

Mon, 09/10/2012 - 22:52 | Link to Comment q99x2
q99x2's picture

Tar and feather that F'ker. Head em up. Move em out.

Tue, 09/11/2012 - 08:49 | Link to Comment andrewp111
andrewp111's picture

Tar and Feathers is too American. The French like the Guillotine.

Mon, 09/10/2012 - 22:49 | Link to Comment lakecity55
lakecity55's picture

I love it when a crummy socialist like Hollande gets whacked. With a wet fish.

 

I wonder if their UE numbers are as fakE as the ones the MSM show USA persons.

Tue, 09/11/2012 - 06:43 | Link to Comment Slightly Insane
Slightly Insane's picture

I will be wetting my lips when Hollande becomes Hollandaise, WHICH I LOVE ON MY BRUSSELS SPOUTS.  HA, HA, HA,

 

Mon, 09/10/2012 - 23:03 | Link to Comment Pool Shark
Pool Shark's picture

 

 

You mean like this?:

http://www.youtube.com/watch?v=IhJQp-q1Y1s

[Note: Hollande repeatedly slaps the French citizen with little 'kippers' of socialism until the french citizen has had enough and retaliates just for the 'halibut' and causes Hollande to 'Flounder.']

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