Governing is rather harder than campaigning. President Hollande is not the first politician to learn this essential truth, but he’s getting the message rather quicker than most. Less than four months after getting the keys to the Elysée Palace around 60% of his countrymen and women tell pollsters they are unimpressed with his performance. Even his predecessor, Nicolas Sarkozy (who broke all records for unpopularity in modern times) took twice as long to upset that many people.
Hence Hollande’s early attempt at a relaunch in a major television interview last night. “I am in combat mode,” he declared, and he wasn’t kidding as he promised the French people €20bn in tax rises, €10bn in spending cuts (which he’d ruled out during the campaign) and all in the face of economic growth forecasts that are less than half what he was promising just a few months ago.
It marks an end to a period of drift which allowed his early weeks to be dominated by very public tiffs between his partner and his ex-partner, and a sense that whoever was in charge, it wasn’t the man at the top. “What if Sarkozy was right?” asked the magazine L’Express, referring to the former President’s verdict that Hollande was “useless”. “I continue to believe that I was right to push for a period of consultation rather than an accumulation of good or bad decisions," the President told Le Monde. Well, that period is decisively over, so the debate can now move on to whether those decisions really are good or bad.
The headline last night was that the new ‘supertax’ on those earning more than €1 million a year would be introduced as promised, and that, contrary to reports, there would be no exceptions. Neither sports stars nor rock legends will be exempt from a tax that is supposed to be in place for just two years, though everyone knows there is nothing as permanent as a temporary tax*. So good luck to Paris St Germain and its new middle-eastern owners as they try to lure top footballers to France to become competitive in the Champions League. On the very day the tax was being confirmed, France’s richest man, Bernard Arnault, revealed he was applying for Belgian citizenship. David Cameron’s ‘red carpet’ may be getting plenty of use.
Taxes on businesses, big and small, will be going up too. A €30bn hole in the public finances is to be filled by an extra €10bn from individuals, €10bn from business and €10bn in spending cuts. So two thirds is to come from tax rises, and a third from spending cuts. When George Osborne launched his ‘Plan A’ a couple of years ago, his ratio was 1/5th new taxes, 4/5ths spending cuts. Economic historians are going to have plenty to work on when they come to judge which approach was right.
Part of the reason there’s so little emphasis on spending cuts is a refusal to cut jobs in the public sector. That is one campaign promise it is still too early to break. But with forecasts for economic growth falling even faster than the boss’s popularity, it’s doubtful any of these projections will add up. Hollande’s campaign promises were costed on the basis of 1.7% growth in GDP in 2013. Now he says it will be less than half that at 0.8%, but in a couple of months time France could be officially in recession, and even that may be optimistic.
Hollande has scored a significant success in getting the European Central Bank finally to step in and do everything in its power to rescue the Eurozone. But if economic reforms in France, Spain and Italy don’t get deficits down and growth up, not even a fully engaged ECB is going to be able to keep the Eurozone afloat. Hollande’s economic plan needs to start working pretty sharpish.
*Remember that income tax itself was brought in as a temporary measure by Pitt the Younger to pay for the Napoleonic Wars.