Prediction: France's economy will worsen relative to the rest of the EU

With Krugman and other Democrats claiming that austerity policies have been the problem in Europe, we will soon have a big test.  Just like Germany's and Poland's policies have been a big test that restraining government spending has worked well and Greece, Spain, and Portugal have provided excellent tests for the opposite, France will now provide another test.  Does raising government spending, increasing deficits, taxing the wealthy sound familiar?


Here are some articles on topics that we will hear more about:


From the Financial Times:

. . . . François Hollande, the Socialist candidate who leads the presidential race after the first round of voting last week, wants to impose a tax rate of 75 per cent on income above €1m and at the launch of his bid in January said: “My true adversary in this battle has no name, no face, no party ... It is the world of finance.”Inquiries from French clients had risen by roughly 40 per cent since the speech, says David Blanc, a partner at Vestra Wealth, a London-based wealth manager.
“I have definitely seen strong interest in what could be done to protect assets both for people resident in France but also for French nationals who are UK resident,” said Mr Blanc, a former UBS executive.
The prospect of a Gallic diaspora of high earners was backed up by Knight Frank, the property agent, which said numbers of French web users searching online for its prime London properties online in the past three months had risen 19 per cent compared with the same period last year. The equivalent figure for Europe as a whole fell 9 per cent.
“The election seems to have pushed a growing number of wealthy French to consider their options for where they are likely to base themselves in the future,” says Liam Bailey, head of research at Knight Frank. . . . 

From the UK Independent:

France will be waking up today to its first Socialist President for 17 years – and bracing for radical change. There are all kinds of reasons why one might fear a François Hollande presidency, especially if you are a prosperous French person.The 57-year-old Socialist has openly admitted that he "does not like the rich" and declared that "my real enemy is the world of finance". This means taxing the wealthy by up to 75 per cent, curtailing the activities of Paris as a centre for financial dealing, and ploughing millions into creating more civil service jobs.Add an explicit threat to renegotiate the euro pact to replace austerity with "growth-creating" spending, and you have one of the most vehemently left-wing programmes in recent history.German Chancellor Angela Merkel – the woman at the centre of the Franco-German economic powerhouse which has dominated Europe – was at one stage even threatening to campaign for her conservative ally, Nicolas Sarkozy, against Mr Hollande.Caution is justified, though one thing Mr Hollande will not repeat is the disastrous tax-and-spend policies introduced by France's last Socialist President, François Mitterrand, in 1981. He was soon forced into a humiliating U-turn, and into sharing power with the right as the Communists quit his cabinet in protest. . . .

Not as radical as Mitterrand? Well, who in the US is advocating these types of policies?

Will Greece continue to repudiate any notion of fiscal responsibility and continue the Keynesian path it has been on?  Can the anti-bailout parties in the EU form a minority government with some help from the Communists on issues with which they agree?  From Reuters:

Greece's Left Coalition called on Sunday for an anti-bailout coalition, saying the country's general election showed that austerity policies had been soundly defeated and a peaceful revolution ushered in.
The Communist KKE - which believes Greece should abandon the euro - immediately rejected Tsipras's call for a leftist alliance.
"Mrs Merkel needs to understand that austerity policies have suffered a huge defeat," said Left Coalition leader Alexis Tsipras, referring to German Chancellor Angela Merkel. . . .