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Krugman writes: "On Friday Standard & Poor's, the bond-rating agency, downgraded France. The move made headlines, with many reports suggesting that France is in crisis. But markets yawned."

Paul Krugman. (photo: NYT)
Paul Krugman. (photo: NYT)


The Plot Against France

By Paul Krugman, The New York Times

11 November 13

 

On Friday Standard & Poor's, the bond-rating agency, downgraded France. The move made headlines, with many reports suggesting that France is in crisis. But markets yawned: French borrowing costs, which are near historic lows, barely budged.

So what's going on here? The answer is that S.& P.'s action needs to be seen in the context of the broader politics of fiscal austerity. And I do mean politics, not economics. For the plot against France - I'm being a bit tongue in cheek here, but there really are a lot of people trying to bad-mouth the place - is one clear demonstration that in Europe, as in America, fiscal scolds don't really care about deficits. Instead, they're using debt fears to advance an ideological agenda. And France, which refuses to play along, has become the target of incessant negative propaganda.

Let me give you an idea of what we're talking about. A year ago the magazine The Economist declared France "the time bomb at the heart of Europe," with problems that could dwarf those of Greece, Spain, Portugal and Italy. In January 2013, CNN Money's senior editor-at-large declared France in "free fall," a nation "heading toward an economic Bastille." Similar sentiments can be found all over economic newsletters.

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+36 # reiverpacific 2013-11-11 11:22
Well duh!
As long as Hollande, a SOCIALIST is in power, the fiscal austerity-hawks are going to be as critical as they can get away with but unlike the Fragmented States, the French people (and Europeans in general) are more politically involved, educated and worldly-wise, still have some power and can bring the country to a halt if they get pissed-off enough.
S. & P.'s utterances and actions, which is limited to a 500-company stock-based index, have less clout in France and mainland Europe than here, and there has always been a certain animus towards France by US ignoramuses.
French property prices have remained stable through the global recession (I know this 'cause I'm in constantly touch with several French real estate companies, bein' as how it's one of my primary options for when I leave the US eventually) and rentals are strictly controlled unlike the slumlord-friend ly Fragmented States. This, with the great universal health care system and widely dispersed high-speed and regional spur rail network, makes it a prime location for my American wife and my final home as we get older (culturally and culinarily too of course).
I have several friends who have retired there and love it.
Fuck S.& P. in their narrow, capitalist, corporate-frien dly milieu!
 
 
+11 # RLF 2013-11-12 04:26
Are we really supposed to believe anything the S&P says after the way they botched the mortgage securities....t hey should be sued by everyone that Goldman stuck with that crap...they should be investigated to see if payoffs were happening...exc ept we have no control over offshore banking...more destructive than Iran's atomic program...which could have some bearing on why we are hearing this now because France is refusing to believe Iran and the US just wants the problem to go away.
 
 
+8 # AndreM5 2013-11-12 10:42
AFAIK the investigation was done and S&P was found guilty of taking payoffs for false ratings.

No one is accountable, of course.
 
 
+10 # RicKelis 2013-11-11 11:46
abstract-Center Cut:
Paul Krugman: A year ago The Economist declared France “the time bomb at the heart of Europe,”[worse than] Greece, Spain, Portugal and Italy. In January 2013, CNN Money declared France in “free fall.” Similar sentiments can be found all over economic newsletters. What you find [with France] is a country experiencing economic difficulties but in general performing as well as or better than most of its neighbors, except Germany. French workers were actually a bit more productive than their German counterparts a dozen years ago — and they still are.
[What about] French fiscal prospects? [Actually] the budget deficit has fallen sharply since 2010. And [concerning] the longer-run burden of an aging population, France has a higher birthrate than most of Europe — in part because of government programs that encourage births and ease the lives of working mothers — so that its demographic projections are much better than those of its neighbors, Germany included. Meanwhile, France’s remarkable health care system, which delivers high quality at low cost, is going to be a big fiscal advantage looking forward. By the numbers, then, it’s hard to see why France deserves any particular opprobrium.
 
 
+5 # RicKelis 2013-11-11 11:48
abstract-pt.1:
abstract: On Friday Standard & Poor’s, the bond-rating agency, downgraded France. The move made headlines, with many reports suggesting that France is in crisis. But markets yawned: French borrowing costs, which are near historic lows, barely budged. S.& P.’s action needs to be seen in the context of the broader politics of fiscal austerity — politics, not economics. For the plot against France is one clear demonstration that in Europe, as in America, fiscal scolds are using debt fears to advance an ideological agenda. And France has become the target of incessant negative propaganda.
 
 
+24 # RicKelis 2013-11-11 11:48
abstract-pt.2:
So what’s going on? Here’s a clue: Two months ago Olli Rehn, Europe’s commissioner for economic and monetary affairs, dismissed France’s seemingly exemplary fiscal policy, because it was based on tax increases rather than spending cuts — and tax hikes, he declared, would “destroy growth and handicap the creation of jobs.” S.& P.’s explanation of its downgrade amounted to the same thing: “the French government’s current approach is unlikely to substantially raise France’s medium-term growth prospects.” Mr. Rehn and S.& P. were [not] basing their demands on solid evidence that spending cuts are in fact better for the economy than tax increases. In fact, research at the I.M.F. suggests that when you’re trying to reduce deficits in a recession, temporary tax hikes do much less damage than spending cuts. Oh, and when people start talking about the wonders of “structural reform,” it’s mainly a code phrase for deregulation — and the evidence on the virtues of deregulation is decidedly mixed. Remember Ireland. All this [should] sound familiar to American readers. U.S. fiscal scolds turn out to be much more interested in slashing Medicare and Social Security than they are in actually cutting deficits. Europe’s austerians are now revealing themselves to be pretty much the same. France has committed the unforgivable sin of being fiscally responsible without inflicting pain on the poor and unlucky. And it must be punished.
 
 
+2 # X Dane 2013-11-11 12:19
RicKelis....Why are you just rewriting what Paul Krugman just wrote??? Do you have any comments? thoughts of your own?
 
 
+5 # reiverpacific 2013-11-11 12:46
Quoting X Dane:
RicKelis....Why are you just rewriting what Paul Krugman just wrote??? Do you have any comments? thoughts of your own?

Yeah, I was kind if wondering about that too.
Maybe advertising a typing service (which I could sure use sometimes with my daffy-digits)? However, thoughts and opinions are what RSN is about; maybe there's a parrot-friendly version somewhere, what?!
 
 
+8 # RicKelis 2013-11-11 14:29
I have done synopses of Paul's articles for 5 or 6 years and still do it for my Facebook page, where I get lots of "friends" commenting on Krugman's writing -- without having to go to the original article if they don't want to, or if they can't get on the NYTimes site. It's not a re-write, by the way - it's actually an editing project that takes about an hour and a half or so. I noticed when I went back for my masters and was doing the thesis that in most scholarly writings there's an abstract that proceeds the article -- it's usually only about 200 words but in this case I've taken liberties to expand it. But it's basically an abstract of the article that I do -- and I wrote Mark to tell him I can't contribute money (really broke here) but I can contribute this abstract and other comments from time to time. And refer RSN links whenever possible and apropos to the subject I'm discussing on Facebook. We all should do our part; that's what I can do for the RSN funding effort - "I can't give you anything but love" to quote an old song.
 
 
+4 # AndreM5 2013-11-12 10:36
I certainly don't mind an abstract, if accurate and fair, which yours seem to be. On the other hand if you want to be more useful, try shrinking the abstract to the 200 words you mention. You don't even need complete sentences, just key points.

On the other hand, we RSN readers might also strive to produce bumper-sticker talking points from these articles. Our congress people are terrible at messaging and need all the help they can get!
 
 
+3 # bingers 2013-11-12 23:09
I appreciate the reposting because the Times has a limit on how many articles you can read without paying and the limit is small. So the post allows me to see other articles.
 

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