Bad news for Hollande as austerity bites

Hollande's focus on cutting deficits with revenues hasn't saved him from the downsides.

The French economy is on the rocks, in a move which threatens to derail president Hollande's economic reforms. The Observer's Kim Willsher reports:

The French leader has been hit by soaring unemployment figures, further factory closures and job losses, and plummeting popularity on top of growing fears that he and his Socialist government are failing to address the country's problems. Members of the opposition right-of-centre UMP have accused them of being "amateurs".

The news is bad, both for Hollande, and for proponents of revenue-side austerity. It is probably too soon to write-off the effects of the controversial 70 per cent tax rate – the pernicious effects of which are supposedly flight of high-net-worth individuals, rather than just a retardation of growth per se – but at the same time, it is clear that Hollande's agenda is, at best, no better than Sarkozy's was.

Despite the unpopularity of those revenue-raising measures amongst the economic elite, a meeting with members of various international organisations today – including the IMF and OECD – will reportedly focus on supply-side reforms "to improve France's competitiveness on the world market and restore confidence at home and abroad". The French labour market, with its ring-fenced working hours, worker protections, and strong unions, is frequently seen as being counter-productive to economic health.

The other major reason why the OECD and IMF are unlikely to press too hard on the question of high marginal tax rates is that, despite the fact that it has led to Hollande's government being seen as a standard-bearer for the left, they still fit very strongly into the narrative of "austerity".

The socialist government has made much the same pledges to be "realistic about the deficit" and practice "fiscal restraint" as we are used to hearing from all the parties in the UK. Where it has differed is in the method by which it has tried to reduce the deficit, focusing on increasing revenue rather than decreasing spending.

While this has driven some economists, like GWU's Veronique de Rugy, mad, it is a perfectly fair application of the principles behind austerity. What it also does, though, is expose the contradictions between those who genuinely desire to reduce deficits, pay down debt and "win the confidence of bond markets", and those who have used those as a convenient excuse to argue for shrinking the state.

Whether-or-not revenue-based austerity is as effective as spending-based austerity, however, it is clear that both are austerity. To those who have argued that, in a recession characterised by depressed consumer confidence and low aggregate demand, the state needs to temporarily push for deficit-funded spending, the bad economic news for France is yet more evidence in favour.

François Hollande. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Voters are turning against Brexit but the Lib Dems aren't benefiting

Labour's pro-Brexit stance is not preventing it from winning the support of Remainers. Will that change?

More than a year after the UK voted for Brexit, there has been little sign of buyer's remorse. The public, including around a third of Remainers, are largely of the view that the government should "get on with it".

But as real wages are squeezed (owing to the Brexit-linked inflationary spike) there are tentative signs that the mood is changing. In the event of a second referendum, an Opinium/Observer poll found, 47 per cent would vote Remain, compared to 44 per cent for Leave. Support for a repeat vote is also increasing. Forty one per cent of the public now favour a second referendum (with 48 per cent opposed), compared to 33 per cent last December. 

The Liberal Democrats have made halting Brexit their raison d'être. But as public opinion turns, there is no sign they are benefiting. Since the election, Vince Cable's party has yet to exceed single figures in the polls, scoring a lowly 6 per cent in the Opinium survey (down from 7.4 per cent at the election). 

What accounts for this disparity? After their near-extinction in 2015, the Lib Dems remain either toxic or irrelevant to many voters. Labour, by contrast, despite its pro-Brexit stance, has hoovered up Remainers (55 per cent back Jeremy Corbyn's party). 

In some cases, this reflects voters' other priorities. Remainers are prepared to support Labour on account of the party's stances on austerity, housing and education. Corbyn, meanwhile, is a eurosceptic whose internationalism and pro-migration reputation endear him to EU supporters. Other Remainers rewarded Labour MPs who voted against Article 50, rebelling against the leadership's stance. 

But the trend also partly reflects ignorance. By saying little on the subject of Brexit, Corbyn and Labour allowed Remainers to assume the best. Though there is little evidence that voters will abandon Corbyn over his EU stance, the potential exists.

For this reason, the proposal of a new party will continue to recur. By challenging Labour over Brexit, without the toxicity of Lib Dems, it would sharpen the choice before voters. Though it would not win an election, a new party could force Corbyn to soften his stance on Brexit or to offer a second referendum (mirroring Ukip's effect on the Conservatives).

The greatest problem for the project is that it lacks support where it counts: among MPs. For reasons of tribalism and strategy, there is no emergent "Gang of Four" ready to helm a new party. In the absence of a new convulsion, the UK may turn against Brexit without the anti-Brexiteers benefiting. 

George Eaton is political editor of the New Statesman.