New World Forum
GLOBAL CRISIS/FRENCH ECONOMIC POLICY
I have two strong beliefs.
The first is that, insofar as the crisis is global, it can be dealt with only globally – that is, economically, socially and politically.
The second belief is that solving this crisis won’t mean returning to the status quo ante, the previous world. So we must build another one, a new world, the world you’ve included in the name of your forum.
France must play her part in building this new world.
In order to contribute to this, I’ll focus first of all on the economic policy Jean-Marc Ayrault’s government has been conducting for the past 11 months.
I’ve set a target: France’s production and budget recovery, with three broad principles for action.
BALANCING PUBLIC ACCOUNTS
The first is a gradual return to balancing the public accounts. Not for this or that systematic or stubborn theoretical reason, but quite simply because, as Head of State, I can’t shift the debt burden onto future generations. That would be irresponsibility, blindness.
Let me remind you of a few figures relating to France. Ten years ago the public deficit, which was already regarded as too large, stood at 1.6% of national wealth, and the debt was around 57% of GDP. (…) It was 4.8% in 2012. The public debt stands at €1.8 billion – more than 90%. If nothing is done it will be 100% in the coming years. I refuse to allow that. Hence the policy of genuine budget discipline, which must nevertheless itself have targets and therefore not hinder the resumption of growth that we must encourage and stimulate.
That’s why the solution to this crisis isn’t austerity: it’s credibility, sustainability and stability.
It’s with this in mind that the government is going to present to the European Commission and, before that, to the French Parliament the programme for restoring balance in our public accounts in the medium term.
Let me remind you of the efforts we’ve already been making for the past year.
In 2012 and 2013 alone, the reduction in the deficits, independently of any short-term impact, will stand at 3% of national wealth – 3%. That’s never been done in our country. That’s significant!
That’s why the French government will argue to its partners – I know we’ve already been heeded by a number of organizations – for the return to a deficit of 3% of GDP to be postponed, or shifted back a year. Why?
Not in order to delay making choices, because I’ve stayed the course, reaffirmed the path and in particular announced that the state’s public expenditure in 2014 will be below what it will be in 2013.
The target must be about the level of spending. There may also be short-term impacts.
But the commitment I’m making, in addition to the path we’re setting, is about the level of spending and about savings.
Moreover, two-thirds of the improvement in the public accounts in France in 2014 will come from savings and the rest from levies. Between 2015 and 2017, the recovery will come about through structural reforms and not automatic cuts, which clearly do considerable social damage if they’re made indiscriminately – because at some point restructuring would be carried out to education, training and investment, i.e. to the preparation of the future, the very conditions of growth.
What I want is genuine budget discipline, essential to reducing indebtedness in the medium term. But also growth, because without growth there will be no deficit reduction. Unless there’s a commitment in terms of public accounts, there will be no return to confidence and therefore growth. It all goes together.
That’s why the second principle of the economic policy the government is conducting is to implement an investment strategy: the competitiveness pact that has been presented and the tax credit for competitiveness and employment accompanying it, to encourage employment, investment and exports. (…)
The third principle is support for employment. How can we accept the levels of unemployment we’re experiencing – youth unemployment and unemployment among over-50s?
That’s the whole purpose of what we’ve done to reform the labour market. (…)
That will be the second stage of the employment reform we’re going to undertake.
That’s what we’re doing in France: genuine budget discipline, the condition for credibility.
Investment, a necessity for preparing growth.
Improving training, employment conditions, and preparation for transfers, essential for combating the structural unemployment that’s gaining ground in our country and Europe – because the second level on which I want to intervene, where France is listened to, is the European level.
The Euro Area is in recession. Never since the euro was intoduced has unemployment been so high. I’m not making any link, as some people would like to try and do. It isn’t because of the euro that there’s a crisis. It’s because there isn’t enough Europe that the crisis is continuing.
No country will get through it alone. Even those which seem best protected by their high levels of competitiveness end up being hit by depression and recession.
EUROPE/FRANCE/RESPONSE TO CRISIS
I don’t want to criticize Europe, I want to defend it, including for what it’s been doing in the past year.
The integrity of the Euro Area has been preserved; this wasn’t certain, it wasn’t a given. (…)
France has carried her full weight; she’s even taken the lead by getting a banking law passed, which I’m told doesn’t go far enough. We’re the first in Europe to get it voted on, even before the measures envisaged by the European Commission.
What has this banking law done?
It separates speculative activities, deposit and credit activities.
It also enables us to make banks responsible and protect savers.
Banks will no longer be able to hold stakes in speculative funds, and at the same time banks will finance the fund whose very purpose will be to rescue establishments in the event of a crisis, without this costing taxpayers anything at all.
I want to pay tribute to what Europe has done in terms of the Euro Area’s integrity, banking union, and intervention mechanisms to support states in difficulty.
But at the same time, I also want to stress what it hasn’t done or hasn’t done sufficiently, particularly in terms of growth.
It’s true – and this was also a French initiative – that we got a €120-billion growth compact passed, a few applications of which we can see today in terms of loans from the EIB and the mobilization of structural funds, and that’s good.
But Europe must do more.
I’m not talking simply about its budget, I’m talking about those funds it could mobilize, those loans it could raise; I still believe this. (…)
I’m thinking in particular of the energy plan, the infrastructure plan and the transport plan. And I believe ideas make progress first between companies – a number are represented here – and between states. Will we be able to do so among all 27 or 28? I don’t know. What I know is that, in any case, France and Germany must have that determination, because, among other things, we don’t have the same energy policies and because, on renewable energy, we can make a number of choices together.
Solving the Euro Area crisis won’t involve a single or simplistic formula.
POLICY COORDINATION/FREE TRADE REGULATION
So the policy I propose is one of essential genuine budget discipline, competitiveness which we must restore, growth we must seek and which therefore involves reordering Europe’s priorities. How?
In no monetary area worthy of the name can policies be left to the states’ discretion.
There’s a need for coordination. On what basis? Countries with a balance of payment deficit, a public accounts deficit must, within a reasonable period of time, catch up on what is making them lag behind the others.
But conversely, countries which have a trade balance surplus or have restored their public accounts to a sound footing must support demand to allow, precisely, those in a more difficult situation to be able to have the support of [economic] activity.
This is why a monetary area such as the Euro Area – and I insist on this because I’m committed to the European project – isn’t about being homogenous (everyone carrying out the same policy), any more than it’s about hegemony (some countries imposing a model on others), it’s about coordination, cooperation and therefore convergence – it’s called solidarity. (...)
This new world which is being built needs cohesion.
I see threats, given the tensions existing today.
I see two. (...) Protectionism and currency war. And it’s often in times of depression that these temptations exist (...).
We must fight protectionism, but at the same time fight free trade that has no rules, no standards. The European countries can’t have social, environmental and monetary rules and continue trading, without any quid pro quo, with countries which have flouted these rules or haven’t applied them. Completely free trade isn’t wholly fair. The regulation of world trade is one of the urgent requirements for the recovery of growth.
TAX FRAUD/MONEY LAUNDERING
But there are also two requirements we must deal with.
The first is to bring unbridled finance under control and combat tax havens. There must be no country on the face of the Earth where concealment, money laundering and fraud are tolerated. Nobody must be able to believe they’re protected by tax systems or secrecy.
On this, France will be unwavering in her determination. I’ll say this both to the G8 in June and the G20 in September.
What are the principles we must establish?
The first principle is the automatic exchange of information for the benefit of the tax authorities. This must be the rule worldwide, because it’s a simple rule. France said so in Dublin last week, at the European Union Council of Ministers. We want these information exchanges within Europe to be automatic, systematic, and also for this to be the rule we establish for ourselves with third countries. Five countries have already signed a joint letter on this, and it will be on the European Council’s agenda.
This expansion must also concern mechanisms for taxing savings, which must be common at least to the whole Euro Area.
I know I can count on the OECD to work in this direction – that is, on the fight against money laundering and on the harmonization of tax rules. (…)
The other requirement, which is a medium-term requirement, is sustainable development.
It’s not a secondary subject we shouldn’t mention before the crisis is over. It’s the reason why France will be organizing the climate conference in 2015. (…)
The hope must be to get back onto the path of growth, the path of employment, with industries we must create, a strategy we must promote, and pride about certain achievements, particularly in the field of innovation and research.
The hope is for Europe to be able to rebuild its political project based on cooperation, coordination and shared investment.
The hope is for a world that succeeds in reducing inequalities, establishing rules and ensuring we’re all responsible for our common destiny.
That’s the future world, which requires first of all a France capable of making her voice heard, because that voice is listened to. (…)./.