Mr Hollande spoke with upbeat rhetoric to get elected.Now he is governing, he pores forth pessimistic language. He campaigned with optimism, he governs with pessimism.
His supporters will say he has to trim to the realities of office. They might argue that he did say in the small print of his manifesto that he too, like Sarkozy before him, needed to get the budget deficit down. Yet what most of us remember was the song “All you need is growth”. It is difficult to see where the extra growth is going to come from on his current policies.
Mr Hollande is right to take action to curb the deficit, even though it is already lower than the UK’s as a proportion of national income. I hope UK socialists will take note that a socialist French President wants the deficit below 3% of GDP, en route for 0%.
Where his policy is likely to prove damaging is opting to do so much of the adjustment by higher taxes. Mr Hollande may find, as Mr Osborne is finding here, that higher tax rates lead to a fall in tax income, or slow its natural growth. Mr Hollande’s income tax increases are so eye catching that they are a help even to London, which looks good value in comparison. Why wouldn’t well off and enterprising French people now go to Singapore, Hong Kong, or New York, to make their money?
There are only so many rich people to tax in the world, and they do tend to move around to lower tax jurisdictions. Mr Hollande will have to tax the not so rich as well, if wants to keep his public spending at current levels. His decision to reduce the retirement age has made it more difficult for him to control spending. He may find, as southern Euro states are finding, that deficits go up, not down as economies decline and as rich people find ways to earn less or move abroad with their money.
Growth requires realistic tax rates, stronger banks and private sector led activity. How is Mr Hollande going to provide that, with a diet of pessimism and higher taxes?