The Fruits of Deficit Reduction in France

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Friday, 12 July 2013 04:44

The NYT had an article about how French consumers are cutting back on their spending, hurting retailers and the economy. The piece notes that unemployment is rising and that the French economy is struggling to recover from its second recession since the 2008 collapse.

It would have been worth mentioning that this is a direct and predictable outcome of the government's austerity policies. The government has cut spending and raised taxes. This directly reduces demand in the economy. Unless the government's cutbacks somehow inspire consumers to spend more, businesses to invest more or foreigners to buy more French goods, they will lead to slower growth and higher unemployment.

As this article implies and research from the I.M.F. and others demonstrate, government austerity has not helped to boost the private sector. The article should have explained the role of government policy in the situation it describes. Presumably if there had been a surge in inflation following a big government spending spree the NYT would have made the connection rather than just noting higher prices in stores.