French economy growth rate during 2018 1^st quarter fell back to 0.3% against 0.7% during the previous quarter. Acquired growth is only 1.2% at the beginning of this year. It means that if France wants to reach in 2018 the 2% target which is in the Stability Program presented to Brussels in April, the quarterly growth rhythm must be above 0.7% until the end of this year, which is far from being established. This result invalidates the positive opinions regarding, until now, the government economic policy. This one is the continuation of the one which was put into practice during the previous presidential mandate. It was supposed to guarantee France for the return of a solid and durable growth which could make unemployment significantly declining.

As at the end of last year and despite the hard climatic conditions which forced households to increase their energy expenditures, consumption growth staid at a low level during this quarter. Purchasing power has stagnated and has even fallen for the majority of pensioners. Food products and goods purchases have decreased. On the opposite, housing investments staid strong thanks to the persistence of very favorable long term interest rates and many home buyers have even had the possibility to renegotiate their current loans, which has reduced their annuities. The relative improvement of enterprises investments which took place during the second half of last year has not lasted. Their growth during this quarter has been only 0.5%.It has fallen in the industrial sector by 0.9% but has stayed strong in services, with notably office buildings and big retail centers. But that will have only a limited impact on production capacities. At last, the contribution of France foreign trade is still disappointing even if there is a slight progress compared to 2017 when it was definitely negative.

The economic policy followed since 2017 was based on a simple principle. Through the reconstitution of corporate margins, these ones were going to invest, to improve their competitiveness and to contribute to the restoration of French foreign trade. They would, at last, create jobs. It was the modernized version of the Schmidt theorem, from the name of the German Chancellor in the Seventies: today profits generate tomorrow investments and day after tomorrow jobs. The reconstitution of the margins is indisputable for the last three years. It has been obtained through the tax policy and the reduction of the charges weighting on wages. The diminution of the corporate tax, through notably the tax credit in favor of employment (CICE), has been huge. Corporate tax had brought 41.2 billion euros in 2012. Forecast receipts in the 2018 Finance bill are 25.8 billion. During the six fiscal years between 2013 and 2018, the tax reduction will be near 100 billion. That tax reduction has been more than compensated by the increase of charges on households. In 2012, income taxes brought 60 billion and VAT 133 billion. In 2018, the Finance bill is based on income tax receipts representing 72.6 billion and VAT receipts 154 billion. The heaviness of the taxes on households has permitted to compensate transfers in favor of enterprises and to fulfill at last in 2017 the European rule about the 3% public deficit.

But the result doesn’t correspond to what was expected. Enterprises competitiveness, put forward to justify these transfers, has not been significantly improved. To the opposite, trade deficit, excluding energy, has continuously increased during these last five years to the point that the whole advantage taken from oil price fall, near 30 billion euros, is about to be lost. Total deficit in 2017 has been above 62 billion and has found again the level reached in 2013. The transfers, which enterprises have received, have not had the expected impact and  foreign exchanges have not contributed to support French economic growth. The trends which are appearing at the beginning of this year show, in that matter, no significant inflection.

So, it is not surprising that the results regarding employment have been very disappointing. Between 2012 3^rd quarter and 2017 3^rd quarter, full time jobseekers number has increased by 560 000. The increase significantly slowed during the final year of François Hollande mandate. During the four last quarters, we even observe a reduction of 48 000 job seekers, with a total number of unemployed people of 3.43 million. But this diminution is trivial regarding the unemployment level which is still very high. A top of that, it is impossible to attribute it, as some would try to do, to the effects of the economic policy. Since 2015, the economic environment has been transformed without the State being at its origin. Oil price fall had a positive impact on household purchasing power and has partly compensated the increase of the tax pressure which hurt them. The deep and lasting diminution of long term interest rates, due to the European Central Bank decisions, has benefited to the enterprises which have seen the financial charges reduced and to families who have started again to buy their homes. That had a positive impact on the building industry. To these points must be added a better international environment which has supported French exports, but not to the point that our enterprises take a full advantage of it. The improvement of the French economic situation in 2017 was not at all the result of the economic choices made since 2013 et it is not surprising that this improvement has been short-lived.

The mistake done through the choice of a supply-side policy is coming from the fact that it was incompatible with the willingness to reduce, in the same time, public deficits. The efforts, demanded to households with a continuous pressure on wages and increased taxes have generated a too heavy weight on internal demand. Market stagnation has not incited enterprises to invest in France and has encouraged them, with the new resources they got, to develop their foreign activities or to offer to their shareholders increased dividends. The current policy does not correct these weaknesses. Fiscal incentives offered to shareholders get definitely on the right direction because an efficient economy needs companies which have enough equities. To incite French people to orientate their saving toward them will have positive consequences on the long term. But that does not bring a solution to the internal demand deficiency which is necessary to a growth rebound and to, at last, a real unemployment reduction. In addition to that, under way reforms have, as an effect, an increase of workers precariousness. That doesn’t restore their faith in the future.

After the 1929 crisis, the American president employed a supply-side policy, in thinking he could restore growth and the country sank deeper in the crisis. It was necessary to wait until 1933, and the election of a new president. This one, being inspired by the works of an economist, Keynes, launched a rebound of internal demand and permitted to his country to emerge at last from its history deepest recession. France has never known such a long stagnation period and despite the 2017 rebound, the 1^st quarter figures show that the country has not yet emerged from it. The problem is that we don’t see a new Roosevelt coming.