The government, through a message from the Prime minister, relieved by the minister for Economic Affairs has just announced the great lines of the economic policy to be followed during the next 18 months as it will be proposed to the Parliament and certainly approved. The reduction of the charges weighting on business will go on and in order to limit State and social expenditures deficits, social benefits, including pensions, child and tenant benefits will be, as a symbol, just increased by 0.3%. Just the minimum pension (less than 3% of the retired people) and the benefits for disable adults will be increased by 3%. In the same time, employees who have overtime will be exempted to pay the social charges related to the related hours.

But this presentation is very incomplete: it is necessary to add the tax increases on gasoline and diesel, the likely freezing of the income tax scale when inflation reached near 2% in 2018 and the continuation of the reduction of the corporate tax rate which will profit to big companies. For profits above 500 000 €, it will be reduced from 33.33% to 31%. That policy is in keeping with the one which was followed during the previous five-year mandate: to support growth through giving more resources to enterprises and encouraging work. Unfortunately, it didn’t give the expected results, with the exception of the last 2017 two quarters.   

Regarding these points, 2018 first-half figures are revealing. The restoration of the competitiveness of French companies should have generated an improvement of foreign trade balance: it is exactly the opposite which happened. Manufactured goods balance, main stake of that action did not stop to downgrade and the contribution of foreign trade to growth has been once more negative (-0.2%) during this year second quarter. Household consumption, due to uncertainties regarding the future and the stagnation of the purchasing power, has a too low growth to constitute an efficient stimulus. The historical interest rate fall has permitted the rebound of homes building but it is now reaching a ceiling. Regarding enterprises investments, they are oriented toward the tertiary sector, offices, retail centers and the renovation of luxury hotels and very few toward the increase of production capacities. Really, the enterprise margins rebound has mainly profited to their top managers and their shareholders: financial markets, dividends and share buybacks are on a strong rise.

The improvement French economy has enjoyed in 2017 has revealed itself as episodic and was not the result of the economic policy which has been implemented: the sharp fall of oil prices and historically low interest rates did support growth. The rebound of fossil fuels prices has put an end to a situation which will appear more as a parenthesis than the demonstration that the economic choices were the right ones. What is worrying is that no lesson has been learnt from the slowing, not to say stagnation which France is experiencing since the beginning of the year. So the action announced for the coming years will aggravate the situation. The origin of these decisions is not ideological or even political. The purpose is not, through a social class reflex, to support employers and to make rich people richer. The government sincerely believes it has found the solution to persistent unemployment, to the degradation of the competitive position of French enterprises and to the too weak growth which is harming the French economy since the 2007-2008 crisis. But it is wrong and it cannot accept that idea. It had already happened in the Thirties in the United States when president Hoover made, by his action, the 1929 crisis worse.

Measures regarding pensioners are incomprehensible. The different pension systems have accumulated a 130 billion euro nest egg to which must be added the 36 billion euro owned by the National Pension Fund (FRR). The private sector employee supplementary pension organization (AGIRC-ARRCO) alone owns 71 billion euro and the supplementary system of liberal profession 22 billion. Regarding Banque de France pensioners, they don’t have to worry: their pension office relies on more than 5 billion, equivalent to the payments of the benefits during 10 years. A share of these accumulated reserves will have to be used to reimburse the social debt, which will permit to reduce or even to abolish the CRDS charge which is added to the CSG. But considerable amounts of money will remain available. At a time when growth is getting nowhere, it is absurd to weight on the retired people level of life and on household consumption when are available such amount of assets which could contribute to support purchasing power, not to talk about social justice.

The project to abolish social contributions on extra-time hours is quite also inappropriate. It remains the historical mistake made by Nicolas Sarkozy when he decided to abolish taxes on extra-time working hours at the eve of the 2007-2008 crisis: to encourage these who have a job to the detriment of unemployed ones through dissuading the enterprises to hire. Germany, which is frequently presented as an example, did, at that time, the opposite choice in supporting short-time working. Just before the great recession, it was better to allow the employers to adapt themselves in keeping the maximum of their employees. Atop of that, you must be very naïve to think that the enterprises which turn to extra-time are not going to take advantage of that measure to weight on general pay rises and to retrieve a significant share of what is today presented as a measure which is in favor of employees.

The government seems also to ignore that consumption prices are not anymore stable but will grow in 2018 by more than 2% and that this trend will quite certainly go on in 2019. The State is the main beneficiary of it: its receipts will grow faster than its expenses and the cost of its debt will diminish compared to GDP because it borrows on short and long term period at negative real interest rates. Households will be the most important victims with a purchasing power which will, at the best, stagnate: enterprises will offer to their employees 2% increase of their pay qualified as generous but a little under prices rise. Workers paid at the minimum rate (SMIC) and pensioners, as we have already seen, will not have that fortune. At last their savings will be impacted because the offered interest on their accounts will be, by large, inferior to the inflation rate.

Fiscal receipts during the first half of the year show well the consequences of the inflation coming back and the government will to focus the tax increases on middle class: income taxes, VAT and energy taxes have brought in 3.8 billion more than last year. It was just enough to compensate the replacement of the wealth tax by a property tax and the reduction of corporate tax rates. How imagine that this package, in fact quite consistent, acts in favor of jobs creation and growth? That policy did not achieve this objective during the previous five years. Who can think that, in toughening it, it will reach the announced objectives? Diabolicum perseverare.