I've never taken much notice of a French election before, but this time I am. Nikolas Sarkozy is pretty uninspiring, but I think his opponent Francois Hollande is even less so, so it's not the drama that's drawing me.

Rather it is the fact that Hollande basically wants to keep on doing what the French have been doing - spending and borrowing more - whilst increasing the top tax rate.

It's pretty much what the Greens would suggest we do in Australia, so it has some interest in terms of where those policies might lead electorally as well as economically.

But more to the point, if the second largest economy in Europe runs away from austerity, where does that leave the PIGS (Portugal, Italy, Greece and Spain)? And if the French influence the Eurozone to cling onto dysfunctional policies what are the implications for Chinese and Indian growth and Australia.

I had a stab at some of these things on AmbitGambit here http://www.ambitgambit.com/2012/04/24/a-natural-experiment-or-catastrophe-for-the-world/.

It's an interesting question, Graham. The thing is, Sarkozy and
Berkel have been the ones holding the Euro together. Hollande is
unlikely to do the same, wanting a better deal for France.

That would only leave one option, a collapse of the Euro and back
to the French Franc, DM etc. What a mess!

Why do you want to spoil my day Graham? Surely it is bad enough watching the fool yanks make stupid decisions at an election, without having to watch the idiot French make another. It really is hard to see how such a bunch of ratbags as the French, ever managed to make such a sensible choice in their power generation technology.

The French have always cornered the market on bad decisions, particularly where getting their hands on unearned wealth is concerned, so the result is probably a foregone conclusion.

Still I can't see how we, in our glass house, can start throwing stones at either of them about electoral stupidity.

Funnily enough, a mere monetary union was never going to suffice in uniting member countries into an entity of continuing strength. The union wasn't comprehensive enough. Member countries still had the autonomy to go their own way as far as borrowing and spending were concerned. Only a tightening of the union with an overarching central control could have (and maybe still can) save the model. It would, however, mean a loss of some sovereignty for member countries - without it, a common currency is probably doomed in the long run.

*Poirot* thanks for the correction recently re *Pink Panther* & *SnagglePuss*

..

Regarding Chinese growth, whilst I do not know, I am wondering about the effect that austerity in Europe will have on their exports of manufactured goods.

Is it possible, that even though austerity will likely produce a situation where the majority in Europe will have less money to spend, that as the Chinese generally supply the bottom end of the market, that in fact they may not suffer all that much in reduced sales?

..

I note that whilst their growth has been revised down, it still is relatively strong.

Dear GrahamY,

It will be an interesting grand experiment for the French.

So will ours. While Obama had austerity forced upon him by recalcitrant Republicans and out of control Tea Partiers, our then prime minister Rudd spent big.

Do the current relative positions of each economy tell us anything, or is it to be dismissed as luck?

Now Gillard is intent on imposing the very type of austerity that crippled the US, all in the name of balancing the budget. Surely a slow turning off of the tap has to be more responsible than slashing and burning.

The current Liberal government in Victoria is also marching down the austerity path and we are quickly becoming a basket case. Steeply rising unemployment, people leaving in droves etc.

Is it all they know?

I think you have your facts confused CSteele. Australia did relatively well after the GFC because before Labor we had a fiscally responsible government that had run a competent economy.

When the GFC hit our floating dollar - a Hawke innovation - took much of the shock by falling down to 60 something cents making our exports even more competitive than they were before. On top of that we were biased towards developing countries where industrialisation of rural communities meant that growth could continue, with or without the West. So China helped to keep us afloat.

The final factor was that the more flexible job arrangements in Australia meant that workers could be put on part-time work rather than sacked, preserving the viability of firms and their intellectual capital. This was an innovation started by Hawke and carried forward by Howard, but opposed by the current crew.

I very much doubt that the economy in Victoria is being particularly affected by the state governments minor cut backs on spending. It is more likely an effect of the now high Aussie dollar on manufacturing, which is a much bigger factor in Victoria than elsewhere.

As for claiming that Obama has embarked on an austerity program - when his income exceeds his outlays I'll accept that as a proposition, but not at the moment when the US government is going backwards at trillions of dollars a year.

Very little of what Rudd did had anything to do with our present prosperity, apart from pulling forward a bit of spending, and racking up debts which will crowd the private sector out to some degree and lessen growth in the future.

Graham,

You're right about the faux austerity in the U.S. I put this link up recently, but I'll add it to this thread as well. Five to six months ago annual U.S. government debt hit 15 trillion. It's already at over 15.6 trillion and on its way to 16 trillion (103.6 percent of annual GDP). Total U.S. debt has gone from around 54 trillion to 57 trillion in the same time frame.
http://www.usdebtclock.org/

Dear GrahamY,

That may well be the narrative the Liberal Party and the Murdoch press want to run with but for me it doesn't really coincide with the facts. 

My narrative, one I think is a little closer to the truth, is the one admitted to by Joe Hockey; that the coalition government was awash with funds due to the mining boom and spent themselves silly on middle and upperclass welfare such as private school funding, retiree tax breaks, halving of capital gains taxes and dropping of personal tax rates. Abbott wants to continue the tradition with a maternal leave scheme costing over six billion dollars.

Labour has been attempting to wind some of the largess and extravagance back via a hamstrung parliament and only been partly successful. 

Australia could have been in a much stronger fiscal position without Howard's giveaways. Rudd was aware things were bleak and knew we were sitting on top of a housing bubble (created in a good measure by the afore mentioned tax cuts) that needed tender loving care to manage or we were headed the way of the States.

If we had lost those couple of hundred thousand jobs Treasury said were saved because of the stimulus and the resultant housing foreclosures had popped that bubble we would now be in far more dire straits than we are in now.

But we didn’t thanks to the spending.

In the end they are two different narratives depending on our perspectives. Neither holds the truth. That is probably for future generations to decide.

As to America the surpluses under Clinton were totally squandered by Bush with middle and upperclass tax breaks, deregulation of the most irresponsible types of banking behaviour and two wars. Obama's efforts to get things back on an even keel have been constantly thwarted by the Republicans and his own delusions of consensus politics.

I am more hopeful for our own country since despite the Gina and Twiggy money floating around threatening to degrade and debase our democracy we are a fair cry for now from the US. Please may it continue.

There is also an Australian Debt Clock;

http://www.debtclock.com.au/

The Germans have been holding up the rest of the Euro zone with the
aid of the French. If France abandons the present financial campaign
then I think the Germans will throw up their hands and cut loose from
the Euro. Merkel has had considerable flack within Germany for the
money that has been pumped into the PIGS and it will take very little
to overturn the assistance.

This is all connected to Joe Hockey's statement recently about how the
Europeans have got themselves into considerable financial difficulties
by borrowing and giving it away recklessly.
Joe Hockey was spot on when he said there is a lesson there for us.

What the politicians don't seem to understand, and certainly the
general public (including the French), don't realise is that this
situation is PERMANENT !

Unless we tap a magic bullet such as cold fusion, we are literally
over a barrel.

I agree with what I think GY is saying.
But not with Bazz,Australia leads the western world in debts, better place to be than last.
I would rather the current leader turn it around and win.
Europe is a basket case.
We should not ignore that,or the implications of failure there.
I support budgets in the black, always, learning to live with in our budget surely,at every level home to country, is better than debt to grow.
Ask Greeks.
Ireland the list is long.
I fear we all will be grabbed by the scruff of the neck and see reality, dreadful crashes, in that Continent this year, more debt Will not fix it.

none of my present links join into it
so will just go..with feelings

sar-cosy..is a player
he would know things like this
would definatly..'be on this list'
http://theuglytruth.wordpress.com/2012/04/26/if-you-liked-the-uss-liberty-the-lavon-affair-and-the-5-dancing-israelis-on-911-youre-simply-going-to-love-the-mek/

sares-cosy would also know of things such as this
http://www.businessinsider.com/these-10-corporations-control-almost-everything-you-buy-2012-4

im sure he would be fine with this
http://www.naturalnews.com/035688_Monsanto_honey_bees_colony_collapse.html

and have noted this
http://enenews.com/japan-tv-news-program-films-plant-life-mutations-in-tokyo-fasciated-dandelions-reported-very-often-video

so that means..who is best..[brave enough]
to keep the radi-actors;;;[power]..going
and which powers get the gifts
and who gets to pay for it all

austerity is a huge fail..that isnt the cure
tax corperations..according to the corperate damages..their product inflicted...[collateral; damage..[build in re build ...*into the cost of weopens]

he is such a big piece
too big to fail

look for an aqccident
[who is number 2]

vote kennedy..you get ford
who do we get ...?

how can we know
who cares

bankers lending govt money at intrest
to bakilout 10 corperations..give tax breaks to ten companies

its insane..the dead corpuss corpse of corperations
leeching the life blood assets etc from the living

tax corperaions
just corperations

give them a 'life' time..then get death duties
as all cotrperate asssets get sold...paying real prices..for assets

got taking 20%..of all assets
losses will be taxed more...[i hate asset strippers]
shelf comanies...bah..its a mess...and we know sarcosy hasnt fixed it

by bye ol boy

once your gone..it will be buy buy buy
let bygones..be gone

by..
by bye
sa'-cosey
got too cosy