09-03-2003 02:16									#1
	France busts deficit limit Get a bigger avatar today!

The Chirac government has recently broken the Euro Zone's agreed upon deficit limit of 3% by posting a 3.4% deficit for this year and it appears likely France will post an even larger deficit next year. The European Growth & Stability pact was adopted to insure that the new Euro would become a strong currency like the German Mark and not sink down to the pathetic level other European national currencies, such as the Italian Lire, once held.

The irresponsibility of the French government exposes an inherent weakness of having a common currency shared by a number of sovereign states. If one country behaves incompetently then all the states will be harmed when the common currency gets hammered in the international currency markets. In the past both Germany and Portugal have broken the deficit limit but both acted quickly to reverse the trend (by cutting spending and raising taxes) while the French government seems to be categorically refusing to do anything meaningful to reduce its deficits.

What long term effects do you think this will have on the Euro and upon the European Union? Is there a powerful enough mechanism in the EU to force France to reign in its irresponsible spending or will the eurocrates be unable to stop Chirac’s spending binge?

Here’s the complete BBC article

	09-03-2003 02:27									#2
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The Growth and Stability Pact itself needs to be redrawn to recognise that budgets shouldn't necessarily balance over the short term but need to balance over the entire economic cycle. Or something else vaguely Gorden Brown-esque.

	09-03-2003 02:39									#3
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Starchild is right. The whole world economy is looking bad right now. Every nation is going to have either large deficits for the whole decade, huge tax increases, or huge spending cuts. I don't think there will be any consequences for France.

	09-03-2003 03:02									#4
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Since Brussels doesn't have any really control over how much the member countries spend the eurocrates may find themselves in a position where the value of the Euro is failing through the floor and they can't stop it because they can't control the deficits of countries like France.

The Germans forced the issue of deficit limits into the Growth & Stability pact just to prevent such a scenario from occurring but now it appears the precautions are failing apart and the value of the Euro will now be less secure. That doesn't mean the Euro is going to immediately go into free fail but it does mean the Euro has now lost the only institutional block which prevents that from happening.

	09-03-2003 03:04									#5
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I must profess I am surprised more of you Euros aren't concerned. The Chirac administration is putting the common currency in jeaperdy, not dire jeaperdy but still the threat is there, just so he can avoid making tough political choices about taxes and/or spending cuts. Doesn't that bother you in the slightest?

	09-03-2003 03:12									#6
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Even Gordon Brown appears keen to renegotiate this bit of the Euro rules. Apparently he is looking for something which will allow some flexibility over an economic cycle of several years.

The likelihood is that the rules will be changed. The only question is who will have the most influence over what is adopted.

	09-03-2003 03:13									#7
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The thing is that tax increases and spending cuts would be just as bad for Europe rigth now as a weak Euro.

	09-03-2003 04:00									#8
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That is what happens when a nationalistic, Degaulle-like wacko (Chirac) is in control of France. Time to bring the 5th Republic down! Bring in the 6th Republic!

	09-03-2003 04:03									#9
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Or the Third (or is it Fourth?) Empire!

	09-03-2003 04:08									#10
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They do not even have a large military or wars to support. Why should they run deficit?

	09-03-2003 04:08									#11
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I now that the French and German presidents want to cut taxes, but I doubt if that will happen. I think there are planned tax cuts in France, but they have been put on hold.

	09-03-2003 04:10									#12
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quote: Originally posted by Lefty Scaevola They do not even have a large military or wars to support. Why should they run deficit?

The French have 300,000 peacekeepers in the Ivory Coast, but I don't know if that is costing them more than usual.

	09-03-2003 04:12									#13
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quote: Originally posted by DuncanK The French have 300,000 peacekeepers in the Ivory Coast, but I don't know if that is costing them more than usual.

Correction: Imperialist war-mongering War for Chocolatiers

	09-03-2003 04:20									#14
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Here's a link concerning proposal for the rules reform for budgets

http://news.bbc.co.uk/2/hi/business/2520777.stm

	09-03-2003 04:24									#15
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Chirac being forced to cut public services would be the best thing to happen to the U.S. war effort

	09-03-2003 04:25									#16
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How so Timex?

	09-03-2003 04:28									#17
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Oh, because he will be unpopular and get voted out of office?

	09-03-2003 04:38									#18
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Because nothing gets a Frenchman more riled than when his handouts and subsidies get cut

	09-03-2003 04:41									#19
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He is unpopular...it is just that his opponent is the somewhat unpalatable Le Pen...and that takes some doing...

	09-03-2003 04:44									#20
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I always think our system sucks

than I look at europes

we at least will hopefully have an alternative in the comng election, they do not

Jon Miller

	09-03-2003 05:32									#21
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quote: Originally posted by DuncanK The French have 300,000 peacekeepers in the Ivory Coast, but I don't know if that is costing them more than usual.

Think you have a decimal point error there.

	09-03-2003 05:41									#22
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France has the best healthcare system and the best rail network. That's going to cost a bit.

This thread isn't as daft as the 'Jews leaving France in record numbers', since there is a small problem, as opposed to a miniscule one.

	09-03-2003 05:41									#23
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Well, at last Chirac and Bush agree on something!

	09-03-2003 05:53									#24
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quote: Originally posted by Lefty Scaevola Why should they run deficit?

To pay subsidies for farmers. We have the same problem in the US; farms are no longer profitable, but farmers do it because "My daddy did it and his daddy before him did it." and they complain to the government to help them keep up thier worthless farms instead of doing something productive. Those farmers are so protectionist that they srcew a poor farmer in Africa so he can buy a fancy pick-up truck with the government handouts.

	09-03-2003 05:59									#25
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quote: Originally posted by Odin To pay subsidies for farmers. We have the same problem in the US; farms are no longer profitable, but farmers do it because "My daddy did it and his daddy before him did it." and they complain to the government to help them keep up thier worthless farms instead of doing something productive. Those farmers are so protectionist that they srcew a poor farmer in Africa so he can buy a fancy pick-up truck with the government handouts.

90% of the world population thinks like this and I hate them! French farmers are the worst kind (I have a summer house in France) but most countrie's farmers are A-holes!

	09-03-2003 06:22									#26
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The single best thing which Europe and the U.S. can do to help each other would be to make an agreement eliminating the fat subsidies they are giving to inefficient farmers. Those fat cats should have to sink or swim just like the rest of us without cushy government hand outs.

	09-03-2003 06:23									#27
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quote: Originally posted by Lefty Scaevola Think you have a decimal point error there.

Yeah, I think you are right

	09-03-2003 06:28									#28
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quote: Originally posted by Oerdin The single best thing which Europe and the U.S. can do to help each other would be to make an agreement eliminating the fat subsidies they are giving to inefficient farmers. Those fat cats should have to sink or swim just like the rest of us without cushy government hand outs.

That will never happen, unfortunatly, since rural areas elect politicians to pork barrel subsidies for them.

	09-03-2003 06:30									#29
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What do the French spend most of their taxes on? I doubt that its farm subsidies, but I could be wrong. If it's not than cutting farm subsidies wont balance the budget alone.

	09-03-2003 06:37									#30
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The French don't spend much on farm subsidies at all. They have the Germans and British pay those.