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ECONOMY

France will not ‘copy’ UK economic model: PM

British economic policies have created mass poverty and inequality and France will not be copying them. That was the view of none other than France's Prime Minister Jean-Marc Ayrault. Read what else he had to say about the UK.

Published: 20 December 2013 09:20 CET
France will not 'copy' UK economic model: PM
France's Prime Minister Jean-Marc Ayrault has derided Britain's economic policies insisting they would not work in France. Photos: Flickr

French Prime Minister Jean-Marc Ayrault said on Thursday that his government will not copy British economic policies as they had created poverty and inequality.

"I see a lot more poverty, more inequalities and if I was to look for a model to reform France I would want to save the French model reforming it and certainly not copy what others do, especially not if we're not talking about the best," Ayrault told French private TV network TF1.

Asked about cuts in public spending imposed by British Prime Minister David Cameron's government, Ayrault said "France is about to regain the level of national wealth it had before the 2008 crisis (which) Britain has still not
refound".

"So the situation in Britain, with the mass poverty that it generated is far worse than in France."

Ayrault criticised Britain's zero-hour contracts under which employees agree to be available for work as and when required, so that no particular number of hours or times of work are specified.

"Do you find this okay?" he asked. "Do you think the French would accept this? This is not our policy."

Economists no doubt will be divided over Ayrault's opinion. While many will agree others will point to France's rigid labour market and lack of competitiveness as reasons why Paris could do far worse than take a leaf out of Britain's book.

"France could definitely do with a dose of Thatcherism," Tomasz Michalski, Professor of Economics at Paris’s prestigious HEC business school, told The Local. "The country has maxed out on state spending and has maxed out on debt. It needs a change of thinking to get back to reality and realize that there are market-based economies that are generating wealth. Many people forget that. (See below to read more of what Michalski had to say)

SEE ALSO: Why France could do with a dose of Thatcherism

Socialist Senator Richard Yung however, backs Ayrault's view and told The Local previously that France should steer well away from copying Britain.

“Look at the divide between rich and poor in Britain. In France we still have a welfare system which brings solidarity and equality to society," Yung said.

Ayrault, a socialist, spoke hours after the French parliament approved a belt-tightening budget for 2014 with huge spending cuts and tax hikes in a bid to rein in the country's high public deficit.

The second budget of President Francois Hollande's government had been rejected by the Senate but passed Thursday in the lower house although the main opposition centre-right UMP party and the far-right National Front voted against it.

Based on projected economic growth of 0.9 percent in 2014, the budget aims to bring down the public deficit from the current level of 4.1 percent to 3.6 percent of gross domestic product (GDP).

In Britain, where unemployment has hit a four-year low, at 7.4 percent, finance minister George Osborne earlier this month hiked the government's economic growth forecasts as the recovery picks up speed.

The economy will grow 1.4 percent in 2013 and 2.4 percent in 2014, Osborne said in his so-called autumn statement.

SEE ALSO: Ten reasons why France is a great place to work

The Conservative minister announced a new cap from next year on welfare spending, and outlined plans for another £3.0 billion ($4.9 billion, 3.6 billion euros) in savings in the public sector.

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ECONOMY

How is Denmark’s economy handling inflation and rate rises?

Denmark's economy is now expected to avoid a recession in the coming years, with fewer people losing their jobs than expected, despite high levels of inflation and rising interest rates, The Danish Economic Council has said in a new report.

Published: 30 May 2023 15:46 CEST
How is Denmark's economy handling inflation and rate rises?

The council, led by four university economics professors commonly referred to as “the wise men” or vismænd in Denmark, gave a much rosier picture of Denmark’s economy in its spring report, published on Tuesday, than it did in its autumn report last year. 

“We, like many others, are surprised by how employment continues to rise despite inflation and higher interest rates,” the chair or ‘chief wise man’,  Carl-Johan Dalgaard, said in a press release.

“A significant drop in energy prices and a very positive development in exports mean that things have gone better than feared, and as it looks now, the slowdown will therefore be more subdued than we estimated in the autumn.”

In the English summary of its report, the council noted that in the autumn, market expectations were that energy prices would remain at a high level, with “a real concern for energy supply shortages in the winter of 2022/23”.

That the slowdown has been more subdued, it continued was largely due to a significant drop in energy prices compared to the levels seen in late summer 2022, and compared to the market expectations for 2023.  

The council now expects Denmark’s GDP growth to slow to 1 percent in 2023 rather than for the economy to shrink by 0.2 percent, as it predicted in the autumn. 

In 2024, it expects the growth rate to remain the same as in 2003, with another year of 1 percent GDP growth. In its autumn report it expected weaker growth of 0.6 percent in 2024.

What is the outlook for employment? 

In the autumn, the expert group estimated that employment in Denmark would decrease by 100,000 people towards the end of the 2023, with employment in 2024  about 1 percent below the estimated structural level. 

Now, instead, it expects employment will fall by just 50,000 people by 2025.

What does the expert group’s outlook mean for interest rates and government spending? 

Denmark’s finance minister Nikolai Wammen came in for some gentle criticism, with the experts judging that “the 2023 Finance Act, which was adopted in May, should have been tighter”.  The current government’s fiscal policy, it concludes “has not contributed to countering domestic inflationary pressures”. 

The experts expect inflation to stay above 2 percent in 2023 and 2024 and not to fall below 2 percent until 2025. 

If the government decides to follow the council’s advice, the budget in 2024 will have to be at least as tight, if not tighter than that of 2023. 

“Fiscal policy in 2024 should not contribute to increasing demand pressure, rather the opposite,” they write. 

The council also questioned the evidence justifying abolishing the Great Prayer Day holiday, which Denmark’s government has claimed will permanently increase the labour supply by 8,500 full time workers. 

“The council assumes that the abolition of Great Prayer Day will have a short-term positive effect on the labour supply, while there is no evidence of a long-term effect.” 

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