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ECONOMY

France’s Piketty backs Miliband… not Hollande

On the eve of the UK election, France's "rock star economist" Thomas Piketty, says the UK would be better off under a Labour government than the Tories, who have only helped to boost inequality over the last five years.

France's Piketty backs Miliband... not Hollande
Thomas Piketty, France's "rock star economist" says the UK would be better off under a government. Photo: AFP

Piketty, recently named one of Time magazine's top 100 most influential people in the world had some advice for Brits heading to the polling booths on Thursday.

The French economist whose book "Capital in the 21st century" became a best-seller in the United States last year believes that when it comes to its place in Europe and the economy then the UK would fare better under Labour's Ed Miliband.

"The Labour party is in a better position than the Conservatives to promote growth, equitable growth and more investment in education and public services and keep Britain in the EU," Piketty told a meeting of the Anglo American Press Association of Paris on Wednesday night.

The economist's book on the dangers of growing inequality thrust him into the international limelight when it was translated into English last year. 

The book forced an international focus on the damaging gap between rich and poor and caught the attention of the public as well as the likes of the US President Barack Obama who has since made tackling inequality his number 1 priority.

Piketty, who has been critical of France's Socialist President François Hollande after initially backing him for the 2012 presidential election, described Conservative party policies in respect of the European Union "as very populist and very dangerous."

The professor at the Paris School of Economics said the Tories had been trying to shift the blame for the UK's problems.

"When you don't manage to solve your domestic social problems its always tempting to blame others, whether foreign immigrant workers, or Brussels or China, Germany. There's always lots of people to blame for your problems, but it's not the right strategy.

Asked whether inequality had risen in Britain under the Tories, Piketty said: "Overall, yes, I would say so."

While Piketty was promoting the idea of a socialist government in the UK, he reserved criticism for France's own left wing administration.

On the third anniversary of Hollande's election to the Elysée, Piketty, who has previously described the president as "a disaster" says the socialists have been givin the impression they have simply been "improvising".

"It's as if the Socialist party has been in opposition for 10 years between 2002 and 2012 and that they never really thought what they would do when in power," said Piketty.

"Over the past three years there's been a lot of stop and go and no clear line in terms of general fiscal policy."

Piketty's main criticisms of Hollande surrounded his decision to initially raise taxes before later lowering them as well as introducing an "incredibly complicated" way to lower corporate taxes.

He agreed the labour market could do with reforming in France, but said it is not to blame for the rise in unemployment in the country.

Piketty said it would be difficult to imagine him supporting Hollande if the incumbent president stands in the 2017 election, but the economist remains pragmatic.

"Let's wait and see. You can always find worse candidates. At election times you have to chose between different options," he said.

Critics of Piketty have tried to deride his work by labelling him a neo-Marxist, but it gained him an audience at the White House  with top economic advisers to the US President.

Piketty used data from the past two centuries across 20 countries to demonstrate how inherited wealth has ensured the dominance of a small class of people and will continue to do so unless action is taken.

He rejects the argument that economic growth in the capitalist system benefits everyone, and advocates a punitive global tax on wealth to address the issue.

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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.

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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