L'Information est d'Or

Post date: 11 Feb 2019 As images of unrest in the streets of Paris and other French cities continue to flood in the European media, the data on France contained in our latest global forecast, published last week, painted a subtler but still concerning outlook for the French economy. GDP growth was at 1.5 per cent in 2018 and recent developments suggest that the acceleration in growth in 2019 that we were previously expecting may not occur. We have therefore downgraded our forecast of annual GDP growth from 1.9 to 1.6 per cent in 2019. Turner's famous yellow A broad range of surveys point to a marked and sudden deterioration in the business environment and consumer confidence. The business climate composite indicator, a survey of business managers compiled by INSEE, declined in December 2018 to a two-year low and the composite PMI dropped in December from 54.2 to 48.7, below the 50 mark which indicates expansion. Social protests represented by the ‘gilets jaunes’ movemen...

I first published this article on the National Institute of Economic and Social Research blog . It is reproduced here with permission. For the non-British readers, the title is a play of words in reference to a famous BBC TV series, the Great British Bake Off. The British Prime Minister and four of her senior cabinet colleagues will in a series of speeches over the next few days set out a vision for the UK after Brexit. Those speeches will likely reiterate the government’s official goal of ‘free and frictionless’ trade with the EU. Less clear are the concessions that the UK is prepared to make to achieve this objective. In this blog we explore the likely trade-offs from the prism of a simple schematic and focus on three key areas of negotiation - market access, labour movement and budgetary contribution. There is no magic formula and the decision is ultimately political. With that in mind, the PM and her colleagues should spell the priorities on each of these three dimensions in th...

The French 5-year budget plan currently under review in the French Parliament deserves careful attention because it is the first one under President Macron and a unique opportunity to address some of the structural weaknesses of the Eurozone’s second largest economy: a high level of taxes and public spending, a competitiveness problem and high unemployment. In NIESR’s November Review , we simulated the main measures of the plan and analysed their macroeconomic impact. We find that this plan strikes a fine balance between improving the French economy’s medium-term growth prospects, returning public finances to a more sustainable path and not damaging short-term GDP growth. However, the quantitative objectives set forth in the plan of reducing public deficit by 2 per cent of GDP and debt by 5 per cent of GDP by 2022 appear too optimistic, and this view is shared by the European Commission. Alexandre III bridge during a flood of the river Seine (June 2016 - picture taken by th...

Picture taken in Lanzarote, by the author I have received since the referendum in the United Kingdom about the European Union a lot of messages, tweets and talks of shock, denial or anger about the results of the UK referendum and of the US presidential elections. You, dear reader, probably witnessed the same thing so I don't need to quote them. Unfortunately, I saw much fewer messages of hope from people who triggered this change by voting for Brexit or for Donald Trump, or who are feeling supported by either cause. But this probably tells more about my network than the real diversity of people's opinion, even though I have always tried to have as open a network as possible. My argument in this post is that, whichever side of the argument you found yourself in, I will try and convince you that you should be optimistic about the future. Democracy is alive Firstly, the two political events mentioned previously were fantastic exercises of democracy. Brexit re...

How well is Europe's economy doing? Following the European sovereign debt crisis and the Brexit (British exit from the European Union), are we about to witness a deepening European crisis fueled by structural issues? Or is it the case, as I heard several European institutional investors say, that European equities are the most promising assets to invest in because Europe is on the track to recovery and its market is undervalued compared to other regions in the World? For example, Igor de Mack, fund manager and spokesperson at DNCA Investments, said in a recent comment that "low valuations [of European equities] are increasingly compelling" Youngster carrying the European flag at the World Youth Days in Krakow, Polonia First let's look at the latest economic figures for the Eurozone. 1. A double-dip recession GDP growth shows the Eurozone suffered a double-dip recession, the first part being in 2008-2009, triggered by the global financial crisis, and the ...

Being part of the Eurozone - and therefore in direct competition with other European nations -means that France has no choice but to enact urgently the following economic reforms: Reduce the weight of public spending in GDP (currently at 57%) Reduce debt before the market forces us to Reform labour market to make it more flexible and reduce unemployment. (cf Unemployment and market frictions Otherwise, they will end up in a Cul de Sac   Which of the 2012 presidential candidates offers such a programme? Not too sure...

5th August 2011 is a historic day when ratings agency Standard and Poors downgraded the US public debt from AAA to AA+ for the first time in modern history. S&P downgrade explanation S&P took this decision to reflect the lack of leadership from US politicians to tackle urgently and decisively the mounting US public debt, which may exceed GDP soon as seen on the chart below. The debate frontier is now between the "spenders" like Paul Krugman - who think the US can recover from the crisis through more public spending which will lead to economic growth necessary to repay debt in the future - and the "deficit hawks" - who highlight that excessive debt raises the risk of a catastrophic default and therefore debt should be reduced urgently. The first view prevailed when a stimulus package was decided on the onset of the recession. The downgrade by S&P, which reflects the increasing riskiness of the US debt, goes in the direction of the second view by sh...

A state-of-the-art conference on macroeconomics has been organized by Olivier Blanchard at the IMF. Although I could not attend it, I followed it on the website of the IMF. A lot of the most well-known economists attended: Joseph Stiglitz, Robert Solow, David Romer, George Akerlof, Maurice Obsfeld. As it was presented by academics, it's very research oriented, but definitely very informative even for the non-academics people. A summary of the results of this conference is given by Olivier Blanchard on VoxEU , a leading website for European economists. Here is the video:

While watching on television (especially Al Jazeera, which had the best coverage) the "revolutions" enfold in Tunisa and Egypt, I have been wondering what triggered those dramatic but welcomed events. According to a lot of journalists, a significant cause was economic conditions: rising unemployment, low growth, high inflation. Hence, the person who started the Tunisian revolution was supposed to be someone who couldn't sell his production and put himself in fire in despair. So how exactly were Tunisian and Egypt economy faring? GDP growth (Source: IMF) Unemployment (Source: IMF) Inflation (source: IMF) Well, surprising as it may be, even after a worldwide recession, they were not faring too bad. Output growth was reasonably high (5.3% in Egypt and 3.8% in Tunisia) and rising in 2010. Unemployment has only increased by 1% since the 2007 and is still on a long-term declining trend. Inflation was only high in Egypt (above 10%) but not in Tunisia. So we ...

Ever since the defeat of the right-wing in the local elections  in France, some MPs of the ruling UMP party feel like they have to "do something" quickly, however stupid this thing might be. Their first demand was to cancel the project of a Carbon Tax. Their argument in a nutshell was that such a tax would only work if it was applied to most countries, that it was not a good time to introduce a new tax during a recession and anyways, taxing was a left-wing thing. I find it a shame that for once we had the opportunity to move from taxing labour (a good thing) to taxing pollution (a bad thing), but I understand that there is disagreement among economists as to what the appropriate carbon tax level should be, so... A few days later, having succeeded on their first demand, the same MPs demanded to remove the 50% cap on personal tax, arguing that this limit was preventing any new tax and that new taxes were necessary to reduce the budget deficit. What? Just a few days after havi...