TCS Daily


When the French Play Budget

By Pierre Bessard - June 15, 2006 12:00 AM

Parisian lawyer Mathieu Laine may not have overstated his point by much when he characterized France as "one big nursery" in his latest book, La Grande Nurserie. En Finir avec l'Infantilisation des Français (JC Lattès, 2006). What he had in mind was the nation's ongoing infantilization by its nanny politicians. After all, in which other country are you officially warned to tidy up your apartment to avoid tumbling over things? But this month the French government went a step further in its unintended efforts to stress Laine's case. The Ministry of Finance launched a new online game: the "cyber-budget", at a cost of €100,000 for taxpayers. The Ministry boasts it is the first in the world to instigate such a program (lesser versions do exist elsewhere).

One of the game's objectives is to demonstrate how bad cutting taxes can be. "The idea is that when we cut taxes, we can't do it without creating deficits," budget minister Jean-François Copé, a typical French technocrat, announced ahead of the launch. But, thanks to the game, everyone can now replace Copé and manage the budget. The one-hour program includes three "missions": understanding how the budget functions, negotiating with fellow ministers while respecting European Union and other international commitments, and maintaining a balanced budget during three consecutive years - all accomplishments that France's actual budget overseers were unable to achieve concurrently over the past three decades. And unlike the cyber game, that failure has had real consequences.

Officially, government debt in France is set to reach €1.2 trillion this year, but as a government-mandated report authored by a commission led by Paribas chairman Michel Pébereau found last year, the country's real indebtedness is closer to €2 trillion. That's over 120 percent of gross domestic product, or twice as much as allowed under the EU's Stability and Growth Pact, originally designed to protect the euro from careless fiscal management. Not that this would prevent the French government from doing what it wants. The agreement already had to be renegotiated when France refused to apply sanctions after it repeatedly broke the deficit limit of 3 percent of GDP. Politicians then promised to do better in the future, but Brussels thinks there is "a non negligible risk" that France's deficit will go over board again this year. The EU, however, suffers from a credibility problem, too. The European Court of Auditors has refused to sign off its fraud-ridden accounts for 11 years running. No chance of leading by example there.

The French government, besides creating games, is genuinely trying to look as if it were mending its ways. In 2007, it is set to cut 15,000 jobs in civil service. The measure sounds promising. The "fonction publique", as France's feared bureaucrats are known, makes up almost half of the government's budget. But what looks like a bold move is in fact pretty tame. Next year between 70,000 and 80,000 civil servants are due to retire anyway. And with five million bureaucrats keeping the French nanny state alive, the reform will hardly translate into a revolution, let alone a perceptible change.

In fact, change is just not on the agenda. Politicians talk endlessly about reforms and the need for France to become more competitive. But it just doesn't happen. Maintaining the French "social model" is too big a priority. In 2006, for the first time in the country's history, income tax revenues will match the interests paid on the debt. The French are increasingly withdrawing from productive life as a result, but the government won't admit that the tax-and-spend model it is trying so hard to preserve is the cause of the country's ills of unemployment, early retirement, and social unrest. Politicians simply don't want to hear about the bad incentives their "model" imposes on entrepreneurs, employers, and workers. "Economic growth" is supposed to straighten everything out, but nobody seems to know where it will come from.

The French government is even failing at communicating the most basic facts about its financial situation. A recent survey showed that 75 percent of the French couldn't merely tell the difference between the deficit and the debt. Try to look up some facts and figures on one of the Ministry of Finance's numerous websites and what will you find? Institutional newspeak about this or that legislative amendment or brash propaganda about how great and improving government performance is.

So there remains the key question: Will the cyber-budgeters achieve what the government has never achieved? There is a glimmer of hope. As the soccer World Cup unfolds in Germany and France warms up to Zinedine Zidane and other national stars, the French government did plan a little "surprise" for those getting online to "manage" the budget: the 50 best players will win a visit to Bercy, the Ministry of Finance's headquarters. Maybe not as fun as a trip to Disneyland Paris, but wait: the thousandth winner gets to spend an entire day at the Ministry with Jean-François Copé himself. Talk about incentives.

Pierre Bessard is political editor of L'Agefi (www.agefi.com), the Swiss financial daily newspaper, and a founder of the Institut Constant (www.institutconstant.org), the Lake Geneva region's free-market think tank.

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