Marketplace Scratch Pad

A French lesson

Scott Jagow Jul 6, 2009

The US has chided European countries for not doing enough to stimulate their economies. But the French have a retort: You’re the one that’s behind. We’re doing stimulus the right way, quickly and beautifully.

From the New York Times:

… about 50 French chateaus are to receive a facelift, including the palace of Versailles. Also receiving funds are some 75 cathedrals like Notre Dame in Paris. A museum devoted to Lalique glass is being created in Strasbourg, while Marseilles is to be the home of a new 10 million euro center for Mediterranean culture.

All told, Paris has set aside 100 million euros in stimulus funds earmarked for what the French like to call their cultural patrimony.

All the projects must start in 2009:

“America is six months behind; it has wasted a lot of time,” said Patrick Devedjian, the minister in charge of the French relance, or stimulus. By the time Washington gets around to doling out most of its money, Mr. Devedjian sniffed, “the crisis could be over.”

Gallic pride aside, Mr. Devedjian has a point. While he plans to spend 75 percent of France’s stimulus money this year, the White House is giving itself until fall 2010 to lay out that big a share of the American expenditure. And many experts predict that Washington will fall short of that goal.

As it turns out, France’s more centralized, state-directed economy — so often criticized in good times for smothering entrepreneurship and holding back growth — is proving remarkably effective at deploying funds quickly and efficiently in bad times.

But the bad times aren’t over — the unemployment rate is expected to top 11% next year. And France may still be heading down the same path as the US in terms of government borrowing:

“There has been a lag with unemployment, but now it will start to bite,” said Hervé Boulhol, head of the France desk at the O.E.C.D.

Paying for all those jobless French will not be cheap. Under French job regulations, unemployed workers are guaranteed up to 67 percent of their former salary and can collect as much as 70,000 euros ($98,000) annually in benefits for two years.

Indeed, without major changes in government policies, France faces costs that will probably be crippling in the long run. “We’re insulated from the shocks, but the next generation will pay for it,” Mr. Boulhol warned.

Meanwhile, in Germany, Chancellor Angela Merkel is promising to cut taxes after September elections. She’s getting plenty of flak for that idea, since Germany’s budget deficit is at its highest level since World War II.

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