Courtesy of Mish.
It is amusing reading day in and day out the Keynesian cure for what ails Europe, especially France.
Consider France. Public spending amounts to 57% of French GDP, yet Keynesians want still more. The sad irony is that 100% would not be enough. In fact, it would make matters worse.
France suffers from too much government spending and too much government interference everywhere one looks.
The Problem
On Sunday, in Eurozone Currency Dispute Intensifies: France Wants More ECB Action to Correct Overvalued Euro, Germany Doesn’t I summed up the problem.
Inflation Won’t Cure France
Contrary to popular belief, inflation will not spur consumer spending. Nor will inflation create any jobs or cause wage inflation.
Nonetheless, France demands the ECB wizards fix something that cannot be fixed by monetary policy.
Problem number one is the eurozone itself. The euro is fatally flawed. In addition, France’s problem is that it is not competitive with Germany and arguably even Spain, not that the Euro is too high.
France desperately needs structural reforms.
- It is nearly impossible to fire someone in France, so businesses are reluctant to hire.
- Government and union rules on everything are sheer madness.
- France seeks to save local bookstores by taxing online retailers and elimination of free shipping.
- Agricultural subsidies to save inefficient French farms (at great expense to the rest of Europe) are inane.
- Pension rules need fixes, and the retirement age needs to increase.
- The “French way of life” is incompatible with rising productivity, especially on a relative basis, so France is increasingly left behind.
How is QE supposed to fix all that? It can’t and it won’t, but it increasingly looks as if the ECB may give it a try.
The Solution
…
