France has a new Prime Minister, Mr. Manuel Valls. He spoke before France’s Parliament and announced that he will work to make their economy more competitive by cutting taxes and federal spending. He said those spending cuts will not amount to austerity, but they will slow the rate of growth in federal spending and hopefully trim the budget deficit to 3.0% of the GDP by the end of 2015 (it is currently at 4.3%). Doing so will keep France within EU guidelines.
Mr. Valls is not a big fan of the EU and bristles at being told what to do by Brussels, but he seems to essentially recognize that the higher taxes and increased government spending brought on by his predecessor are not working, and a dramatic shift is necessary. This recognition may be a politically driven shift in thinking in Pres. Holland’s administration as the conservatives made serious inroads against the socialists in municipal elections. It would seem the electorate is catching on to the reality that pushing higher taxes on businesses and individuals does not make life better in the aggregate. Keep going, Mr. Valls. You are on the right track.
Valls’ statements bode well for France, and by extension bode well for our forecast for a better economic environment in the latter half of 2015 for the European Union.