Friday, 4 May 2012

The Eurozone Crisis and the French Election

As France goes to the polls this weekend, and the European Central Bank meet today to assess the state of the Eurozone, it is worth reminding ourselves what is at stake: our country is in difficulties, with 8% unemployment, albeit this figure is coming down, and we are on a slow journey back from the possible bankruptcy we were heading for. Noone likes the medicine but in the long term it will make us better. Anyone doubting the present course need only look to Europe and study the unemployment and debt situations in the Eurozone.
An analysis of unemployment shows that total unemployment rates in March 2012 were as follows:
- Spain: 24%
- Greece: 21%
- Portugal 15%
- France 10%

It gets more frightening when you look at youth unemployment:
In Spain and Greece this is 50%+
We should take pride in the fact that our apprentice figures have doubled and that slowly the jobs are coming in the private sector to fill the public sector squeeze. Manufacturing in the UK is holding up well, and locally in Northumberland there are signs of well built, locally wanted, mixed use housebuilding projects at Stannington, for example, that will make a huge difference.  

Into this context I put the French Election: Hollande, the French Socialist Candidate, looks like winning, notwithstanding a typically combative performance from Sarkozy in the only French TV Debate on Wednesday night. The key issue is how do you get out of a debt crisis. Many will recognise Sarkozy's attack on Hollande for not being serious about the task of cutting the deficit.
"If you want to control your destiny, the first task is to bring down the debt," he said.

This is also the crucial debate that frames Britain. When you are in debt does the state borrow significantly more to fund its way out of a debt crisis?
I believe that we need to live within our means. That means making tough decisions. But I do see signs that the medecine is working. In the House of Commons there is a simple opposition by the Labour party to every single effort the Coalition has made to cut the deficit. Not one time have they agreed to cut the bills paid by UK PLC.

In France, Hollande clearly wants and intends to borrow much more, at high interest rates, and try to spend his way out of a debt crisis. He may win the election. The issue will be whether his economic approach works. As a fiscal Conservative I think he is wrong. The issue is whether by his actions he brings down the Eurozone as their fragile debt agreements spiral out of control. That would affect us in Britian dramatically.