THE TRIBUNE SUNDAY – The markets are panicking… Do you think this will last?
JEAN PISANI-FERRY – We are experiencing considerable political upheaval, and the turbulence experienced by the markets will not calm down immediately. Obviously, it is not the markets that make politics and dictate our choices. But they impose a constraint of consistency. If the markets judge that our policy – whatever it is – says one thing and does the opposite, they will not follow. And we could know what the United Kingdom experienced with Liz Truss, the Prime Minister who could not implement her program. Even if, unlike the English, we are not at risk of a currency crisis because the euro protects us.
Are we at risk of a debt crisis?
The most synthetic indicator is the spread [l’écart de taux d’emprunt] between Germany and France. It is currently at 80 basis points, compared to 50 before the elections. It’s not dramatic, but the signal is there. France is very in debt today. And therefore very subject to market appreciation. When a power makes a series of promises that investors do not believe, the markets no longer follow. And this can lead to a debt crisis like ten years ago in Greece, Italy, Portugal, which, to finance themselves, then had no other choice than to turn to the IMF and the European funds. We are not there yet, because we need spreads of the order of several hundred points… but we also know that things can happen very quickly. The second risk is also the absence of a majority which prevents any policy. This scenario can also be worrying.
But Europe wouldn’t protect us?
Two years ago, the European Central Bank adopted a new instrument to respond in the event that the spread widens too much. But in the regulation, it is specified that this mechanism, which aims to block the contagion of crises, cannot be activated if these deviations are induced by fundamentals. It is not designed to counter the effects of irresponsible policy.
We are starting to have elements of the program… what do they inspire you?
I am shocked by the fact that neither the RN nor the New Popular Front start from a diagnosis of the problems of our economy. None are interested in productivity which is stagnating in France nor in the disconnect with the United States, which has accelerated in recent years. They reason as if the only issue was the distribution of income. Furthermore, these two programs rely on protectionism: French for the RN, European for the Popular Front. Certainly, we are no longer in an all-out liberalism situation, but it does not seem to me that putting barriers everywhere will help our economy. Thinking about more regulated competition is the right path.
What do you think of the program of the New Popular Front?
Indexation of salaries to inflation, minimum wage of 1,600 euros net, repeal of the pension reform, etc. The government left is far away. Just the 10% revaluation of the civil servants index means 20 billion euros to be found. On the revenue side, tax increases are planned but to the tune of 50 billion euros, while spending is expected to increase much more.
And on the National Rally side?
We still have few elements. We can base ourselves on the 2022 program,
and some statements. But a 5.5% VAT on energy products and gasoline would cost between 12 billion euros (according to the RN’s calculation) and 24 billion euros (according to Bruno Le Maire’s calculation). With the exemption from contributions on salary increases, this summer we would be close to 30 billion euros in additional spending, or 1 point of GDP. Without forgetting the nationalization of highways, measures aimed at families, etc. Faced with these expenses, the RN does not anticipate any money coming in.
Does France have the means to implement this type of program?
No, France does not have the means to implement either of these programs. And we are already sending a signal to the world that the country is in disarray. Emmanuel Macron failed to create a consensus around a balanced policy. On the contrary, it has divided and strengthened the extremes. This is coming back to him today in a boomerang, since these oppositions are making outrageous proposals. We could always discuss certain elements of his economic policy, which I often did, but the backbone – improving attractiveness, prioritizing education, controlling public spending, etc. – benefited from the consensus of economists. Emmanuel Macron lost his compass, which was to emerge from a largely artificial confrontation between the right and the left to rebuild a consensus, in terms of values, reforms and balance. We can only regret it.
