Shortly after his inauguration French President Francois Hollande became an integral part of the development of the European 120 billion euro financing package, a proportion of which was assigned to investment in infrastructure. Since coming to power in May, Hollande has been forceful in expressing his desire to redirect European concern from austerity to growth with the strategy of inspiring infrastructure and small company investment.
Hollande’s pledge to demolish France’s public deficit and debt and his pro-growth campaign were popular with anti-austerity voters, but whether or not he can deliver on his promises is coming into question.
Despite advocating a moderate stimulus plan to boost growth in Europe, Hollande is debating abandoning all but the most essential infrastructure investment projects in his own country. Hollande and his hard up government have asserted that they will be more scrupulous when considering whether the economic benefits of planned projects are worth the outlay. A drafted finance ministry document proclaimed ‘Only the most pertinent projects will be retained’ and the building of high speed rail lines may be one of the first projects to fall by the wayside.
This development comes after the National Audit Office stated that several of the largest projects planned were not conducive to reining in the deficit. Economists have also voiced fears that due to companies and consumers being overstretched the boost to jobs and spending that several of the intended infrastructure projects aim to produce will not occur.
At Coe-Rexecode think-tank one such economist stated that: ‘A stimulus plan focused on infrastructure projects that only makes the deficit worse bears medium-term risks that outweigh the weak boost to growth in the short-term. […] A real, economically pertinent stimulus plan is one that allows us to get back on track and restore our competitiveness, which has been the French economy’s weak spot’.
Additional pressure has been heaped on the French government as Labour Ministry data announced jobseeker levels have risen for a fourteenth consecutive month. The socialist government listed fighting unemployment as a top priority but the reports released yesterday show that in June almost 24,000 main-land residents registered as unemployed, pushing the total number of jobseekers perilously close to 3 million. With recession threatening and job creating projects being abandoned Hollande’s government may be powerless to stop the flood of layoffs. This rise of 7.8 per cent within a year means that 2012 is now the worst year for job seeker levels in the country for well over a decade.
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