Translated Saturday 22 May 2010, by Henry Crapo and reviewed by Henry Crapo
The president of the Republic wants to change the constitution in order to inscribe in it the obligation of budgetary equilibrium, as opposed to social and public expenditures. This is his way of making unconstitutional any political alternative. It constitutes capitulation in the face of demands by Germany and by the financial markets.
Yesterday, at the Elysée palace, at the conclusion of the 2nd conference on the deficit, the president of the Republic announced that he counted on fomenting, soon, a veritable constitutional coup d’état. He actually declared that he wished to see “an operational constitutional reform that would oblige each newly elected government to make an agreement as to the trajectory of the deficit. Each government would at the same time commit themselves as to the date on which an equilibrium in public expenditures would be attained.” If Nicolas Sarkozy is able to obtain such a reform, this would mean that, no matter how the French people vote in 2012, even if he is beaten, he would be able to impose on the future head of state, and on the elected majority, the obligation to continue his policies of austerity. To impose an equilibrium in public expenditures, in view of the present debt and the weight of interest payments that it generates, means necessarily to impose cuts in expenditures, even if new fiscal revenues are tapped. There remains open the question as to whether the head of state can put together the 3/5 majority of the Assembly and of the Senate to vote for his reform.
The Freezing of Contributions
The attempted coup de force extends beyond the perimeter of the State. It aims to put under control also those institutions as essential as the Social Security system and the territorial entities. In these same closing remarks, Nicolas Sarkozy not only confirmed the freeze on State expenditures, but also rendered official the reduction in the rate of progression of expenditures for health programs, which dropped from 3% in 2010 to 2.9% in 2011 and 2.8% in 2012, as well as “a true moderation in local expenditures.”
As for those local expenditures, he gave his benediction to the “freeze in transfers of the State to local collectivities.” He explained in detail that “these transfers will be modulated with respect to criteria of good management, in order to encourage the local collectivities to reduce their expenditures in the same proportion as does the State.” Finally, he announced “an immediate moratorium on legally-imposed norms affecting local collectivities, excepting international norms whose application is obligatory.” This means that, in order to impose economies in expenditures, the collectivities will be able to bypass, for example, existing security requirements applicable to such and such equipment.
In order to justify this austerity plan, the head of State relies on the report edited by the current director general of the INSEE  and of his predecessor. In this text, Jean-Philippe Cotis and Paul Champsaur start with the a-priori assumption that the public debt is something essentially bad, a sort of canker sore that must be treated. While avoiding taking too blatant a stand in favor of a policy of austerity, they consider that, whatever may be the rate of increase in the French economy, the deficit will remain high, and will leave little margin for maneuver. They draw the following conclusion: “Merely to stabilize the debt by 2020 will require a substantial effort.”
Once past these expected stages in the argument, the report reaches some conclusions that are not without interest. It also confirms indirectly what we have stated, that the public finances suffer less from an excess of expenditures than from insufficient receipts. Thus, it notes that “in the period 2002-2008, efforts made to reduce expenditures translated into an improvement in the structural balance of the State by 1.3% of the gross national product,” but that this was canceled out “by the decrease in obligatory taxes” (-1.6% of GNP). The whole set of measures in support of capital and the big fortunes of the wealthy has in a way “cannibalized” the decrease in State expenditures. “This reasoning”, continue the authors of the report, “can well be extended to the whole of the public administration.”
The Best and the Worst
This demonizing of deficits and of the public debt is in fact tied to the imperatives of the European pact of stability, which aims at making sure the euro remains an attractive currency for finance. Nicolas Sarkozy confirms this. In his intervention, he justifies his austerity plan by invoking the necessity, in the face of the crisis, “to consolidate the pact of stability.” One of the strong demands of Germany is thus accepted. In fact, the deficits, like Aesop’s tongues , can be either the best or the worst of things: it depends upon whom they serve, and who pays for them.
 Institut national de la statistique et des études économiques, National Institute for Statistics and Economic Studies.