COMMENT: When in France | Planet Scotland

George Kerevan. Picture: TSPL
George Kerevan. Picture: TSPL
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I’M WRITING from Paris, where (as usual) the workers on the urban rail network are on a go-slow. This means I will have to set off extra early if I’m to make my plane home. The upside to France’s Kamikaze industrial relations is that I had a tranquil arrival in the country, because Air France pilots were on strike. Charles de Gaulle airport was empty.

However, personal irritations aside, I am not one of those who write off the French economy as a busted flush. Drive across central France and you are surrounded by vast fleets of giant trucks hauling freight and boundless fields being attended by colossal agricultural robots. What France loses from its firecracker industrial relations it more than gains through productivity levels that outstrip those of the UK. The trick is to invest in 
industry and infrastructure, as do the French. UK investment remains 

While I’ve been on this side of the Channel, Manuel Valls, France’s Socialist prime minister, was in London for talks with David Cameron. To prove his commitment to economic reforms, Valls promised that French shops would open on Sundays. This was duly contradicted over here by the Mayor of Paris, who knows better than to get on the wrong side of French shopkeepers.

Valls has an even bigger problem with the European Commission. France must present its domestic budget to the commission next week, for approval. This proposes a deficit of 4.3 per cent for next year – far above the official 3 per cent EU ceiling. If the commission fails to discipline France, can it impose austerity on Greece and Portugal?

My bet is that the French will stand pat and get away with it. For this week the earth started shifting under both the commission and its taskmasters in Berlin.

The real problem child of the European economy is no longer France but Germany.

On Thursday, markets were shaken by news that German exports plummeted in August. By championing austerity to the point of deflation across the eurozone, Berlin has destroyed its own export markets. Even Wall Street caught a chill after the depressing German numbers.

As a result, this week’s IMF summit in Washington signalled a shift in mood towards a looser fiscal stance. Of course, the IMF is headed by Christine Lagarde, who is as French as they come. Cannily, she left the running to her Chinese deputy, Min Zhu. He came straight to the point: “There has been a big drop in aggregate demand. Someone has to fill that gap.”

Zhu’s comments were echoed by ECB boss Mario Draghi: “For governments that have fiscal space it makes sense to use it. You decide to which countries this sentence applies.” He meant Germany.

Swinney remains, 
as ever, cautious

BACK on Planet Scotland, SNP finance secretary John Swinney this week presented his draft Budget for next financial year.

The big innovation is that the Scottish Government has stamp duty under its wing – a down payment on greater income tax powers which arrive in 2016.

Despite having access to more revenue levers, ever cautious Swinney has opted for a neutral Budget – though his (renamed) house purchase tax is skewed towards more expensive properties.

Memo: Scotland’s political parties can’t go on putting off the evil day when they have to decide if they favour spending or austerity.