Far be it for me to criticize France. But....
The leaders of the G20, an organization representing some of the largest economies in the developed and developing world, are meeting on April 2. Not surprisingly, those leaders are trying to hash out an agreement about how to move forward in dealing with the economic crisis. France has taken the lead, among some European nations, in opposing US efforts to push for larger worldwide stimulus packages.
The US wants the G20 countries to commit to spending 2% of their GDP on stimulus packages meant to boost demand and kick-start the economy worldwide. France's Finance Minister is arguing that no more stimulus is necessary, and in any case, he says that the US was the last country to pass a stimulus package, so it's facing a bigger crisis than the rest of the world, so.... well, it's not totally clear what the French Finance Minister is arguing. But it sounds like he's saying that:
1. The US deserves whatever economic pain it's suffering;
2. The French, European and world economies are somehow insulated from a worsening American economy, so to hell with the Americans; and
3. That the economic crisis is graver in America than in Europe.
Let me quote the AP story first, then I'll walk you through a Brookings analysis that sheds some very interesting light on just what some Europeans, notably France, have really done to address the economic crisis (hint: not much).
From AP:
Japan joined the U.S. push for more government spending to fight the economic crisis on Friday but G20 unity looked seriously compromised after Paris accused Washington of disregarding the urgent need for tough market regulation.
"The United States is insisting on the need for a strong, rapid and coordinated stimulus. Why? Because they were the last ones to put in place their plan and they are facing a bigger crisis," France's finance minister, Christine Lagarde, said.
"For most of the countries in continental Europe, the urgency is to develop the rules, highlight discipline and sanctions through a new architecture of the financial system," she said in an interview published by Les Echos newspaper.
So I decided to take a look at what France, and the rest of the European countries, have already done with their stimulus plans, since supposedly they have the moral high ground when it comes to stimulus plans.
And while some European countries, like Germany, have passed significant stimulus packages, others, like France, have passed some of the smallest stimulus packages, as a percentage of national GDP, of any G20 nation.
From Brookings:
Almost all countries in the G-20 have announced fiscal stimulus measures.[2]
The total amount of stimulus in the G-20 amounts to about $692 billion for 2009, which is about 1.4 percent of their combined GDP and a little over 1.1 percent of global GDP. This is a significant amount of stimulus, but appears to fall short of what is needed to tackle a crisis of the proportion we are currently in. The IMF, for instance, has called for stimulus equal to 2 percent of global GDP.[3]
Three countries—the U.S., China and Japan—account for about $424 billion of the overall stimulus in 2009, with their shares in the overall global stimulus amounting to 39 percent (U.S.), 13 percent (China) and 10 percent (Japan). Measures for 2009 in the U.S. stimulus package amount to 1.9 percent of its 2008 GDP and the corresponding numbers for China and Japan are 2.1 percent and 1.4 percent, respectively. For the remaining G-20 economies, the total fiscal stimulus amounts to 1.0 percent of their overall GDP.
In 2010, the U.S. accounts for over 60 percent of planned stimulus. China and Germany are the next largest contributors with China contributing 15 percent of G-20 stimulus and Germany contributing 11 percent. Measures for 2010 in the U.S. stimulus package amount to 2.9 percent of 2008 GDP, China’s 2.3 percent, and Germany’s 2.0 percent.
In summary, while almost all countries have signed on to the fiscal stimulus program, the size of the stimulus varies substantially across countries, with some of the stimulus packages looking downright meek (e.g., France, which has proposed measures amounting to only 0.7 percent of GDP in 2009).
What disturbs me is that the French are trying to take the moral high ground on the stimulus when they have one of the most paltry stimulus packages around. Second, it's incredibly dangerous to adopt an attitude that somehow the economic crisis isn't global. Chris has told me a lot in the past about how Europeans were under this deluded notion that the banking and housing crises were "an American problem." Yeah, not so much. (At least our laid off workers aren't
taking hostages.)
to imply that what happens in America won't affect what happens in France, seems economically naive. We are all in this together, quite literally - we have a global economy, no one is insulated from what happens in another major trading partner. And finally, the idea that somehow we're beyond the worst of the crisis, and now can start focusing on how to stop it from happening again is, well, a bit premature. I'm all for focusing on how to stop this from happening again, but if I'm drowning I'm more worried about whether you throw me a life preserver now than whether you run off to requisition more life preservers for the future. The French Finance Minister's attitude seems unnecessarily confrontational, autarkic, and even a bit dangerous.
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