Sylvain Bersinger is chief economist at Asteres. He analyzed the different economic programs of the different parties for the legislative elections and published a series of summary notes.
franceinfo: The risk premium on government bonds has never been so high since the euro crisis in 2012. Is this excitement in the financial markets justified or is it disproportionate?
Sylvain Bersinger: I think this slight distrust you mention is not completely absurd. France’s creditors are turning away a little, it’s not a tsunami, but they are turning away a little from French government bonds, which is pushing up the rate. We see that there are programs that are not funded at all, so it is not surprising, in a context where there is already a lot of public debt and a high deficit.
The debt amounts to more than 3,000 billion euros, a new figure released this morning.
The closest example is Liz Truss in 2022 in Great Britain. She announced £45 billion in tax cuts, a bit like that, pulled out of the hat, and it created a bit of a panic at the time on the pound and on the British Treasury bond market. She was forced to backpedal and then resign. When you see the potential holes that could be made in the budget of programs that are currently leading in the polls, you think that it is not entirely surprising.
Economic issues are at the heart of the debate: pensions, purchasing power, salaries. Is this particularly the case in these elections?
We really have the impression that all the parties are placing the issue of purchasing power at the top of their programs. This is probably linked to the fact that we are emerging from an inflationary context that has been quite unprecedented for about forty years. Even if the inflation figures are rather encouraging, with 2.1% year-on-year, with high inflation, wages that have followed with a lag and losses in purchasing power, it is not entirely surprising that the economic issue is at the top of the programs.
Are there any similarities among the programs?
If we look at the program of the New Popular Front and the National Rally, there are differences, but there are many similarities. We have a vision of the economy that is rather a closed vision, hostile to globalization, with the idea that it is by protecting ourselves that we will be able to keep jobs at home, and therefore, in the long term, purchasing power. Which, in my opinion, is quite absurd.
“The goal of international trade is, above all, to import and buy what others do better and cheaper than oneself.”
Sylvain Bersinger, chief economistat franceinfo
The New Popular Front talks about price blocking, it does not talk about closure.
There is a renegotiation of a whole bunch of trade agreements, so there is still a vision of trade in this sense. There is also a very strong similarity, I find, on the idea that the economy must be stimulated by a whole bunch of spending: spending on public services, on pensions. If you bring the retirement age back to 60 or 62, it is an additional financial commitment for the State.
According to the New Popular Front, this is “demand driven” spending. The idea is to revive consumption with wage increases. You are extremely harsh on this point, you say that it is “vulgar Keynesianism”.
I took up the word of Paul Krugman, who is himself of the neo-Keynesian movement. To explain this term a little, Keynes’ idea is to revive the economy through demand, through consumption. But this is to be done when the economy suffers from a lack of consumption and demand. However, my analysis is that the French economy does not suffer from a lack of demand. The French economy suffers from a difficulty on the supply side, from a difficulty in producing more. This can be seen in the trade deficit, in the recruitment difficulties, in inflation that has fallen significantly, but which is still present. And Krugman’s term “vulgar Keynesianism” is the idea that it is an overinterpretation of Keynes, in which the economy must always be revived through demand.
“Keynes said that the economy should be stimulated by demand ‘when it suffers from a lack of demand’, which in my opinion is not the case today.”
You also say that these programs, like that of the National Rally, underestimate expenses and overestimate revenues. The New Popular Front highlighted the financing of its program. The revenues planned in their program, according to you, are overestimated, and in particular the new tax revenues, with taxes on super profits, new taxes for the super rich, etc.
First of all, what is very paradoxical is that they want to go back on the European stability pact. It is totally contradictory. But let’s start from the principle that the revenue and expenditure figures are correct. You don’t even come across a balance. And if we dig a little deeper into a whole bunch of figures, they really took the assumptions that suited them at all levels. And if we do a slightly more objective figure, we come across, roughly, a hole of about 50 billion.
For Renaissance, the party of the presidential majority, there is not much in their program. Moreover, your summary note is extremely short. It is still surprising when there is a debt of more than 3,000 billion. No additional savings, no additional revenue.
Yes, it is a rather hollow program, which puts forward a golden rule “anti-tax increases”, which commits to not increasing taxes. We still have some measures on purchasing power, which would cost the State, but not a lot. So it would probably increase the public deficit a little, perhaps up to 10 billion. But it is true that it is a program that lacks a little breath, which perhaps lacks a few bold reforms.
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