Spot the difference

Buttonwood points out that Francois Hollande’s plan to eradicate France’s deficit by 2017 doesn’t on the surface look that different to the UK coalition’s latest budget plans to eradicate our deficit by 2017:

TAKE two countries. One has a government “inflexibly committed to austerity”, lacking a Plan B and dragging the economy down, according to its critics. The second country has a new President who has just declared that his victory is a rejection of austerity. The victory has been hailed as a new dawn for European politics.

The first country, the UK, is aiming to balance its budget by 2017. The second country, France, plans to balance its budget by, er, 2017. Funny old world.

In reality, there’s a bit more to it: the French are trying to cut their deficit from 5.3% of GDP last year, the UK from 8.7%. So we here are still looking at an extra 3.4% of GDP worth of tightening over the five-year period.

But this still touches on my earlier point: rather than being inflexibly committed to austerity, the UK in fact seems to already be in the process of switching to a Plan B as the global economy deteriorates vis-a-vis 2010 forecasts. It’s just that loosening fiscal policy in a modern welfare-state economy with automatic stabilisers doesn’t always require a conscious decision by the government.


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