Thursday, May 17, 2007

Sarkozy vows to reverse economic decline

Mr. Nicolas Sarkozy, a conservative and former Interior minister known for his divisive rhetoric has won the French presidency in a tight race. He has pledged to remake France by a new style of leadership.

He has promised among other things, reducing unemployment, cutting taxes, keeping trains running during strikes, and moving away from an antiquated social welfare system. He wants to shrink the government bureaucracy and create new businesses opportunities.

An article in the Guardian draws a comparison between France and Germany. Both France and Germany have suffered economic stagnation and high unemployment.

In Germany, the conservative leader Angela Merkel, who promised sweeping reforms, has managed to control wage growth. This has helped to gain international competitiveness for German exports.

France is mired in a system of labour laws that work on fixed working hours, guaranteed benefits or lifetime employment. As a result productivity is down and French exporters have lost out in some of the international markets.

The British Guardian refers to a debate between "Anglo-Saxon" versus "European social model."

Anglo-Saxon economy or Anglo-Saxon capitalism (so called because it is largely practiced in English-speaking countries such as the United Kingdom, the Republic of Ireland, the United States, Canada, New Zealand and Australia) is a capitalist macroeconomic model in which levels of regulation and taxes are low, and government provides relatively fewer services.

In addition, Anglo-Saxon economies generally are more 'liberal' and free-market oriented than other capitalist economies in the world.

Countries in mainland Europe (such as France, Italy and Germany) possess a macroeconomic model called continental capitalism (also called Rhenan capitalism).

The debate amongst economists as to which economic model is better, circles around perspectives involving poverty, job insecurity, social services, and inequality.

Generally speaking, more liberal economies produce greater overall prosperity, while the continental models have lower growth, and a lower average standard of living, but lesser poverty at the lowest margins.

France has one of the world's largest economies and is a member of G8, the world's major industrialised democracies.

Mr Sarkozy is a an efficient administrator and the French will look up to him to bring them out of the economic quagmire.

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