French Unions Promise "War" in September

Posted: Aug 14, 2012 12:01 AM

As France slides deeper into recession, Public confidence in Hollande slides.

  • 54% are unhappy with president François Hollande's overall performance.
  • Only 33% trust government to cut debt
  • Only 40% think Hollande can find a solution to the eurozone crisis.

However, people are happy with free money. They approve Hollande's reducing the retirement age to 60, from 62, for some workers.

Lowering retirement age may make the affected workers happy, but the policy is economic folly in the face of increasing lifespans.

Moreover, those poll numbers are 100% guaranteed to get worse as Hollande is doing all the wrong things economically such as raising income taxes and supporting financial transaction taxes. Hollande's job proposals are even worse.

War over Peugeot

The Financial Times also notes France’s powerful CGT union has promised “war” in September over the closure of Peugeot’s carmaking plant at Aulnay near Paris.

Peugeot fired 8,000 workers and that has both the unions and Hollande howling. For more details, please see Car Maker Peugeot to Cut 8,000 Jobs, Close Plant; Shape of Things to Come.

The union "war" will further pressure Hollande to follow through with his Economically Insane Proposal: "Make Layoffs So Expensive For Companies That It's Not Worth It"

This is how I described the proposal in the preceding link:

Four Things, All of Them Bad

  1. Mass layoffs will occur before the law passes.
  2. Companies will move any jobs they can overseas.
  3. Ongoing, if it's difficult to fire people, companies will not hire them in the first place.
  4. Corporate profits will collapse along with the stock market should the need to fire people arise.

The proposal to force companies to sell plants rather than fire workers as outlined by Industry Minister Arnaud Montebourg and Labour Minister Michel Sapin is nothing short of economic insanity.

Government Spending Over Half of French GDP

In Quick Facts on France, Heritage says "Government spending has increased to a level equivalent to 55 percent of total domestic output. The deficit remains more than 6 percent of GDP, pushing public debt up to more than 80 percent of GDP."

Unemployment will Rise, GDP will Sink

In a recent panel discussion in Spain, Paul Krugman said he would start to worry when government spending is over 50% of GDP. France is already there.

As Hollande steers France further into the gutter, French unemployment (already over 10%) is bound to rise and GDP will sink.

Krugman's cure? More government spending of course.

Gary Shilling: US in Recession Now or Within 3 Months, Deleveraging Will Take 5-7 More Years

In a Daily Ticker Interview with Henry Blodget, economist Gary Shilling makes the case the US is already in recession.

"We've had three consecutive months of declines in retail sales," says Shilling, president of A. Shilling & Co., an economic research and forecasting firm. "That's happened 29 times since they started collecting the data in 1947, and in 27 of the 29 we were either in a recession or within three months of it."

Shilling expects this recession will last about a year and shave about 3.5% from growth from peak to trough.

This time is different, says Shilling "because a lot of things that normally go down in a recession are already there, like housing." And policies that normally help revive the economy are absent. The Fed can't cut interest rates because they're already near zero and the housing market won't be a catalyst for growth, Shilling says.

Before the last presidential election Shilling said that whoever got elected then wouldn't get re-elected because the economy would still be weak with high unemployment.

Now Shilling says he'd like to see one party in control in Washington because it increases the odds of cuts for entitlements and could help "restore confidence in Washington." But even then he says it will take five to seven years to complete the deleveraging that's already underway before the economy recovers.

Case for Recession

On June 21, I made the case 12 Reasons US Recession Has Arrived (Or Will Shortly)

On July 11, I wrote Case for US and Global Recession Right Here, Right Now; Recognizing the Limits of Madness; Permabears?

More QE is Pointless

While everyone is looking for another round of QE, on August 1, I explained Another Round of QE is Pointless.

Would Another Round of QE Help?

Everyone is looking for the Fed to do something.

I have to ask what good could it possibly do? Yield on the 10-year treasury is about 1.5%. Would it make any difference to businesses if it was 1.25% or even 1%?

I suggest additional monetary stimulus would not do anything to spur job creation and it would continue to punish those on fixed incomes.

An additional round of QE could ignite a further rally in equities (already in bubble land). However, one of these QE moves by the Fed will blow sky high, and with equities priced beyond perfection, the next round of QE may be the one.

Timing the Recession

Shilling thinks the recession started in the second quarter. Obviously, I agree.

It will be interesting to see when and where the NBER places it.

Mike "Mish" Shedlock