French president-elect François Hollande has launched a preemptive attack blaming outgoing president Nicolas Sarkozy for the huge budget deficit of France.

Given Hollande wants to tax millionaires 75%, I find it quite ironic that Hollande blames the problem on “hidden taxes” of Sarkozy.

Please consider Brussels raises alert over French deficit

Brussels has raised a red flag on France’s budget deficit next year, in a warning over a €24bn fiscal shortfall that threatens to develop into a confrontation with Paris over austerity.

François Hollande, the French Socialist president-elect who has warned against over-reliance on austerity, said he had “anticipated” the deterioration in public finances and blamed “hidden taxes” left behind by the outgoing president Nicolas Sarkozy.

European Commission forecasts unveiled on Friday suggest France is expected to meet its deficit target of 4.5 per cent of gross domestic product in 2012, but its shortfall next year will be 4.2 per cent – well short of the 3 per cent EU target. Closing the 1.2 per cent gap would require savings or new taxes amounting to about €24bn.

France was one of 13 countries in the 17-strong eurozone that Brussels said it expected to miss their deficit targets for 2013, with the total deficit for the single currency bloc slipping by 1 per cent of overall output.

Spain fell badly short, nursing an expected 6.3 per cent deficit next year – some 3.3 per cent wide of its target.

Olli Rehn, the EU commissioner responsible for economic affairs, said he was “waiting for the French authorities to decide which measures will be introduced for 2013”.

Mr Hollande, who campaigned for growth initiatives alongside austerity measures, will find it harder to hit the target if the EU growth forecasts for France prove correct. Brussels forecasts growth at 1.3 per cent next year, weaker than the 1.7 per cent expected by the incoming Hollande administration.

Tax-raising measures account for 40 per cent of Mr Hollande’s deficit-reduction programme, and 60 per cent spending cuts, but the Socialist president-elect has been vague about where the cuts will fall.

Hollande in Deep Trouble Already

Note that Hollande does not have the decency or the courage to name his budget cuts.

Moreover, I can guarantee cuts will be bigger and/or the tax hikes greater than he has announced because growth estimates in France are wildly optimistic.

Specifically, the idea that France is going to grow 1.7% next year is preposterous.

I am willing to bet France will not grow at all. If so, expect still more austerity measures or tax hikes, with protests spreading to France as they did in Greece, Spain, and Italy.

The result will be as happened in Greece. Voters will start backing any candidate willing to tell Brussels and the Troika to go to hell.

Marine Le Pen is one such candidate on the right. She is in favor of exiting the eurozone. Expect to see counterparts on the left willing to say the same thing as politics splinters in country after country.

Mike “Mish” Shedlock
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