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What waits at the end of the line for a nation that has borrowed and spent its way into a hole that it can no longer climb out? Not even after imposing extremely high income taxes on its most successful people?
France is about to find out. Bloomberg‘s Helene Fouquet and Mark Deen report:
The glory days of France’s welfare model may be behind it.
The country’s Socialist government led by Prime Minister Manuel Valls is chipping away at a system that dispenses 52 billion euros ($66 billion) annually just in family benefits, and is among the most generous in the world. A hemorrhaging public deficit and debt on track to reach about 100 percent of gross domestic product within two years have left the government with little choice but to attack what in France has been a way of life for almost a century.
In fact, France has not balanced its budget since 1974. And even with the cuts it is now being forced to consider to remain solvent, it won’t this year or the next either. Here’s CNBC’s brief description of what France’s Socialist government has put on the table:
The French government presented its 2015 budget on Wednesday, unveiling a 50 billion euro ($63 billion) savings program cutting deep into the country’s beloved welfare system.
The cuts unveiled on Monday by Marisol Touraine, minister of social affairs, health and women’s rights, include a decrease in childcare benefit for higher earners, less parental leave and a cut to the existing child birth benefit.
Previously, families could receive up to 923.08 euros ($1,164) at the birth of every child but will now receive up to 308 euros ($388.5) for the second and following children.
These particular cuts are aimed at an 84-year-old French Social Security program that has helped France sustain one of the highest fertility rates in Europe by providing incentives to have children, which have been very successful in that France is one of the very few European nations with a fertility rate high enough to sustain its current population level. In a very real sense, the cumulative debt run up by all French politicians and bureaucrats over the last 40 years is now forcing them to directly steal the future from French children before they are even born.
Here’s how one spokesman from France’s Socialist government justified doing that:
“It’s not the end of a generous system,” government spokesman Stephane Le Foll said yesterday. “It’s the end of spending that wasn’t useful — and that’s in order to preserve a system that is a costly one.”
To translate: “The needs of the state in France outweighs the needs of the French people.” And apparently, even the state’s need for French people, who are clearly getting the message.
Like death row, being on debt row is not a pleasant place to be.