France

As I sat down to write, French Prime Minister Michele Barnier was making last minute adjustments to his budget before presenting it to the National Assembly.

So, there may be a few unintentional omissions from this piece, but not too many because the problems of the French economy have been widely circulated in advance of the Barnier budget.

On Friday morning Barnier was widely expected to introduce an austerity budget of cuts and higher taxes totalling $66 billion – or two percent of the French GDP. Two-thirds will come in cuts in government spending and one third in tax increases.

The savings will come from a six-month delayed pension increase and $20 billion in cuts to government departments. The newly-appointed Barnier also wants to cut local government subsidies for businesses. To raise money, Barnier plans to introduce a temporary super tax on firms with more than a $1.1 billion turnover and households with earnings over $547,000.

The super tax is likely to have no problem in the French legislature. There is very little sympathy in France – or most everywhere else – for the rich. Pensioners are another problem. National Rally leader Marine Le Pen has already accused the government of “stealing from the elderly.” As for government cuts, the devil is in the detail and those details will only become clear in the coming weeks of debate.

It is clear, however, that something must be done to deal with the government deficit which is expected to exceed six percent of GDP in 2024.

President Emmanuel Macron had a reputation as a good money manager. And back in January 2020 he appeared to have the economy under control. Then the pandemic struck. Macron pledged to “protect” the French people “whatever it costs.” Government spending leapt to 59 percent of GDP – more than Germany or Spain or any other OECD country.

As the pandemic eased, Russia invaded Ukraine and the price of oil and grain rapidly rose along with almost every inflation marker. Macron’s economic plans went out the window.

But the parlous state of the French economy is not Barnier’s only problem. He is prime minister of a minority government with France’s left and right wing parties broadly united in their opposition. But not completely, Le Pen’s RN favours cuts in government but not cuts in pension payments.  The left joins them on behalf of pensioners but also opposes any cuts in government spending.

Barnier’s hope is to gain broad support from the Gaullist parties and then play off the left and right over specific aspects of France’s finances.

The budget has to be agreed by December. If Barnier fails to win the support of a majority of the National Assembly then he has the option of using emergency measures to push it through. But that is highly unpopular and could easily lead to the collapse of his government.

United States

Trump may have broken the law – again. This time the law in question is known as the Logan Act.

The Logan Act was passed in 1799 shortly after the creation of the United States. It makes it illegal for private individuals to conduct diplomacy or negotiations with foreign governments without authorisation from the federal government. Breaching it can cost a fine and three years in prison

The law makes sense. The Secretary of State – or any of his officials – don’t want their efforts being contradicted or undermined by an individual negotiating with a different agenda.

According to the latest book by investigative journalist Bob Woodward, Donald Trump spoke with Russian president Vladimir Putin at least seven times since leaving the White House. Of course, they may have just been exchanging recipes or discussing when to send Putin the latest health care products. That, however, seems unlikely given wars in Ukraine and the Middle East.