04/17/2013 Letter of Edouard Carmignac
Monsieur le Président de la République Palais de l’Elysée 55, rue du Faubourg Saint-Honoré 75008 Paris
Paris, April 17th 2013
Monsieur le Président,
Barely nine months ago, I welcomed the news of your election and the historic opportunity this gave you to reform France in depth, with broad support from most levels of society.
I also allowed myself to warn you on the serious dangers associated with the initial projects announced by your government. As my advice went unheeded, I believe it is my duty to express my conviction that pursuing the current course will lead France to an economic, political and moral impasse.
Economic activity is declining at a much faster pace than the comforting forecasts issued by your administration would suggest. We estimate that GDP will drop by close to 1% this year which will neither help to stabilise unemployment nor cut the budget deficit. This cannot come as a surprise. Prime Minister J.-M. Ayrault made the unfortunate decision not to rein in the state’s extravagance but to attempt to reduce public deficit by increasing the tax burden on households and companies. Using public spending as a stabilising factor in periods of cyclical slowdown may be appropriate, and funding the additional expense by temporarily raising taxes on the highest earners is not unreasonable. However, when the economy is condemned by its lack of competitiveness to indefinite modest growth, and when public spending accounts for 57% of GDP – of which only 90% is covered by tax receipts, refusing to offer a credible cost-cutting programme for the public sector is suicidal.
The crisis of confidence caused by runaway public spending has consequences which will be difficult to curb. How can households be encouraged to spend in a context of both rising unemployment and taxes? How can entrepreneurs be enticed to invest in a domestic economy with such poor visibility while also being faced with confiscatory tax rates? The temptations of expatriation, not only for our top executives but also for our young graduates, create further barriers to a lasting recovery.
France’s bloated public sector is not your own doing. France is the only country in the developed world where employment in the public sector has been growing faster than in the private sector since 1987. Getting this situation under control is a moral imperative and a matter of national preservation, as efforts to improve competitiveness have to be shared by all and it is inconceivable that economic activity may recover without a credible programme of structural reforms aimed at ending austerity.
We need a bold and visionary government. The country has many assets it can draw upon, among which are its talented entrepreneurs who have, all too often, felt persecuted in recent months. Time is running out. European history is now in quick motion and the discredit that has fallen upon Italy’s politicians should provide food for thought.
With this hope in mind, I remain, yours faithfully,
Edouard Carmignac
