After the "summer holidays" closure, the italian restaurant where we go from time to time in my neighbourhood opened again ... with prices 30-50% higher than before the summer !
Pasta which used to cost 11 - 12€ now costs 16€. Typical pizzas which were about 13-15€ are now around 18€. A glass of "Primitivo di Manduria" red wine is now 9€ ...
I like aubergines so I ordered a "N'duja, melanzane grigliate e straciatella" pizza
Yes this is Luxembourg, not France. And of course eating out is what is called "discretionary spending". As our income hasn't increased at all, we'll simply eat out less often ... which for this particular restaurant might not matter much because they are always fully booked .. but a serious shock to "discretionary spending" may translate in significantly less economic activity overall ... at a moment when the governments are highly indebted and have thus less margin to cushion the loss of income of the most vulnerable.
If the ECB raises rates further to quench inflation, it won't be long before Italy, France and many other EU countries will begin feeling the pain of servicing debts in excess of 100% of GDP ... Yes, outstanding bonds are fixed coupon but as the shorter durations mature they'll need to be replaced by new borrowing at (much) higher rates.
So what's to be done? To get out of the funk France needs more economic activity and more efficient capital allocation. As public actors are structurally worse at allocating capital than private actors, the logical response would be for the state to lower taxes, suspend the more stifling regulations and scale down its level of intervention in economy.
Which is something the British Tories find natural to do and are in a position to do, with a population that remembers what "bitter medicine" tastes like from Thatcher's time.
But the French only have one answer to any economic challenge, and that is "more State!" No French president or government has ever managed to decrease significantly the level of state intervention in the economy and those who did manage for a limited period of time, and to a limited extent, were (paradoxically), the Socialists ...
An extra challenge is the very corporatist structure of the French society with very little appetite for doing "what's right for the country " - as each "guild" fights for itself (the railway workers, the teachers, the farmers, the lorry drivers, etc) and when asked "ok but where should the extra money come from?" - they all invariably respond "soak the rich!" ... of which, of course, France has less and less because when one has money, relocating to Belgium or Switzerland to protect your wealth is not that much of an issue ...
I expect the economic situation in France to continue to deteriorate and am saddened by the politicians' lack of courage... Granted, selling self-reliance to the French is not easy, but I can't see France mending until a French "Margaret Thatcher" emerges to put the house in order.
Yay! 🤗
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