Here is Ambrose-Evans Pritchard:
Company taxes will fall by €20bn a year equal to 1pc of GDP, to be phased in gradually by 2015 under a convoluted system of rebates.
Premier Jean-Marc Ayrault said it amounted to a 6pc cut in unit labour costs, enough to close the gap with eurozone rivals. “France is not condemned to a spiral of decline, but we need a national jolt to regain control of our destiny,” he said.
The mid-rate of VAT for restaurants and services will jump from 7pc to 10pc. The top rate will rise slightly to 20pc. Spending cuts will plug the revenue gap in order to meet the EU’s 3pc deficit target.
Critics call it the most humiliating U-turn in French politics since François Mitterrand abandoned his disastrous experiment of “Socialism in one country” under a D-Mark currency peg in 1983.
Mr Hollande came to office vowing lower VAT rates to protect the buying power of workers, and called business tax cuts a “gift to the rich”. He imposed €10bn of fresh taxes on firms just weeks ago in his 2013 budget, a move that set off a revolt by business leaders.
. . .
Pressure is mounting from all sides. The International Monetary Fund warned this week that France risked being left behind by Italy and Spain as they embrace root-and-branch reforms.
. . .
Jean-François Copé, the Gaulliste leader, said the Hollande package was “hyper-complex, bureaucratic, and wholly inadaquate”. Business leaders said it helps but comes too late reverse a collapse in profit margins as recession looms.
The tax reform aims to switch the burden from wealth creation to consumption, a trick used by Germany to carry out its “internal devaluation” within EMU. The policy was pioneered by Margaret Thatcher, a detail that France’s socialists prefer to keep quiet.
For Mr Hollande, it has been a painful wake-up from the utopian reverie of his first months in office. “Exercising power today is very hard. You don’t get any breaks, of any kind,” he confessed.
Yes, reality kinda sucks. On monetary issues a large share of the right is out of touch with reality. On fiscal issues it’s the left. But to their credit, they learn more quickly than those on the right.
PS. Can anyone find me average hourly nominal wages in Britain over the past 10 years or so. That’s the best test of whether tight money is the problem, or whether inflation is becoming a problem.