Previous French socialist leaders were wedded to Keynesianism. But Mr Hollande is the first French socialist president to advocate a supply side approach to growth.
So says Philippe Aghion in today’s FT. The piece is a nice diplomatic effort to appease the Germans. However, it is only that. The article continues on the subject of economic growth:
This growth package should have a few distinct components.
The EU should mobilise its structural funds to finance reforms in labour markets, product markets and higher education.
The EU must also do more on what is typically called industrial policy. One idea would be to use the EU budget as collateral for the issuance of so-called “project bonds” that would co-finance industrial projects with the European Investment Bank. Information technology and clean energy are obvious areas for such investments. Another idea that Mr Hollande will pursue is to allow for mutualised debt (eurozone bonds) aimed at financing infrastructure projects.
It seems to me that it is the EU that is supposed to do the Keynesian dirty work (“deficit spending”), while national leaders can shine with their balanced national budgets. If you ever thought that economics has nothing to do with politics, think again. And if you ever thought that balance sheets were not important in economics – well, get out of here!