ABSTRACT
The starting point for the following considerations is my perception of a strong contradiction in the behaviour of the French government shortly after it came to office. In Amsterdam, on 16June 1997, the French Prime Minister Lionel Jospin signed the ‘stability pact’ which locks fiscal policies of the member countries in the future Monetary Union (MU) still more tightly into a corset of austerity than the provisions of the Treaty of Maastricht (TM) had done, e.g. by obliging member countries to pursue the objective of balanced budgets.1 This signature obviously further reduced the room for manoeuvre for an expansionary fiscal policy as a basic macroeconomic requirement for more employment. Two days later, on 19June, the same Lionel Jospin addressed the French national assembly and explained his government’s programme, focusing unequivocally on the fight against unemployment, announcing, among other measures a rise in the minimum wage, costly publicly financed jobs for young unemployed persons and a law reducing the legal working time to 35 hours per week without wage losses, and promising subsidies for rapidly complying firms. Although these measures will be partly financed through higher taxes on capital gains it seems clear that, for a transitory period, they would increase the public deficit. It follows that Jospin, although announcing his intention to keep the deficit under control, was also making it clear that this was not his main concern.
