Herb Prooy: Bad plan

Herb Prooy thinks Hollande’s growth paragraph is a mistake for Holland.

Last Sunday, illusion won over reality in Greece and France. As if there is an alternative to the severe cutbacks needed to avoid the collapse of local economies and, in their wake, the euro. A scenario is emerging which promises to deal a devastating blow to the prosperity of large parts of Europe.
Growth paragraph
The Greeks are on a collision course and it is doubtful whether they will want to comply with the demands of the IMF and Europe. The new French president François Hollande wisely holds to the budget deficit of 3% but wants to get there by implementing fewer cutbacks and stimulating economic growth. It would mean no civil servants would have to be fired (in France 55% of gdp is spent on the public sector!) and the pension age, raised to 62 under Sarkozy, can go back to 60.
PvdA leader Diederik Samsom also believes this is the way forward and supports Hollande’s plan to add a growth paragraph to the European budget pact.
Inefficient and prohibitively expensive
Eureka! It’s a miracle other European government leaders haven’t thought of this. Or have they? In 2007, at the start of the financial crisis, not only were the banks bailed out with taxpayers’ money but the economy was stimulated as well. The expense landed us with huge budget deficits and meanwhile the next crisis is looming on the horizon.
Government-led stimulation of the economy is largely inefficient and prohibitively expensive.
The growth we need so much will have to come from the real economy, from actual labour and production. From companies or, more specifically, from entrepreneurs.
Samsom and Hollande’s plan for growth is flawed because they can only make good on their promise to the electorate if entrepreneurs dare to invest and refloat the economy at their own expense.
But why would they when labour market reform is not forthcoming and stability and confidence in the market and the euro are far from making a comeback?
This asks for the kind of measures that neither Hollande or Samsom would win votes with.
Herb Prooy is an entrepreneur in the filed of ‘software as a service’

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