France is among EU’s biggest public spenders

The French government is the third biggest public spender in Europe, yet the quality of the health, pension and education services its paying for are significantly lower than other EU countries. A new government study explains why.

France is among EU's biggest public spenders
France is one of Europe's biggest spenders, but its not getting great services. Photo: Pascal Pavani/AFP

Government spending in France amounted to 54 percent of the country’s total wealth in 2012, which puts it well above the European average and ranks it third among the freest spenders on the continent, behind Denmark and Finland.

Observers might shrug and point to France’s excellent healthcare, retirement and social welfare system when explaining it. However, France's spending is not necessarily translating into better services.

In fact in some cases it is getting a lot less in return for its money than some of its neighbors, according to a study from France Strategie, which is linked to Prime Minister Manuel Valls’s office.

“According to several studies, there is room to improve efficiency in our healthcare system (lack of outpatient care) and our overconsumption of medicines,” the report said. “Health spending would also be more efficient if there was better coordination between actors.”

To start, France’s generous spending on education, retirement and healthcare explain why it is above the European expense average of 47 percent of Gross Domestic Product, as well the outlays of Germany (42 percent) and the United Kingdom (about 45 percent).

On the other hand Denmark and Finland shelled out 58 percent and 55 percent of their GDPs respectively, making them the top spenders in the EU in 2012. Unfortunately for France’s taxpayers looser spending hasn’t necessarily translated into equivalently better services.

Though France spent more than any other European Union nations on pensions, neighboring countries like Luxembourg, the Netherlands and Sweden were as good or better than France in terms of the adequacy of payments, the report said. Though the quality of its retirement fund was just a few points better than France, the Netherlands was spending nearly half what France was.

Up next, the French school system, particularly its secondary levels, suffered from a similar lack of bang for its euro. It was the third biggest spending, yet the quality of teaching its students were getting was in the bottom half of the EU’s core 15 nations.

France, which only beat Italy, Spain, Greece and Portugal, has suffered recently from a crisis within its national education system. Teacher suicides and battles over the school calendar have added to the anxieties of French parents and prompted calls for reform.

Finally France’s health system, which is among the best in Europe, also cost taxpayers more than in most EU countries. Sweden and Finland both had more effective systems, at a lower price than France, the table found.

It’s worth noting that France came in at number six in terms of quality behind countries like Denmark, the Netherlands and Luxembourg, which have significantly smaller populations.

Though the UK was not far behind France in cost (7.9 percent of GDP versus about 8.3 percent respectively), the Gallic care was considered nearly three times better.

If most of the areas seem as though they have been in the headlines lately, it’s because they have. The government has announced cuts or freezes in many of these areas and more are expected.

It’s part of President François Hollande “Responsibility pact” which aims to cut €50 billion from France’s expenses over the next three years, which would allow the country to reduce taxes on companies.

Those companies are then supposed to create some 500,000 jobs, which would hopefully mean more opportunities for the record 3.38 million unemployed people in France. The government has already warned, though, the coming cuts could hurt.

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The Euro celebrates its 20th anniversary

The euro on Saturday marked 20 years since people began to use the single European currency, overcoming initial doubts, price concerns and a debt crisis to spread across the region.

The Euro celebrates its 20th anniversary
The Euro is projected onto the walls of the European Central Bank in Brussels. Photo: Daniel Rolund/AFP

European Commission chief Ursula von der Leyen called the euro “a true symbol for the strength of Europe” while European Central Bank President Christine Lagarde described it as “a beacon of stability and solidity around the world”.

Euro banknotes and coins came into circulation in 12 countries on January 1, 2002, greeted by a mix of enthusiasm and scepticism from citizens who had to trade in their Deutsche marks, French francs, pesetas and liras.

The euro is now used by 340 million people in 19 nations, from Ireland to Germany to Slovakia. Bulgaria, Croatia and Romania are next in line to join the eurozone — though people are divided over the benefits of abandoning their national currencies.

European Council President Charles Michel argued it was necessary to leverage the euro to back up the EU’s goals of fighting climate change and leading on digital innovation. He added that it was “vital” work on a banking union and a capital markets
union be completed.

The idea of creating the euro first emerged in the 1970s as a way to deepen European integration, make trade simpler between member nations and give the continent a currency to compete with the mighty US dollar.

Officials credit the euro with helping Europe avoid economic catastrophe during the coronavirus pandemic.

“Clearly, Europe and the euro have become inseparable,” Lagarde wrote in a blog post. “For young Europeans… it must be almost impossible to imagine Europe without it.”

In the euro’s initial days, consumers were concerned it caused prices to rise as countries converted to the new currency. Though some products — such as coffee at cafes — slightly increased as businesses rounded up their conversions, official statistics have shown that the euro has brought more stable inflation.

Dearer goods have not increased in price, and even dropped in some cases. Nevertheless, the belief that the euro has made everything more expensive persists.

New look

The red, blue and orange banknotes were designed to look the same everywhere, with illustrations of generic Gothic, Romanesque and Renaissance architecture to ensure no country was represented over the others.

In December, the ECB said the bills were ready for a makeover, announcing a design and consultation process with help from the public. A decision is expected in 2024.

“After 20 years, it’s time to review the look of our banknotes to make them more relatable to Europeans of all ages and backgrounds,” Lagarde said.

Euro banknotes are “here to stay”, she said, although the ECB is also considering creating a digital euro in step with other central banks around the globe.

While the dollar still reigns supreme across the globe, the euro is now the world’s second most-used currency, accounting for 20 percent of global foreign exchange reserves compared to 60 percent for the US greenback.

Von der Leyen, in a video statement, said: “We are the biggest player in the world trade and nearly half of this trade takes place in euros.”

‘Valuable lessons’

The eurozone faced an existential threat a decade ago when it was rocked by a debt crisis that began in Greece and spread to other countries. Greece, Ireland, Portugal, Spain and Cyprus were saved through bailouts in return for austerity measures, and the euro stepped back from the brink.

Members of the Eurogroup of finance ministers said in a joint article they learned “valuable lessons” from that experience that enabled their euro-using nations to swiftly respond to fall-out from the coronavirus pandemic.

As the Covid crisis savaged economies, EU countries rolled out huge stimulus programmes while the ECB deployed a huge bond-buying scheme to keep borrowing costs low.

Yanis Varoufakis, now leader of the DiEM 25 party who resigned as Greek finance minister during the debt crisis, remains a sharp critic of the euro. Varoufakis told the Democracy in Europe Movement 25 website that the euro may seem to make sense in calm periods because borrowing costs are lower and there are no exchange rates.

But retaining a nation’s currency is like “automobile assurance,” he said, as people do not know its value until there is a road accident. In fact, he charged, the euro increases the risk of having an accident.