FRENCH PUBLIC FINANCE

New Zealand Herald, Volume LXXV, Issue 22956, 7 February 1938, Page 8

FRENCH PUBLIC FINANCE

In spite of M. Bonnet's efforts to restore French public finances after the failure of M. Blum's spending policy, the deficit in last year's Budget is announced at £52,000,000, or £22,000,000 higher than the estimate. The adverse result will not bring comfort to a nation financially distrait or inspire confidence in the soundness of the current Budget. This is estimated to balance at £370,000,000, an increase of nearly £100,000,000 since the advent to office of the Popular Front. Once begun, the rake's progress is hard to halt. Apart from doubts whether the new Budget has really been balanced, there is the fact that France consigns several large but inconvenient accounts to an extraordinary Budget, which takes care of rearmament, public works, municipalities, railways and colonies. The deficits under these heads amount to £170,000,000, all to be met by borrowing. Chronic shortages of this kind have denuded the money market and undermined French credit. Authorities are agreed that the only way out lies in increased production and industrial activity. Unfortunately production still lags, being at least 25 per cent below the 1929 output, whereas in Britain —without the "benefit" of a Socialist new deal—it is 25 per cent higher than in 1929. Here is the real crux of the French budgetary problem. If production increased, the yield of revenues would rise automatically with it, and the chronic deficits evaporate. The main obstacle to the starting of this beneficial trend is political, uncertainty killing confidence, and industrial, the 40-hour week and the sullen mood of the workers barring that growth of output and therefore of real wealth on which financial stability must always be based.