Hollande Asks for Austerity, Tax Cuts to Fix France

The policy battle of the last six years has been over how governments should respond to the recession that swept most of the globe, the slow growth that followed, and high unemployment. One camp argued for immediate large increases in government spending financed by borrowing, followed early in the recovery by higher taxes on the rich. The other recommended decreased government spending paired with tax cuts and increased labor market flexibility. For the most part, the first camp has carried the day, with governments around the world first reaching record budget deficits and then passing tax increases on high earners. However, this week in a major sea change on the policy battlefield, President Hollande of France announced a conversion.