Like Baldrick, French president Nicolas Sarkozy has a cunning plan. He's going to give €1000 to anyone buying a new car (assuming their old one is more than 10 years old, and they opt for an environmentally friendly model).
First of all, it strikes me as barmy for a government to borrow money, ramping up its budget deficit in the process, and then give it to people to spend on cars. What this really amounts to is future taxpayers subsidizing current taxpayers’ new cars – and it’s hard to see how any rational person would regard that as a good thing. Indeed, even Patrick Devedjian, the general secretary of Sarkozy's own party, the UMP, is against the idea.
It’s not going to do anything to boost the economy either – it will just encourage money to be invested in unproductive sectors. It’s true that car manufacturers are suffering, and maybe this could help them temporarily – but only at the expense of other areas of the economy. In the long run, the auto companies would be far better off restructuring than relying on government subsidies anyway. It's instructive to note that Sarkozy's idea is hardly new: they've already tried it three times, in 1994-5, 1995-6, and in 2007. And if it didn't work then, why should it work now?
Sarkozy could actually make a far greater difference to French industry if he got round to tackling the high taxes and restrictive labour laws that make it so difficult for French companies to compete in global markets. He did win the presidency promising a rupture with the past, after all.
