French Employment Minister Michel Sapin made it clear that his government’s tax-and-spend policies are just not working and admitted that France is bankrupt.
Just half a year since his party came to power, Michel Sapin told radio listeners: “There is a state but it is a totally bankrupt state.
“That is why we had to put a deficit reduction plan in place, and nothing should make us turn away from that objective.”
While the admission was unlikely to have been intentional, it highlighted huge concern at Socialist President Francois Hollande’s handling of the economy.
Since Francois Hollande came to power, unemployment and the cost of living have continued to spiral in France, while “anti-rich” measures have provoked entrepreneurs to leave the country.
Francois Hollande is currently trying to revive France’s economic fortunes by cutting spending by the equivalent of more than $80 billion.
The president has also pledged to increase taxes by $30 billion over the next five years.
Shrinking economies make it difficult for eurozone countries to get debt levels under control despite pushing through harsh spending cuts and reforms because shrinking output makes the value of a country’s debt as a proportion of the size of its economy worse.
Last week the IMF downgraded its growth forecast for the eurozone from 0.1% to a minus 0.2% contraction, warning that the eurozone “continues to pose a large downside risk to the global outlook”.
The Bank of France has already produced data showing that capital investment is leaving the country every day, along with the business people who helped to build it.
Among those who have moved their vast wealth out of France is Bernard Arnault, the country’s richest man.
Bernard Arnault, the 63-year-old head of luxury goods group LVMH, insists that he moved the cash and assets to Belgium for “family inheritance reasons”.
But others are convinced that, like numerous other tycoons and celebrities, he simply wants to avoid taxes including a 75% top rate on income being introduced by President Francois Hollande.
Bernard Arnault, who owns numerous homes around the world including one in London, applied for a Belgian passport soon after Francois Hollande’s Socialists won presidential and parliamentary elections last year.
Earlier this year, actor Gerard Depardieu became another high-profile Frenchman moving his assets abroad.
Gerard Depardieu obtained a Russian passport, bought a house in Belgium, and put his multi-million dollars Paris town house on the market.
There have even been reports that Nicolas Sarkozy, the last President of France, is preparing to move to London with his third wife, Carla Bruni, to set up an equity fund.
Prime Minister David Cameron has already said that Britain will “roll out the red carpet” to attract wealthy French people.
Pierre Moscovici, France’s finance minister, immediately tried to play down Michel Sapin’s comments, saying they were “inappropriate”.
He said: “France is a really solvent country. France is a really credible country, France is a country that is starting to recover.”
France is Europe’s second-largest economy and is suffering from rising unemployment, with figures up 10% on last year.
Meanwhile Greek opposition leader Alexis Tsipras said Europe must abandon austerity policies and hold a summit to make Greece’s debt sustainable.
Alexis Tsipras said a conference similar to the one that brought debt relief to Germany in 1953 is the only way to solve their financial crisis.
Greek GDP fell 6% in 2012, the lowest in Europe, as the country struggled with the financial crisis. Portugal’s GDP fell 3%, while Italy declined by 2.3% and Spain’s GDP shrank by 1.4%.
The French GDP rose by 0.2% last year while Ireland grew up 0.4% and Germany increased by 0.8%.