5 expected by Ixis CIB Bercy building on 1

Discussions about inflation and purchasing in France power are hardly allayed that emerges a new topic for discussion between economists and policy: that of the impact, for the French economy, the recovery of the tax on added value (VAT) in Germany. "For the whole of the euro area, growth in the coming months will be disrupted by the German shock", noted the national Institute of statistics and economic studies (Insee) in his memo on the economy last month. Since two days and, in practice, since yesterday , the rehabilitation of 3 points, to 19, rate normal German VAT is a "tax unprecedented shock", Sylvain grind, specialist economist at Ixis CIB Germany.

Shock all the more important that, among the amounts at stake the order of 20 to 25 billion euros, according to Sylvain Broyer , "two-thirds will not be reassigned. The bulk of the additional revenue from VAT is indeed intended to fill the deficit; only one-third should be recycled in the German economy through lower social contributions.

If a favourable impact on French growth was expected in the last quarter of 2006, German households with probably anticipated expenses and thus doped the request to the France, the increase in the VAT should have a recessive effect this year, via a decline in German demand and a reduction in production costs.

"The France is losing."

"The Germany will win in competitiveness to nearby countries geographically and structurally. "As a main partner trade but also as competitor, the France is losing," notes Eric Heyer, Deputy Director of the Department of analysis and forecast of Observatoire français des conjonctures économiques (OFCE). According to his calculations, this new aspect of the policy of competitive disinflation in Germany should remove the France point of growth this year (about 2 to 2.5 expected by Bercy). To "complete" its assessment, OFCE, which criticizes the "non-cooperative" policy, also took into account the recessive impact on the Spain and the Italy, themselves clients of the France. The Germany is the first customer of the euro area, just 42 of its imports. On the other hand, and the German VAT increase so will boost inflation in the eurozone in the first quarter, OFCE Encipherment did integrates step a possible increase in rates by the European Central Bank.

At Ixis CIB, Sylvain Broyer anticipates turn profits growth of 0.8 Germany (about 1.5 expected by Ixis CIB, Bercy building on 1.3); or, noted in a study in June, the loss of 1 point of German growth a mechanically "as" a reduction of 0.2 point of growth in France"to which must be added the effects induced by income, investment... that can double the mechanical effect".

"A strong Yo-Yo effect".

Bercy, which recognizes that the impact of the VAT increase "exists", temper pessimism and believes his side that "the consensus suggests that there is a strong effect of Yo-Yo between the end of 2006 and early 2007 it is eroded". Stressing that the VAT increase will fund to for a third of the declines in loads, the entourage of the Minister of finance j. including that "the effect on production costs be not solid" and that the German competitiveness will play in the "medium term".

Finally, it is argued in Bercy, the recessive impact will be offset by the policy of support for the application implemented in France: "tax reform and the increase in the premium for employment will support the purchasing power to height of a half percentage point, or about 0.3 points of GDP." The negative impact from Germany should be less.