Attention now switches to France.

We have seen the PIIGS (Portugal, Italy, Ireland, Greece and Spain) come to the agonizing realization that the Day of Reckoning has arrived. Soft Socialism has run out of other people's money to redistribute and these governments have run their credit dry. Weak economic growth has dipped into deep recessions with unemployment hovering at 25%. Huge public debts and struggling businesses are not accidents but the consequence of Social Democracy; what I call Soft Socialism. It is fitting that among the young, who have been miseducated to be big supporters of Socialism, unemployment is even higher, 50%.

It then comes as no surprise that one of the architects of Soft Socialism (France) is now coming to attention as it faces its own Day of Reckoning. The French people did the (to them) logical thing: put the Socialists in charge of reforming Socialism. And what has Mr Francois Hollande, France's Socialist President decided to do to make France more competitive? He and his Party did what you can expect Socialists to do: 1. had lots of meetings, 2. added more government in the form of a new Ministry (the Ministry of Industrial Recovery), 3. raised taxes on high earners and 4. and asked a sympathetic businessman (Luis Gallois, former Chairman of Airbus) to draw up plans to make France more competitive. So, how does the French version of hope and change coming? Well, the plans drawn up by Monsieur Gallois have been filed in the place where all such plans are filed, several high profile high earners have left France for friendlier countries (expect tax receipts to fall) and big businesses have concluded that there is no point to hire more workers.

What about the obstacles to productivity, which are: Rigid work rules, including the 35-hour week, high administrative costs, strict government oversight of layoffs and generous severance when job loss is inevitable. The upshot is an effective tax rate of more than 60 percent on corporate profits, once all the expenses are tallied. How about the reforms suggested by Mr Gallois: increase the work week, shift some of the tax burden to the workers and reduce government spending? President Hollande is quoted as "I'd advise against the idea of a shock, which has more of an attention-getting effect than a real therapeutic effect," Hollande said Thursday. Without offering details, he said he would prefer a "pact" among the government, workers and employers.

Pres Hollande is like the Father in the European fairytale, who was offered money for one of his children, but he could not part with any, because he loved them all. The obstacles to productivity are the children of the Left and they are all precious to the Left, because they define who the Left are. The obstacles to productivity took decades to put in place and will not be removed if the Left has a way to preserve them.

But, time is running out. Standard and Poor downgraded the biggest French bank BNP Paribas last Thursday and the stage is set to usher in more unpleasant surprises.