Friday, December 02, 2005

France: The New Enron

Don't tell Paul Krugman about this.

Just two days ago France discovered that its national debt was €2,000bn - almost twice the figure normally found on the state balance sheet.

The difference derives from some €900bn ($1,080bn, £630bn) of off-balance sheet public sector pension liabilities that Thierry Breton, finance minister, now points to when warning citizens about the scale of the country's debt problems.

"What is shocking is the bill we are leaving for the next generation," he said this week. The minister is a former chief of France Telecom who was brought in nine months ago to correct France's accounts.

Mr Breton is seeking to challenge not only opponents of economic reform but the 25 per cent of the French workforce in the public sector who benefit from numerous special privileges, notably more favourable pensions than their private sector counterparts.