Euro Area's unpleasant truth

The Economist argues that given weak competitiveness and growth prospect, France needs to cut its welfare and public sector wages/benefits. Seems like tax increase would be difficult economically, politically, and legally. This is a difficult game, because as Moscovici rightly suggests, front-loaded fiscal austerity kills the economy, while loss of market access could be a reality if confidence in public finance is lost. Now that the tail risk is gone after the announcement of OMT last year, euro area countries need to run this narrow path.

Just one small minor comment on the following chart. To have a balanced argument, would not it be possible to have a 3-4 year projection, together with real growth projection. The current picture masks an important link between real and fiscal sectors.

                             Source: The Economist