The world is transfixed by what is going on in Greece and Italy.  It is uncertain who will be the leader going forward.  Can the new Greek leader adopt the EU offer, in the face of increased rioting over increasing austerity?  Will the wily but incompetent Berlusconi finally throw in the towel and let reform begin, before the market for Italian bonds evaporates?  Right now, the futures market seems to think Berlusconi will be voted out today, and the Dow looks to gain about 65 points at the open.

But, look at France.  They are actually concerned about keeping their triple-A credit rating . . . who knew?  When we faced that prospect, we took a one-handed approach of cutting discretionary spending, ignoring both entitlement spending and tax increases.  The French just instituted their second austerity plan in less than three months.  They accelerated the change in their pension retirement age by one year.  They cut health care spending by 1.2 billion euros.  They cut housing subsidies by 400 billion euros.  They increased the VAT by 1.5% to bring in 1.8 billion euros.  They stopped indexing their tax brackets, so that taxpayers with rising incomes would be forced into higher tax brackets.  And, they put a temporary 5% increase in income taxes on their biggest corporations, raising 1.1 billion euros.

While I take issue with certain parts of this new austerity program, I marvel that they are actually able to do something.  It is especially remarkable that they took this action before their elections next Spring.  That took a degree of political courage and willingness to compromise that deserves respect!  At least, they are trying to save their AAA . . .

After all, nobody ever accused the French of being impotent . . .