There are two ways in which this economic trap can be set. One arises when high levels of taxation have to be imposed to finance the welfare spending. This could in the past have been described as the Swedish problem until that country’s reforms in the 1990s (see Chapter 8). Now it might be termed the French problem, with public spending in France at over 55% of GDP, more than five percentage points higher than in Sweden and ten higher than in Germany. France has run a budget deficit continuously since 1974, so this is also why its public debt keeps on rising and is now nearly 94% of GDP.
...more
