France and Italy: It is easier to hand public money to households than to correct supply-side problems

France and Italy suffer from quite similar supply-side problems: declining industrial production capacity and insufficient cost competitiveness in industry given product sophistication; hiring difficulties for companies despite high unemployment and a low employment rate due to low labour force skills; tax ation that discourage s employment. Correcting these supply-side problems may be painful (wage moderation, public spending cuts) and take time (raising the sophistication of industry, improving skills). Under pressure from public opinion, the easy road is being taken to increase the fiscal deficit in order to raise household incomes, which is obviously not as hard as correcting the supply-side problems.