New Year Blues for French Government

December 29th, 2012
in Op Ed, syndication

Written by

A journalist at a British newspaper once told me he had a French student journalist working for him and was puzzled by the structure of his stories.

The Anglo-Saxon way to write a news story is to hit the reader with the most important point first and give him or her the who-what-where-when-how-and-why, if known, in the first three or four sentences. After that you can expand and elaborate.

He asked the Frenchman how he structured his stories. "Thesis, antithesis, synthesis," he replied.

Follow up:

If you ever read a 500 word story about a football match that does not tell you the final score until the last paragraph, the chances are that it is the work either of a total incompetent or a journalist trained in the synthesis-antithesis-synthesis tradition.

Francois Hollande, elected President of last May, earned a reputation in his 11 years as secretary general (not, it should be emphasised, the leader) of the Socialist Party for his skill in uniting the warring cliques behind carefully a crafted synthesis to which all could put a signature.

Can't kick the habit

As president, directly elected by referendum, which makes him indubitably the country's leader, he gives the impression that he cannot kick the habit.

On the one hand he publicly backs his prime minister, Jean-Marc Ayrault, but on the other he expresses confidence in his rumbustious minister for industrial 'redressment,' Arnaud Montebourg, who has just been on the losing side in a dispute with Ayrault over an ill-considered and extremely controversial plan to nationalise a steel plant owned by the ArcelorMittal international steel giant.

There has more of the same associated with other ministers who have taken initiatives which were not first cleared with the president and prime minister. It would be an exaggeration to say that the government gives the impression it is working as a well-oiled team.

None of this has impressed the general public. The approval ratings for Hollande are in the region of 37 to 39 % in the most recent polls and for Jean-Marc Ayrault some three or four points lower, exceptionally low for a government of only eight months.

In the same synthesising spirit, Hollande is trying to get the social partners - trade unions and employers - and other interested parties to get together with ministers and their advisers at a series of conferences to hammer out consensus agreements on a whole range of issues.

This is in the spirit of the German and Nordic social democratic movements, much admired by Hollande, where strong and united trade union movements negotiate with their counterparts and conclude agreements which all can live with and benefit from.

Doesn't work in France

But this does not work in France where the trade unions are weak. Only about 8 % of the labour force is organised, most of them in the public sector, and the major unions are just as interested in marking their differences with the rival unions as they are in making deals with the employer organisations or the government.

The predictable result is that these exercises in consultation will not yield satisfactory results: it will be left to the government to shape the necessary legislation, which it might as well have done from the start.

Hollande has also found it difficult to explain the reality of the economic crisis that grips the country, although he did finally tell the French over the Christmas break that 2013 will be 'a very difficult year.'

His pitch since he became president has been that he will 'resolve' the serious unemployment problem in the first two years of his five year mandate and, as the economy returns to normal rates of growth, the next three years will be devoted to distributing the fruits of growth.

However, the government is committed to a policy of budget austerity, aiming to reduce the general government budget deficit from 4.5 % of GDP in 2012 to 3.0 % in 2013 and zero by 2017, in accordance with agreements imposed by the European Commission in Brussels on members of the single currency Eurozone.

This implies a significant reduction in total demand. This is not made more bearable by the fact that the private sector is in the doldrums, with industrial output and housing construction in decline and consumer demand barely holding its own - household consumption up by 0.2 % in November, demand for meals at a national charitable organisation, Restos du Coeur, up by 12 %, as two same day headlines summed it up.

Heading for 3.5m unemployed?

Unemployment in November increased for the 19th successive month by almost 30,000 to reach 3.13m. If it keeps up this rate the total will reach 3.5m by the end of 2013. That would be about 12% of the labour force (neither the government itself, the European Commission, the IMF or the OECD thinks it will go so high, however).

Where the government has shown a strong and determined lead is by increasing taxes, mainly on business and the rich, in order to attack the budget deficit problem. This has not been a great success either.

Realising that the increased taxes on business were excessive, the government has provided for a substantial tax rebate on corporate income tax starting in 2014 at €10bn and reaching €20bn in 2016.

The higher taxes on the rich, including a top income tax rate of 75 % plus higher wealth tax, is driving some of the rich, as well as many entrepreneurially minded would-be rich, out of the country, though the evidence is mostly anecdotal and the true numbers are not known.

But when one of the country's most popular film stars, Gérard Depardieu, switched residence to Belgium in December, he did not leave anything to rumour. He flounced out with an open letter to the prime minister denouncing the punitive treatment of people of talent like himself, who had paid 85 % of his income in tax (presumably income tax plus wealth tax) in 2012.

The members of the government expressed astonishment at Depardieu's lack of patriotism in difficult times, but polls suggest that about two-thirds of the population 'understand' the actor's action.

The president's problems have also been compounded by his failure to live up to some of his more extravagant election campaign promises.

He said he would not ratify the EU pact on growth and stability (it set budget and debt reduction targets) agreed by the governments in March, 2012, unless policies for European growth were written into the treaty. But no sooner than he had shaken hands with Chancellor Angela Merkel of Germany than this promise evaporated.

He also presented himself as the enemy of finance, a Jacques the Bank Killer, who would radically reform the finance industry. But when the government's bank reform proposals were published in December there was nothing radical about them at all.

These and other policy disappointments have destroyed confidence in the government of left wing opinion. This has been demonstrated in the Senate (Upper House), where the Communists and the Ecologists have voted with the right-centre opposition to defeat almost all the most important legislation from the government, including the 2013 budget.

They could do this with impunity because it is the National Assembly vote that counts. In the National Assembly the extreme left wing groups and the Ecologists have not followed the example of their colleagues in the Senate (the Socialist Party has an absolute majority in the 577-seat National Assembly of 15 votes).

It is not surprising if the Paris newspaper Le Figaro, no admirer of socialist regimes, has been able to inform its readers over the Christmas break that the government 'has got the blues', and that 'ministers are in a state of depression, sometimes wondering what they are there for', as an unnamed minister said.

Make a Comment

Econintersect wants your comments, data and opinion on the articles posted. You can also comment using Facebook directly using he comment block below.



Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day


Asia / Pacific
Middle East / Africa
USA Government

RSS Feeds / Social Media

Combined Econintersect Feed

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution



  Top Economics Site Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2018 Econintersect LLC - all rights reserved