Over the last two months, The Slog has occasionally given readers the benefit of personal observations about France’s willingness (or ability) to take the strain and pain of austerity. My general argument over that time has been to the effect that there are no signs at all of that intention – in fact, few signs as yet that the Sarkozy Government has anything but the vaguest idea of the mess it is in.
So far, the one verifiable fact – issued by Christine Lagarde’s Finance Ministry – is that not a single French public sector worker has been forcibly removed from employment. There have been a small number of unreplaced retirees and a couple of voluntary redundancies, but that’s it. And while we must remember that Mme Lagarde is not an A* maths student, the figures weren’t compiled by her and so are probably reliable. What I’d like to do now is take you through some equally cast-iron numbers. Those of a French disposition should look away now.
Lagarde predicts the French economy will chalk up growth of 2.0% next year, and reduce the budget deficit from 8% of GDP to 6%. Her optimism is based on the Bernanke Wyoming principle of ‘It must, because otherwise we all drown’. But real life is different: senior Natixis economist Jean-Christophe Caffet forecasts that France will grow in 2011 at only a 1% rate. Or exactly half of Christine’s guesstimate…and under a third of her original prediction in February of a 3.2% rate of expansion.
It could be the growth is going to come from upping efficiency. GDP per capita in France runs at under two-thirds the US level, so there’s room for what the house agents call potential. However, the per capita output is a direct result of Union power – and that shows no signs at all of going away: Sarkozy has only to suggest a cut in State pensions for les syndicats to start talking blocked autoroutes and blockaded ports.
Mme Lagarde’s forecast will certainly need to be realised – and more – if the country’s deficit is to be controlled. Currently running at a compound increase of 3 billion Euros a month, there is much talk at Finance and in the Elysees Palace of bold steps to get the deficit down. But as the Organisation for Economic Co-operation and Development (OECD) caustically observes, “France has a poor track record in meeting the deficit targets in its stability programs”. In the 10 post-euro launch years for which data are available, France’s budget deficits averaged 3.25% of GDP.
In short – as The Slog has been recording since its inception – France has been outside the limits allowed by the Single Currency Act every single year.
The truth is that, as Nicolas Sarkozy has gained a proper whiff of the increasingly truculent French mood, he has reverted to ‘France First’ type. Of late it’s becoming obvious that his policy of choice will be protectionism – the diametric opposite of that free trade which is supposed to be the economic point of the EU.
The Economist Intelligence Unit (EIU) notes how the French President continues to set up and protect ‘national champion’ companies. He is also voluble on the subject of encouraging “Franco-French” mergers – to prevent foreigners from acquiring French companies.
France wants what it always wanted from the EU: freebies, not free trade. Free trade is great when Germany is buying all the farming output (with Brussels throwing the rest away) but once Germany gets antsy about the debt and the Rosbifs kick up rough about the Common Agricultural Policy, France will be the first to end the game by taking its ball home.
It’s been 55 years of stitch-up, corruption, bureaucratic hubris and unwritten German war reparations in the gradual emergence of the EU caterpillar from the EEC butterfly. But it is now revealed for what it is: an insolvent farce to which there is little balance and zero rationale.
People often write to me of an alleged ‘gloating desire to see the EU fail’, but they miss the point. A loose Europe with retained State’s rights and a desire to learn mutually remains a great idea – and precisely what the bloated, controlling and mendacious EU can never be. And anyway, such critics don’t read the data enough. For example, 16 out of the 18 members of the eurozone contribute nothing at all to growth. The primary sources of ‘profit’ for the Union are France and Germany inside the zone – and the UK outside it.
Anyone keen on that shambolic confection as a primary trading partner must, I would contend, be a bailout short of a brain.