In the midst of the economic crisis, France’s Socialists are denying reality. The minister of industrial renewal is calling for nationalization of some industries, while the president shies away from necessary structural reforms. Business leaders fear the clock has been turned back 30 years.
The minister compares his office with a position on the battlefield, one that you only leave as a fallen soldier — or when the last bullet has been shot.
Arnaud Montebourg, the French minister of industrial renewal, carries his head high. In his mind, politics is a combat sport. A shiny, decorative sword hangs on the wall behind him in his office on the third floor of the enormous Ministry of the Economy, Finances and Industry in Paris. The 50-year-old combative politician tends to rush headlong into battle, but he is often left with no choice but to carry out the maneuver he despises the most: retreat.
That was the case last weekend, after Montebourg had become locked in a spectacular wrestling match with the steel giant ArcelorMittal, which employs 20,000 people at 150 sites in France. In Florange, north of the city of Metz, which sits near the borders with Germany and Luxembourg, the company planned to permanently shut down two blast furnaces and lay off 630 workers.
The industrial site, in the economically depressed Lorraine region, has long been unprofitable, and ArcelorMittal suffers from overcapacity. The plant closing probably wouldn’t have attracted much attention, but Montebourg, who sees the preservation of industrial jobs as his primary goal, needed a success — and forgot the principle of proportionality.
Instead, he brought out the biggest gun in the Socialist government’s arsenal, and threatened the company with the temporary nationalization of the Florange site, and declared its main shareholder and CEO, Indian steel magnate Lakshmi Mittal, to be a persona non grata because he doesn’t respect France. Mittal was shocked and requested a meeting with French President François Hollande. Prime Minister Jean-Marc Ayrault was forced to recognize that Montebourg had set a fuse which, if lit, could cause the government to explode.
THE threat of the euro’s collapse has abated for the moment, but putting the single currency right will involve years of pain. The pressure for reform and budget cuts is fiercest in Greece, Portugal, Spain and Italy, which all saw mass strikes and clashes with police this week (see article). But ahead looms a bigger problem that could dwarf any of these: France.
The country has always been at the heart of the euro, as of the European Union. President François Mitterrand argued for the single currency because he hoped to bolster French influence in an EU that would otherwise fall under the sway of a unified Germany. France has gained from the euro: it is borrowing at record low rates and has avoided the troubles of the Mediterranean. Yet even before May, when François Hollande became the country’s first Socialist president since Mitterrand, France had ceded leadership in the euro crisis to Germany. And now its economy looks increasingly vulnerable as well.
As our special report in this issue explains, France still has many strengths, but its weaknesses have been laid bare by the euro crisis. For years it has been losing competitiveness to Germany and the trend has accelerated as the Germans have cut costs and pushed through big reforms. Without the option of currency devaluation, France has resorted to public spending and debt. Even as other EU countries have curbed the reach of the state, it has grown in France to consume almost 57% of GDP, the highest share in the euro zone. Because of the failure to balance a single budget since 1981, public debt has risen from 22% of GDP then to over 90% now.
The Syrian authorities on Wednesday ordered airstrikes close to the tense Turkish border for the third consecutive day, and said a French decision to recognize and consider arming a newly formed coalition of Syrian government opponents was an “immoral” act “encouraging the destruction of Syria.”
“This is an immoral position because it allows the killing of Syrians,” said Faisal al-Miqdad, Syria’s deputy foreign minister, according to Agence France-Presse. “They are supporting killers, terrorists, and they are encouraging the destruction of Syria.”
On Tuesday, France became the first Western nation to fully embrace the new umbrella organization, the National Coalition of Syrian Revolutionary and Opposition Forces, which came together last weekend under Western pressure after days of difficult negotiations in Doha, Qatar.
On Wednesday, President François Hollande of France invited the leader of the group, Sheik Ahmad Moaz al-Khatib, to Paris for talks, Reuters reported.
A lenient gang-rape verdict has prompted outcry and a debate on France’s inadequate response to rape. The French media’s ambivalence towards rape victims also needs to be examined.
There seems to be a feminist revival in France. The promise made by François Hollande during the presidential campaign that his new government would be 50 per cent female has been kept. The ministry of justice led by Christiane Taubira has been quick to submit a new anti-harassment law, responding to the cancellation of the existing law under Sarkozy’s mandate, which caused all ongoing harassment cases to be dropped. Also, for the first time since 1986, the country has a ministry of women’s rights, run by 35 year-old Najat Vallaud-Belkacem, also spokesperson to the government, who is keen to abolish prostitution. French feminist organisations, like Osez le féminisme! (Dare Feminism!), created in 2009, are going strong - one of OLF founders is even an adviser to Vallaud-Belkacem - and feminist magazine Causette, also three years old, is proving to be serious competition in the realm of women’s magazines.
In such a context, what is now known as the “Créteil verdict” was met with considerable incomprehension and anger. Here’s a quick summary of the events that led to it.
- Nina and Stéphanie*, now in their late twenties, claim that when they were 15 and 16 they were repeatedly raped by a group of boys in the ‘cité’ where they lived (a housing estate in the Parisian suburb of Fontenay-sous-Bois). The facts they narrate are not part of an isolated crime, but of long-term sexual enslavement. They recall being dragged to basements or empty staircases while boys queued up to rape them. This happened, they say, almost everyday for six months in 1999. They pressed charges in 2005.
In 2010 and 2011, the first two years of Europe’s sovereign debt crisis, Germany seemed to emerge as the continent’s dominant power, possessing an unrivaled ability to shape its neighbors’ destinies. Enjoying unabated economic strength, Germany agreed to bear the largest burden in the eurozone’s financial rescue, and so it was able to determine the pace and methods of managing the crisis. It also influenced the economic and budgetary policies of Europe’s debt-ridden countries, such as Greece and Spain, and it used that authority to impose an agenda of reform and austerity across the eurozone. Witnessing these developments, some observers went so far as to proclaim the onset of German hegemony and argued that only Berlin could solve the continent’s woes.
Although Germany is, to be sure, the most important European country for overcoming today’s problems, its abilities to project its power at the EU level are substantially restricted — and they will diminish further in the months ahead. Germany’s position as the chief backer of the eurozone’s stabilization arrangements does not necessarily translate into political supremacy. And as the euro crisis has escalated and Germany has lost political allies, it will now have to accept that the common currency area will only partly conform to its vision.
The first reason Berlin will struggle to implement its plans for Europe is that political developments of the last six months have left Germany a rather isolated giant. In 2010-11, it was largely because of cooperation between Berlin and Paris — and the close partnership between their two leaders that came to be known as Merkozy — that Germany was able to set European policy and disregard the attitudes of other eurozone members, generally the southern countries with large deficits. Now, France’s new president, François Hollande, has advocated a European pro-growth agenda that clashes with German Chancellor Angela Merkel’s preference for austerity and, in the view of many Germans, would not encourage national governments to implement necessary reforms. Meanwhile, Austria, Finland, and the Netherlands — smaller eurozone members that traditionally side with Germany on economic matters — have ceased to be reliable partners for Berlin, as populist forces have pressured their governments to withdraw from rescue mechanisms or demand stricter regulation of the recipient countries’ budgets in exchange for financial help. Berlin’s other usual allies in balancing against Mediterranean-style policy approaches, the United Kingdom and Poland, lack importance in the present crisis. Neither country uses the euro, and the eurozone is where the main political decisions on the future of Europe will be made.
The call to Vincent Grandil’s Paris law firm began like many others that have rolled in recently. On the line was the well-paid chief executive of one of France’s most profitable companies, and he was feeling nervous.
President François Hollande is vowing to impose a 75 percent tax on the portion of anyone’s income above a million euros ($1.24 million) a year. “Should I be preparing to leave the country?” the executive asked Mr. Grandil.
The lawyer’s counsel: Wait and see. For now, at least.
“We’re getting a lot of calls from high earners who are asking whether they should get out of France,” said Mr. Grandil, a partner at Altexis, which specializes in tax matters for corporations and the wealthy. “Even young, dynamic people pulling in 200,000 euros are wondering whether to remain in a country where making money is not considered a good thing.”
A chill is wafting over France’s business class as Mr. Hollande, the country’s first Socialist president since François Mitterrand in the 1980s, presses a manifesto of patriotism to “pay extra tax to get the country back on its feet again.” The 75 percent tax proposal, which Parliament plans to take up in September, is ostensibly aimed at bolstering French finances as Europe’s long-running debt crisis intensifies.
But because there are relatively few people in France whose income would incur such a tax — perhaps no more than 30,000 in a country of 65 million — the gains might contribute but a small fraction of the 33 billion euros in new revenue the government wants to raise next year to help balance the budget.
One of the refrains of the French presidential campaign was the suggestion by Nicolas Sarkozy that the French presidency is not an office for the “normal” man his challenger François Hollande claimed to be. Indeed, it’s fair to say that Hollande won despite, not because of, the reputation he had cultivated as Socialist party leader for the previous eleven years. (The cruel nickname “Flanby,” from the brand name of a quivering custard dessert, speaks volumes.) The French presidency, with its extraordinary powers reflecting the national emergency in which it was born, was expressly designed not for “normal” politicians, but for immense historical figures of the stature of Charles de Gaulle, the former general, leader of the French resistance and providential founder of the Fifth Republic.
Hollande had a different model in mind, however: François Mitterrand, who was president of France from 1982 until 1995—and the man who gave Hollande his start in politics by offering him a presidential staff position the year after graduating from the highly selective École Nationale d’Administration. After emulating Mitterrand’s rhetorical style on the campaign trail, Hollande in his first days in office has taken another leaf from Mitterrand’s book, imposing his own cautious stamp on the complexion of the new government.
President Obama welcomed new French President Francois Hollande to the White House on Friday, an initial meeting that came as world leaders feel a renewed sense of urgency to contain the European debt crisis.
The two leaders spoke for about 20 minutes in the Oval Office, covering such issues as Afghanistan, Iran, Iraq and Syria — including Hollande’s pledge to draw down French combat troops in Afghanistan by the end of the year.
France’s freshly inaugurated Socialist president, Francois Hollande, visits the White House Friday and plans to announce an early pullout of all French troops from Afghanistan by year’s end.
Obama is scheduled to head to Camp David on Friday evening to welcome the leaders of eight of the world’s richest countries, including Hollande, for the Group of Eight summit this weekend.
In brief remarks to reporters in the Oval Office, Hollande said he was committed to providing assistance to Afghan security but through alternative means. He added that he would discuss the subject further at the NATO summit in Chicago, which begins Sunday.
“I reminded President Obama that I made a promise to the French people to the effect that our combat troops would be withdrawn from Afghanistan by the end of 2012,” Hollande said. “That being said, we will continue to support Afghanistan in a different way. We’ll seek a different format. And all of that will be done with good understanding with our allies.”
In past comments, Hollande at first said he would withdraw all the 3,400 French military personnel, but later specified he would pull out only combatants.
François Hollande arrived in Germany on Tuesday, hours after becoming France’s new president, for talks on the European debt crisis with Chancellor Angela Merkel.
Drama surrounded Hollande’s journey to Berlin, as lightning struck his plane and prompted a return to Paris, CNN affiliate BFM-TV reported.
The president switched to another plane and flew again toward Berlin, Hollande spokesman Faouzi Lamdaoui told BFM-TV.
As he was sworn in Tuesday, Hollande promised a new approach to tackling the financial woes plaguing Europe.
His talks with Merkel will be closely watched in light of the urgent challenges the continent faces.
Hollande was inaugurated Tuesday as France’s first Socialist president since François Mitterrand left office in 1995. He secured election victory this month over incumbent Nicolas Sarkozy, one of the most U.S.-friendly French presidents in decades.
Recent elections in France and Greece pose significant challenges to the strict economic austerity policies Germany has called for in response to the eurozone sovereign debt crisis. Still, Germany has resolutely rebuffed any efforts to alter the European fiscal compact agreed to late last year, explains CFR’s Sebastian Mallaby. “There’s a battle coming up between Hollande and his European partners as to quite what a growth agenda might mean,” he says. At the same time, the political situation in Greece is “more potentially cataclysmic in its consequences,” Mallaby argues, because it could not only signal a Greek exit from the eurozone, but also undermine European financial institutions and facilitate further sovereign debt contagion.
Voters in Greece rejected the country’s mainstream political parties, and, by extension, the latest EU-IMF bailout. In France, voters elected François Hollande to implement pro-growth policies in a worsening economic climate. What are the implications of these recent elections on EU efforts to resolve the eurozone debt crisis?
In the case of France, what François Hollande has done by defeating [current President Nicolas] Sarkozy is basically to put on the agenda a “growth pact.” The question is how to define that rebalancing of European policies away from the austerity formula that has driven it so far. The problem is that there are three competing definitions of what Hollande’s growth agenda might mean for Europe. There’s a kind of [ECB President] Mario Draghi version of this, which is that the growth pact should involve the kinds of structural reforms for the labor market and so forth that have already been put in place in Italy and Spain. The problem with that is that although it drives better growth in the longer term, in the short term, labor market reform means firms can fire people more easily, and those structural reforms actually will drive a reduction in employment and demand in the short term and make recession worse. There is a different version of what a growth pact might mean and one that François Hollande is more keen on, and that is ideally to relax the austerity pact—the fiscal responsibility pact, as [German] Chancellor [Angela] Merkel called it. But Germany has rejected that option. So there’s a battle coming up between Hollande and his European partners as to quite what a growth agenda might mean.