Saturday, September 8, 2012

A German Partner for Hollande--if he wants it

Martin Schulz, president of the European Parliament and member of the German SPD, is making far bolder proposals than François Hollande for a new course in Europe. Hollande should pay attention. Here is a partner worthy of him if he actually wants to strike out in a new direction. (h/t Phil Fileri)

Belgium, Here I Come

Hey, I've got nothing against Belgium. Moules-frites, le Manneken pis, insipid beer, language brawls, or proof that life without government is not impossible. But if I were worth €41 billion, I'm not sure I'd want to live there. So has Bernard Arnault been driven into making himself into a Belgian joke by Hollande's promise to tax gazillionaires at a marginal rate of 75%? He denies it. He will keep his French nationality, he says, and remain a "fiscal resident" of France. For Bernard Girard, this is a good thing, indeed, such a good thing that he thinks it ought to be built into EU law. I agree, although I also agree that it might be a tricky law to write.

In general, I think the threat of fiscal self-deportation in response to Hollande's tax policy is overblown, but it gives journalists something to write about. That said, I don't think this symbolic tax is a good idea either. A more comprehensive overhaul of the tax system is what is needed, and this particular approach exposes a large flank to mindless criticism and mock alarm. There are already rumors that the tax is going to be diluted anyway by making it apply to individual rather than household incomes, which opens up a lot of space for creative accounting.

As for Arnault, I've always thought it symbolic of a certain French economic decadence that the country's richest man is the head of LVMH, which stands for Louis Vuitton Moët Hennessy. If you wanted to spell "lap of luxury," you couldn't do better than LVMH (full disclosure: although I don't carry a $4,000 handbag or wear a $750 scarf, I've been known to quaff a glass of VSOP from time to time). Where are the whiz kids writing software or designing cell phones? To be sure, there's always Xavier Niel, who worked his way up from teleporn to telecomms. But there's something depressing about the fact that the biggest moneyman in France is in overpriced luggage. It projects a rather backward image of what is in fact quite a dynamic and diversified economy.

How Is He Doing?

It's the Mayor Koch question that's on everyone's lips in France: "How am I doing?" Only it's put in the third person and addressed to François Hollande: "How is he doing?" Now Hollande himself has gotten into the game, and he shows that he's been paying attention to the fact that everyone else is asking the question. And there's nothing surprising about his answer: "he" is doing just fine, "he" is going about things at his own pace, "he" is redefining the presidency, a task thrust upon him by the failure of Sarkozy's redefinition, etc. In this interview, he shows himself to be perfectly lucid but perhaps a tad optimistic about what it will take to succeed.

By contrast, Marcel Gauchet, whose answers are equally predictable, is perhaps a tad pessimistic.
François Hollande, c'est le contraire. Il a une conscience très aiguë de la difficulté des situations, mais cette acuité intellectuelle, doublée du scepticisme fondamental qui en est le corollaire, le rend indéchiffrable. On ne sait pas où il va et cette absence de direction a une conséquence immédiate sur la crédibilité de sa méthode : la concertation apparaît comme une façon d'esquiver les choix plus que de les préparer. Au fond, son intelligence le dessert. Un esprit sommaire et fonceur serait plus compréhensible par l'opinion.
This sounds almost like Sarko-nostalgia, and, indeed, Gauchet is fairly explicit that that is precisely what it is:
En caricaturant, je dirais que Nicolas Sarkozy avait la direction, mais pas la méthode, alors que François Hollande sait faire mais n'a pas de cap. Contrairement à ce qu'on a beaucoup dit, Nicolas Sarkozy avait une vraie ligne politique : la banalisation américano-libéralo-européenne pour liquider les particularités françaises dénoncées comme autant de handicaps. La crise l'a empêché de réaliser son projet, mais il en avait un.
What is not quite clear from the interview is whether Gauchet believes that Sarkozy's "direction" was the right one or whether he believes that Hollande shares that analysis.

I think Gauchet skirts the real question, which is whether economic liberalization, which he seems to favor, is compatible with existing European institutions, about which he confesses an aporia:


Quelle est à vos yeux la "bonne question" ?C'est évidemment l'Europe, qui est notre incertitude majeure, y compris par le scepticisme profond qu'elle suscite aujourd'hui. La difficulté pour Hollande et les socialistes est de sortir de l'épure mitterrandienne. Mitterrand a fait de l'Europe un grand dessein où s'inscrirait le destin français, mais il a fallu pour ce faire accepter d'en passer par une Europe libérale. Trente ans après, il se révèle que cette union par la libéralisation des marchés a entraîné l'Europe dans une impasse. Il est urgent de proposer autre chose. Mais quoi ?

Yes, but what? The problem, it seems to me, is that Hollande has been totally silent about what kind of Europe he would like to see emerge from the crisis. And this silence is enabled and abetted by the nombrilisme of the French press, which is obsessed with the "How is he doing?" question and uninterested in the "How is Europe doing?" question. Read the Italian or German press, for instance, and you'll find daily commentary on Draghi's latest moves, on the partition of sovereignty given the assertion of unusual central bank powers, on the conditionality of bond purchases in the secondary market, etc. To be sure, France is in an anomalous position: in the short run it has benefited from the discomfiture of the southern states. It can borrow short-term at negative interest rates. But in the long run its competitive position is deteriorating further, as Spanish and Italian unit labor costs decrease.

France needs a strategy for survival in this new environment, and such a strategy requires thinking beyond France's borders. Limited labor-market reforms (such as the intergenerational contracts) do not address the need for industrial restructuring implicit in the single market. The "right question," to put it in terms of the Gauchet interview, is not a Franco-French question but a European question. And that can't be answered by asking how "he" is doing. France has to begin asking how "we" are doing, where "we" means we French together with our European partners. Because the euro crisis is no longer just a currency crisis: it is a crisis of the European Union and can only be resolved in transnational, not national, terms.