Wednesday, May 15, 2013

Inside the Paris-Brussels Accord

The EU recently granted France a two-year respite in its drive to reduce the budget deficit to 3% of GDP. How did this come about? Le Monde has a very interesting background piece today. It reports that the steady French push for more pro-growth measures since Hollande's election met with backing from, most notably, the IMF, Barack Obama, and even European Commission experts, all of whom argued that a further recession in France (now confirmed by the latest statistics) would be more harmful to European prospects than continued depression in smaller economies. The main opposition came from the staffs of Rehn and Barroso, who argued that such a double standard (lenience for big countries, harsh austerity for smaller ones and even for the large southern neighbors Italy and Spain) would spark political difficulties. It seems that the outbursts against Germany by several Socialist Party figures also helped persuade the EC that something had to give.

EU Turns Off French

According to a recent Pew poll, support for the EU has declined more in France than anywhere else:


Recession Redux, Le Monde Doubles Down

INSEE announced today that France is back in recession, with another quarter of negative growth. Meanwhile, Le Monde has adopted the tone of those whom Paul Krugman calls Very Serious People. In an editorial today, the paper gravely clears its throat and calls for ... structural reform, while warning readers that--surprise--these take time to produce results. France has been talking about structural reform for twenty years. The editors might have aimed to be a little more specific.

But sometimes one has the impression that nothing ever changes in France. Is it so long ago that Sarkozy supposedly took care of the so-called special retirement regimes? Yet last night they were all back in the news, on France2's JT de 20h. Every one of them, including the SNCF's, whose reform was the centerpiece of Sarkozy's effort.

But of course as I wrote at the time, Sarkozy headed off more serious trouble with the unions by buying some (the train drivers) off with side deals, while delaying the effect of reform for others by many years. Austerity means that these arrangements have proved too costly, so Hollande will be forced to undo them. Now we will hear the Right criticizing the Left for redoing what the Right previously did badly under volleys of catcalls from the Left. Is it any wonder that people distrust politicians?