Tuesday, January 14, 2014

Hollande's News Conference 3

What is the best argument that can be made in support of Hollande's new economic policy? I accept the point that removing the burden of cotisations familiales from firms may lead to some additional hiring. One might further argue that what Hollande has in mind is not a supply-side move but a stimulus-by-stealth, in which he cuts taxes on industry immediately but dithers on the promised spending cuts for a year or two, yielding a stimulus of a point and a half or so of GDP over 12 to 24 months. The budget deficit will also rise, but Brussels will have been appeased by the structural reform and will therefore let it pass. Let's say the maneuver cuts unemployment by 1 percent, so the president can claim that the inversion of the curve he has been promising for nearly two years is finally occurring. He may even squeeze out a half a point of growth before interest rates rise owing to the rising debt/GDP ratio. So there could be method to this madness.

On the other hand, what then? €30 billion is a big trou de sécu to make up. Arun (see comments on previous message) thinks that a little territorial reform and tinkering with allocations and proverbial fat-cutting will start the ball rolling. I think this is a pipe dream. For one thing, territorial reform never seems to happen. Sarkozy tried it and was shot down by his own party. Hollande won't even be given the courtesy of a face-saving compromise. The Socialists are powerful at the local and regional level, more powerful than Hollande at the moment. The local barons owe him nothing: he's hurt them more than he's helped. You could see the impatience in François Rebsamen's proposal today that France do away with the post of first lady--a warning shot across Hollande's bow. They will resist the dismantling of their fiefdoms, and Hollande will lose this battle.

Is Hollande serious about €50 billion in spending cuts? Frédéric thinks not. I tend to agree. If you were serious, you wouldn't make such an announcement out of the blue. You would have had extensive consultations beforehand and a list of proposed cuts to use as cudgels on the aggrieved parties. You have to make them fear worse in order to get them to accept the merely grievous. Today's opening gambit only encourages all the other players to call the president's bluff.

Finally, this strategy, if it is one, even on the best interpretation that can be given to it, fails to offer anything by way of compensation to le peuple de gauche. Nothing, that is, but a vague promise of jobs. L'emploi, the president said, is the only thing he cares about. But many who voted for Hollande did so because they don't trust firms to use their tax breaks to do new hires, even with the lamentably named observatoire des contreparties, which is supposed to ensure that only firms that toe the line get the breaks. But what is the line they are supposed to toe? Are there any criteria for an adequate number of new hires? No, the details are to be negotiated "branch by branch." But what branch of industry these days doesn't have a sob story to tell about how it must cut costs before it can hire, how it must restructure in order to grow, how it must await the revival of demand before it can invest? And I don't mean to say that these sob stories lack truth. They're all too accurate. Hollande's social liberalism with contreparties is neither fish nor fowl: it aims to micromanage what firms do without means to assess conditions in the industries it purports to direct. Meanwhile, the promised reductions in state spending imply a retreat from earlier promises to foster long-term growth by funding new research and development, investing in education, etc.

I see this new policy as yet another exercise in temporizing, hoping that something will turn up while trying this and that without much analysis of how the parts are supposed to fit together.

Hollande's News Conference 2

The major announcement that Hollande made today was what he called a "responsibility pact" among the "social partners." What might "responsibility pact" mean, and why did its announcement cause Laurence Parisot to tweet joyously that enfin employer charges for cotisations familiales would be reduced by €30 billion over the next three years?

The answer is clear: the "responsibility pact" is the ingenious name conjured up by Hollande's spin doctors for a second wave of austerity. Employers are delighted to be relieved of €30 billion in charges. "Households," presuming that households have feelings, might feel somewhat less delirious with joy at the announcement that the €30 billion will not be shifted onto their shoulders. So, how will the cut be financed? By a massive reduction of state expenditure. Not just €30 billion but actually €50 billion by 2017. How? Hollande didn't say. But of course budget-cutting talk is cheap. One can always worry about the details later, or count, as Hollande is no doubt counting, on that elusive "expansionary contraction" that is supposed to follow declarations of virtue by formerly sinful politicians. "The Lord helps those who help themselves." Perhaps, but He has been remarkably unhelpful to Greece, Italy, and Spain. The UK's somewhat improved recent economic performance in the wake of draconian austerity is probably Hollande's actual inspiration, but France lacks Britain's financial sector, where most of the gains have been concentrated. So Hollande is probably investing in vain hopes, hoping that their vanity will not become fully apparent until another 18 months of inaction have passed, by which time his approval rating will have sunk into the single digits. But there is always consolation in la vie privée, about which the less said the better--or so we are told (see below).

This is a proposal that the American Tea Party would love. John Boehner would be falling all over himself to praise it. But how in the world can it be implemented in France? What does Hollande propose to cut? He didn't say, but the glum faces on any number of his ministers at various points in the proceedings suggest that discussions are already under way. The only one who didn't look glum was Montebourg, who seemed excruciatingly bored, perhaps because he is already planning his exit from the government and his repositioning as the anti-Hollande for a 2017 presidential bid. Of course, he will have to prepare for Valls, who will challenge him as Sarkozy-bis. Hollande is a dead letter. He is finished in French politics, and I don't care about the polls, reported in the Guardian, that suggest his extra-non-conjugal escapade with Julie Gayet has actually increased his approval rating ("Oh, those French!" clucks the English writer).

And while I'm on the subject of la vie privée, it's rather amusing that, when asked whether Mme Trierweiler is still la première dame de France, Hollande said he would take up the question at a later date but before his scheduled trip to Washington. The French, who profess to have no interest in the private lives of politicians but can talk about nothing else whenever a scandal hits the press (like people everywhere), have nevertheless adopted the habit of their much-reviled puritanical American cousins in creating an official position of "first lady," whose occupant is chosen not by the people but in consequence of the sexual choice of their elected leader. The people nevertheless pay for her staff of 4, she has an office in the Elysée, performs official functions, etc. So private life and public life constantly interpenetrate in this day and age, and yet this interpenetration is not to be discussed in public. Perhaps it would be more honest and aboveboard to concede that a president's private life is not and cannot be private in the conventional sense and then consider what implications that might have for a president who, as a candidate, promised that his behavior would always be exemplary. If a president wants his private life to remain private, then his partner should behave as Yvonne de Gaulle behaved and stay out of the public eye.

Hollande's News Conference

I'm watching Hollande as he speaks. I may have something to say about the substance later--if any substance emerges. I haven't heard much yet worth writing about. But I wanted to say a word about the form. Hollande has never been a great orator, but there's something very odd today about the rhythm of his speaking. His phrases are broken off in strange places, and at times he seems to hesitate as if he can't quite find the word he wants. His mind seems detached from his performance. This would be comprehensible, given the events of the past few days, but given the importance of this press conference for the remainder of his presidency, it's a strangely abstracted performance. One more disappointment in a long series?

UPDATE: He's better in the question session--again on form, not on substance.

The Structural Weakness of the Front National

For months we've been hearing that the Front National is France's "leading party," largely on the basis of one poll and a by-election victory in Brignoles. Now Marine Le Pen is trying to lower expectations. She expects her party to be on the lists in only 500 of some 36,000 French communes in the March 23-30 municipal elections.

Is this a tactical lowering of expectations in order to trumpet later a "victory" by beating the forecast? Or does it represent a real structural weakness of the party? Le Monde points out that even allowing for considerable progress since the party reached its nadir in 2008, the FN will still be present on only 16.6% of the lists in communes of more than 3,500 people. The party is plagued, still, despite ample recruitment of younger cadres in recent years, by a shortage of qualified candidates and organizational weaknesses at every level. So it is a bit premature, perhaps, to envision a rerun of 2002 in the next presidential election.

One does have to worry, however, about the state of the two major parties. Hollande has done his best to run the Socialists into the ground, first by an absence of strong leadership and now by betraying his promise to maintain "exemplary behavior" if elected. Meanwhile, the UMP rank-and-file seem to be banking on a return of Sarkozy, yet Sarkozy, according to recent polling, remains unpopular with a substantial segment of the population (though less unpopular by far than Hollande and only slightly ahead of Marine Le Pen).