Sunday, September 23, 2007

Trichet, Villepin, Euro, the Right

Was it my imagination, or did Jean-Claude Trichet seem a trifle irritated by Jean-Pierre Elkabbach's incessant needling about his non-responsiveness on the subject of the euro-dollar exchange rate (on Le Grand Rendez-vous d'Europe1)? Trichet tried to remind Elkabbach that the words of a central banker, unlike those of a journalist--or a politician--can have real consequences: "No person in a position of responsibility would answer your question," he said. Apart from this inconsequential skirmishing, Trichet came with one message he wanted to get across to France: public spending is too high, a point he made by comparing French public expenditure (national + local + social security) to that of the Scandinavian countries as a percentage of GDP. "There is no aspect of the French personality that makes this a matter of fate," Trichet said; 25 years ago the French still had their state and their social model, but their government consumption was lower than that of the Scandinavians; now it is higher. He refused to be drawn into the question of what should be done to remedy the situation. He simply wanted to lay the fact on the table.

Earlier, Villepin had continued his harassment of Sarko, calling upon the president to "tame himself" and adopt a less "frenetic" style. He was also critical of the Sarko-Guaino attack on the ECB. The problem is not with the bank, he said, but with the states, which need to agree on a policy. In this he anticipated Trichet's line.

It's interesting that Guaino, who used to be close to Philippe Séguin, may be speaking more for the nationalist right of which Séguin was the champion in the Maastricht days, than for Sarkozy, who has the problem of reconciling the nationalists with the "Orleanists," to use a distinction proposed by the late René Rémond. One of Sarko's great talents has been his ability to unify these two currents of the right, keep their tensions under control, and at the same time draw in the xenophobic and populist element, without which (as he allegedly told Yasmina Réza) victory would have been impossible. The attacks on the ECB humor the nationalists while irritating the Orleanists. Villepin, with his Napoleonic predilections, might be thought to be more at home among the former than the latter, but la tête a ses raisons, que le coeur ne connaît pas, to stand the old adage on its head.

Vichy and Rugby

I know nothing about rugby, but I thought I knew something about Vichy. This morning, however, I came across this interesting historical sidelight, which brings politics and sports together in a surprising way.

Guaino on Euro

Henri Guaino, Sarko's chief speechwriter and alter ego, says that the euro is at an absurd level compared with the dollar and even more absurd compared with the yuan. "This can't go on," he says. "We can't just stand here with our arms folded." The high euro is ruining our efforts to improve our competitiveness and productivity.

As an American who has traveled in Europe recently, I have to agree that the euro feels absurdly high. Yet I've seen calculations by economists based on one set of hypotheses or another that suggest it isn't high enough. In any case, if France is determined to drive the euro down, it's time to move from "jawboning" to a more concrete proposal for how this might be done. The current French strategy seems to be to drop dark hints that it's all the fault of the European Central Bank. But how much does Sarkozy really think that a drop in the ECB rate of 1/4 or even 1/2 point would change the exchange rate? How does he propose to approach China on the subject? Would it be wise to encourage a more rapid diversification out of US government debt than is already under way, given the shaky state of the credit markets? The questions go on and on, and Sarkozy's posturing looks not so much like a "rupture" with traditional French policy as a continuation of the "blame Europe" approach to explaining why things are not right with France.

Jean-Claude Trichet will be on Le Grand Rendez-vous d'Europe1 today, and though I swore after last week's program that I would give this one a pass, I just may tune in for a response to Guaino. Trichet will also be coming to Harvard soon. It will be interesting to hear his views about Sarkozy.