Monday, July 30, 2012


"Competitiveness" seems to be the watchword of the day. Much of Hollande's economic strategy is concerned with restoring French competitiveness by reducing unit labor costs. So just how bad is the situation?

The very term "competitiveness" is a contested one. Some observers, like Paul Krugman, think that it doesn't make much sense to talk about national competitiveness. A new paper (gated access) by Delgado, Ketels, Porter, and Stern begs to differ. Entitled "The Determinants of National Competitiveness," the paper constructs an index based on both macroeconomic and microeconomic factors. The authors then go on to consider labor costs relative to this competitiveness index and produce the following graph:

According to the authors' reasoning, France, as you can see, has a high "competitiveness score," which is a measure of its potential output per worker, but also a somewhat high unit labor cost compared to its potential output ranking (the point marked "France" lies above the regression line). As you can see, France looks relatively good compared to its main European competitors. Germany's residual is higher than France's; Spain, Italy, and Greece are off the charts in terms of labor cost relative to potential output. And countries like Singapore, Malaysia, China, India, and Chile are relatively attractive for investment.

So this graph more or less sums up conventional wisdom. But does it make sense? That depends on what one thinks of the index constructed by the authors, which, if you look at the details of the paper, in many ways reflects (and quantifies) conventional wisdom--or conventional neoliberal ideology, if you will. So take these findings cum grano salis. But there is food for thought here.

Duy and Krugman: Draghi Makes No Sense

Tim Duy and Paul Krugman parse Mario Draghi's speech and decide it makes no sense. Both the Fed and the ECB will make important decisions this week, so we will see if last week's market euphoria survives in the cold light of day. Initial German approval of Draghi's remarks has been walked back, as the saying goes. The Bundesbank has not moved one iota, and Schaüble sounds considerably less positive than he did at first.

Saturday, July 28, 2012

The Call Center Controversy

The "optics" aren't good, as the saying goes: Ile-de-France Transport outsources its call center work to Morocco. One might have expected this from the efficiency-minded Right, but the Left? If the government can't keep government jobs at home, what jobs can it keep? I'm a wet social liberal, but this decision is a bit startling and seems a tad on the penny wise, pound foolish side.

I see Montebourg is on the case, but then again, what case hasn't he been on since he took office. His ubiquity reminds me of Sarkozy's as interior minister.

Well, at least this flap takes people's minds off Ségolène Royal's gaffe--or was it speaking truth to power--in saying that Najat Vallaud-Belkacem owed her job to her ethnic background. It would have been more gracious to say she owed her job to her good looks, but perhaps Royal had reasons for not going there.

Friday, July 27, 2012

Le Grand Paris

Remember Sarkozy's plan for "Le Grand Paris?" If you don't, it's not your fault: it was one of those here today, gone tomorrow Sarkoplans. There was a big urban transport project embedded in all the airy imaginings of a new urbanplex stretching from Paris to the sea, however, and that hasn't died--yet. Cécile Duflot seems to have become its champion, after having been its enemy. But the budget crunch may do for the rail line as well.

Has Germany Changed Its Mind?

German finance minister Wolfgang Schaüble has more or less endorsed ECB head Mario Draghi's statement yesterday that the ECB "will do what it takes" to save the euro and, added Draghi, "believe me, it will be enough." The markets are apparently interpreting this as a promise by the ECB to buy beleaguered sovereign debt. Pierre Moscovici, while taking care to emphasize the "independence" of the ECB, said yesterday that it appeared direct market intervention was on the table.

So have we turned a corner in the euro crisis? Has the ECB decided to start the printing presses running overtime, and have the Germans decided to stop warning about "moral hazard," "encouraging profligacy," etc.? The proof will be in the pudding. But would you want to speculate against the possibility that the ECB might in fact be ready to use the big bazooka and not just run at the mouth? (On the other hand ...)

If the change of course has in fact occurred, we can retrospectively attribute it to two things: the imminent disaster that Spain faced this week and the report that austerity hasn't worked out so well for the UK, which turned in a dismal 0.7% GDP shrinkage last quarter. And even Germany has begun to feel the bite of the global slowdown. So the Germans may have blinked. And the Dow is flirting with 13,000 again. Everybody's happy, what could possibly go wrong?


Hollande the unflappable has kept his cool as the bad news poured in: first Aulnay, now Air France. Major layoffs will not make his life easier. Suspicious minds will naturally think that both firms, which have been in difficulty for quite some time, may have delayed their announcements until after the presidential election. In any case, the problem is now Hollande's to deal with. Michel Sapin sees unemployment back to 10% by the end of the year. Meanwhile, Hollande's pet project, the "generational contract," in which a firm will receive a tax exemption for hiring a young person to be tutored by an older employee nearing retirement, won't generate much employment, according to the OFCE. It's one of those symbolic gadgets that politicians like.

Not that symbolism is unimportant.  I've just read Franz Olivier-Giesbert's Derniers carnets. For Giesbert, symbolism is everything. Or, anyway, symbolism plus budget discipline and character, with considerable overlap in the latter two categories. The book has the usual Giesbert defects and qualities: astonishing quotes--so astonishing that one suspects half of them are made up, especially as certain tics of Giesbertian language appear frequently in the mouths of his subjects, portraits etched sometimes in acid and other times bathed in embarrassing sentiment, intense likes and dislike, and occasionally shrewd judgments. Surprisingly, Hollande wins his approval, perhaps in reaction against Sarkozy, whom he seems truly to detest while granting him high marks for political skill: "genius without talent," he says of Sarko, while Hollande has "talent without genius." A nice formula, even if it leaves all the important questions unanswered.

Still, one might make the case that Hollande's detachment is just the right attitude for the difficult times ahead. There will be no promises of fetching jobs with his teeth or bludgeoning recalcitrant opponents into submission. Indeed, those champions of the working class, Le Pen and Mélenchon, have been strangely silent since the election, despite the blows that have fallen upon their blue-collar constituencies. Perhaps they're waiting for the rentrée, on the theory that no one in France pays any attention to anything in July and August anyway.

Juppé and Bayrou also meet with Giesbert's approval. An odd trio indeed.

More on the European Auto Industry

In the wake of the PSA Aulnay plant's announced closing, we have been looking at the European auto industry. A war has erupted between Volkswagen and Fiat. Sergio Marchionne, the head of Fiat and president of the ACEA, the association of European auto manufacturers, has charged Volkswagen with being "too aggressive" in its price discounting. Marchionne claims that VW, which is selling 2 million vehicles a year in China, is using its profits on Chinese sales to capture European market shares from less well-placed European manufacturers such as Fiat, PSA-Peugeot, and Renault. VW is outraged by the charges and is calling on Marchionne to resign his ACEA position. What's interesting here (assuming that there is some truth to the charges) is the way in which all competition has become global. In an industry like automobile manufacturing, you can't concentrate on your local or regional market and hope to overcome the advantages of the global winner. Some years ago, Claude Bébéar, the head of Axa, the French insurance giant, warned his fellow French business magnates that they had only one choice: "Get big and compete, or find a niche." In automobiles, there are few niches.

Thursday, July 26, 2012

Juppé's Observations

What do you know? I agree with everything Alain Juppé says:

Mais pendant ce temps là… l’évolution de l’Europe et du monde nous mène à la catastrophe, dans une relative indifférence dont je ne suis pas sûr qu’elle soit seulement estivale.

J’écrivais il y a quelque jours que la probabilité d’une explosion de la zone euro ne cesse de croître. Chaque jour qui passe, hélas!, le confirme. Et que font les gouvernements européens pour conjurer le péril? Rien ou presque rien. C’est maintenant que la France devrait monter en première ligne pour proposer, à ceux de ses partenaires qui y sont prêts, d’aller plus loin dans l’unité politique dont ne peut se passer une union monétaire.

J’entends ce matin annoncer la fin du monde d’ici un siècle si nous continuons à détruire nos éco-systèmes. Routine. Indifférence générale. Perplexité aussi. Qui croire, qui suivre de ceux qui fixaient, récemment encore, la date du “pic” de pétrole aux alentours des années 2020/2030, et des autorités américaines qui se lancent à fond dans l’exploitation du gaz de schiste, susceptible de leur garantir un siècle d’indépendance énergétique? On a le sentiment que le monde a perdu le Nord, que personne ne fixe le cap, que chacun se débrouille et navigue à vue, alors que nous sommes tous sur la même galère. La France devrait parler fort pour appeler au ressaisissement.

Il est vrai que notre ministre du redressement productif parle beaucoup. Agit-il vraiment? J’en doute. Soutenir la production de véhicules électriques, dans la droite ligne des propositions de la commission Juppé-Rocard sur les investissements d’avenir, c’est sympathique, et sans aucun doute utile à moyen/long terme. Mais qui ne voit qu’à court terme, ce n’est pas la réponse attendue pour redonner force à notre filière automobile? Tant que le nouveau pouvoir évitera soigneusement d’ouvrir le débat et d’engager l’action sur la compétitivité du secteur productif français, nous manquerons la cible.

Draghi: "Whatever It Takes"

After his Le Monde interview the other day, Mario Draghi is back, this time speaking to the Global Investment Conference in London, where he said that the ECB will do "whatever it takes" to preserve the euro:
«All'interno del proprio mandato, la Bce è pronta a fare qualunque cosa per preservare l'euro, e credetemi, questo basterà».
And his words were not without effect: spreads on Italian and Spanish bonds immediately decreased. Perhaps investors missed the phrase "within its mandate." German public sentiment has rapidly hardened against "doing whatever it takes," and it remains to be seen how free a hand Draghi actually has. The speech received a lot of play in Italy (which is why I'm quoting from the Corriere della sera) but none at all in France. The imminence of doom has apparently sharpened Italy's focus. France is still preoccupied with internal problems.

European Auto Industry

The Times looks at Europe's auto industry and sees overcapacity everywhere. Will the French strategy--promoting "clean" cars (hybrids and electrics)--work? It will be costly, with bonuses of up to €7000 euros per car. Montebourg thinks this will be "self-financing" because of the penalties attached to the purchase of highly polluting vehicles, but I'm not sure the arithmetic works out: if the plan is self-financing, it would be effective in stimulating a moribund industry or encouraging a shift to new technologies, and if it isn't self-financing, it will heavily burden the state. Meanwhile, PSA announced huge losses of nearly $1 billion for the quarter.

Wednesday, July 25, 2012

Tuesday, July 24, 2012

Italy Wants a Signal

As I said in a previous post, the euro crisis is coming to a head. Italy wants a "signal" from "Europe" that it will stand by commitments made at the recent summit.

ROMA - Per Corrado Passera non c'è più tempo. "Un segnale lo deve dare l'Europa. Ed è ora che lo dia". Sia per tranquillizare i mercati che per raffreddare lo spread. Così il ministro per lo Sviluppo Economico, a margine di un'audizione sulle ecomafie, ha risposto ai giornalisti che gli chiedevano un commento sull'attuale situazione economica dell'eurozona.
But who speaks for "Europe"? And what sort of signal will it take to calm the markets this time? La Repubblica seems to think that "Parigi" is standing with Italy:
Parigi, Roma e Madrid: "Attuare impegni"

But "Parigi" is speaking softly, if at all, and not carrying a very big stick, as far as I can see.

UPDATE: See Trisha Craig's comment on the regional contribution to the woes of Italy and Spain.

Response to Commenters

Some comments on a previous thread concerning Hollande's speech at the Vel' d'Hiv' prompted this response from me, which I think is worth posting here, where it will be more visible:

Yes, Roosevelt loathed de Gaulle, because in his eyes de Gaulle was a fantasist who took himself to be "France." A bit like Joan of Arc hearing voices, or an asylum inmate imagining that he is Napoleon. And you can see the thing from Roosevelt's point of view. In one discussion, Roosevelt and Churchill were laying plans for a major operation, talking about deployments of troops, fleets, airplanes. De Gaulle piped up: "France will contribute 1,000," he said. Roosevelt wondered, "One thousand what? Tanks? Divisions? Ships?" So he put the question to de Gaulle. The answer: "One thousand men." To a leader thinking in terms of hundreds of thousands of troops, this may well have seemed ... risible.

But Roosevelt underestimated the importance of symbolism, which was de Gaulle's forte, and when circumstances are right, symbolism can turn into real force. It has been estimated that the French Resistance was worth several divisions to the Allies. But all this is quite irrelevant to Hollande's apology. Unlike Boris, I find the Franco-Israeli historian's contribution quite small-minded. True, de Gaulle and the Resistance did not have the fate of French Jewry in mind (nor did Roosevelt, for that matter). But it's quite right of Hollande, who is the leader of all the French, not just French Jewry, to recall, while apologizing for France's failings, that de Gaulle and the Resistance did save France's honor by refusing to capitulate. What made Hollande's speech so splendid was that he didn't feel the need to choose: either I am a Gaullist or I am a defender of the Jews. No: he said forthrightly that one can speak of the Jews and still pay homage to de Gaulle. I wish that Henri Guaino, now joined by Bruno Le Maire, who really should know better, understood this.

(I will have to rethink my previous praise for Le Maire. Both his interview with Mediapart and his statement on the Hollande speech were extremely disappointing. I gave him credit for more intelligence.)

Greece Is On Its Way Out ...

I'm not normally a betting man (although I do invest in the casino known as the financial markets, which may be a crazier thing to do than putting on a tux and heading for Monte Carlo), but I'm willing to give odds that Germany has decided to let Greece go. I know that the FDP doesn't speak for Germany, but here is what the party's secretary-general said:
"Athen ist bei der Euro-Rettung zum Hemmschuh geworden. Die mangelnden Fortschritte Griechenlands bei allen Reformen, Sparvorhaben und Privatisierungen führen dazu, dass die Finanzmärkte die immensen Anstrengungen in anderen europäischen Ländern nicht ausreichend würdigen", beklagte Döring nun.
"Athens has become an impediment to saving the euro." You can't put it any more bluntly than that. Making an example of Greece didn't prevent contagion to Spain and Italy, which was the real purpose of putting the screws to Greece, so why bother pouring more money into that bottomless pit? So say Germany's archest neoliberals. So it's on to plan B, or is it plan W--I've lost count.

Hollande has thus far been quiet, but with Germany now on negative watch by the ratings agencies, it's clear that Europe must try something new. If the Germans jettison Greece, there's not much France can do to stop them--if it even wants to. But the growing danger is that Germany may decide that it's had enough of the euro altogether. It may persuade itself that it conceded too much to France in the construction of the euro, not to say the EU, and decide to go it alone, or propose a new currency union excluding the troubled economies. I think the endgame has begun, and France will not be able to remain silent much longer.

La Bise, or France Comes to America

After freedom fries, French kissing in the land of the free and home of the brave, armed to the hilt? The French are amused.

Monday, July 23, 2012


In today's mail arrived the news that I have been promoted from Chevalier to Officier de l'Ordre des Arts et des Lettres. Indeed, it seems that the promotion was actually made some months ago, while Sarkozy was still president, but since the wheels of the French bureaucracy grind exceedingly slowly, I had no idea. As someone told me the last time I received a French decoration, the proper attitude to take is, "Ça ne se demande pas, ça ne se refuse pas, ça ne se porte pas," but I confess that I do occasionally wear my lapel ribbon.

Is the End Nigh?

For the euro, that is. As FT Alphaville points out, Spain has €44 billion in reserves and imminent needs to fund a lot more than that in interest and principal turnover:

Italy is not in much better shape. So, will the ECB start buying? Will Germany let it? Will Greece exit, since the IMF is ready to pull the plug? Will a Greek exit precipitate a general collapse or a division of the euro into two zones, a Neurozone and a Seurozone? The old worries are back with a vengeance.

Le Cacheux on Competitiveness

Jacques Le Cacheux has an excellent analysis of France's competitive position and of proposals to improve it. Among other things, Le Cacheux notes (as I have repeatedly emphasized here) that France has a serious problem in manufacturing due in part to high unit labor costs in that sector:
Pourtant, l’indicateur se référant à la seule industrie manufacturière délivre un message bien différent (graphique 2) : en moyenne depuis le lancement de l’euro, la compétitivité-coût de l’industrie française par rapport à ses partenaires de la zone s’est sensiblement maintenue, se dégradant très légèrement sur la période ; mais dans le même temps, l’industrie allemande a, quant à elle, très substantiellement amélioré la sienne – de près de 20%.
This is not the whole story of France's deteriorating current account balance, to be sure, but it is part of the story, and Hollande's determination to attack this problem is praiseworthy. In the remainder of his piece, Le Cacheux carefully analyzes the positive and negative aspects of both the social VAT and the CSG. Here is his bottom line--cautious approval of the Socialist strategy.:
Alléger le coût du travail en transférant la charge d’une partie du financement de la protection sociale vers des prélèvements autres que les cotisations sociales apparaît souhaitable et possible, tout en rendant le système fiscal français plus juste. Pour ce faire, il convient de compenser la baisse des cotisations sociales, patronales, mais aussi éventuellement salariés, par un alourdissement des prélèvements pesant sur la consommation et sur les activités polluantes, afin de modifier résolument les prix relatifs, donc les incitations qui pèsent sur les entreprises et les ménages dans leurs choix de techniques de production et d’emploi et dans leurs choix de consommation ; et de conduire en même temps une réforme de la fiscalité directe qui permette de compenser les effets négatifs de ces modifications sur le pouvoir d’achat des détenteurs de revenus modestes et de rendre l’ensemble des prélèvements directs plus progressifs. Alourdir la CSG sans conduire cette grande réforme[2] serait léser ces catégories.

Du Rififi chez les ex-Sarkozystes

Defeat is a beautiful thing in politics because it strips away all the hypocrisies that surround power as long as it lasts. Thus we learn that Raffarin saw Fillon as a man "sérieux, secret et solitaire" who lacks the stuff of a "party leader," though other "missions of the first rank" might be found for him at some future date. Copé, on the other hand, gets Raffarin's support not because he has the stuff of a party leader but because he was loyal to Raffarin when the latter was prime minister--"he scratched my back, so I'll scratch his," a high political principle, to be sure. Meanwhile, NKM has thrown her hat in the ring, while Bruno Le Maire, as we saw last week, has timidly dipped his toe in the waters.

NKM and Le Maire are running on what they call their "ideas," although no actual ideas are in evidence. What they mean by "ideas" is a readiness to reconsider the premises of Sarkozy's program. Having judged that the party received a "whupping," both think that they need to put a new face on the interests that the UMP represents. Copé, on the other hand, is interested only in lining up big battalions behind him. He has the stuff of a party leader, dixit Raffarin, which means first and foremost knowing how to count. Fillon, on the other hand, is counting the number of party members who can't stomach Copé. This is substantial but probably not quite enough to put him over the top. So it's not a very edifying contest on the right, but at least it distracts the UMP from what would otherwise be its full-time occupation, sniping at everything Hollande has done. With the exception of Raffarin, who actually has some remarkably kind words for the new Socialist government. In fact, I'm surprised that these judgments didn't cause more of a stir than his relatively mild dig at Fillon:

Comment jugez-vous les premiers pas de la présidence et du gouvernement socialistes ?Le mérite de l'exécutif, ces premières semaines, c'est d'apporter un certain apaisement, dont la société française avait besoin. Je vois plusieurs éléments positifs, notamment en matière de politique étrangère : Laurent Fabius semble avoir réussi sa mise en trajectoire.
Mais apaiser n'est pas anesthésier, et je crains que l'évaluation que fait M. Hollande de la crise manque de gravité. Par exemple, le choix de la loi organique plutôt que de la loi constitutionnelle concernant la "règle d'or" serait un mauvais signal, à la fois pour nos amis allemands et pour les marchés. Je crains que de trop nombreuses décisions ne soient reportées à 2013. Les impôts tout de suite, les réformes demain, c'est dangereux.
Que pensez-vous de la suppression des exonérations de charges sur les heures supplémentaires votée mercredi à l'Assemblée nationale ?Je comprends qu'il s'agit de tenir des promesses. Mais je pense que la décision est mauvaise. Nous n'avons pas la même philosophie que la gauche en matière de travail. La droite est favorable à l'augmentation du travail, la gauche au partage du travail. C'est un vrai clivage.
La gauche semble s'être convertie à la baisse du coût du travail, est-ce une bonne nouvelle ?Progressivement, la réalité s'impose à tous les gouvernements. Trop de socialistes ont cru que la crise était imputable à Nicolas Sarkozy. Mais ce dernier est parti, et la crise et ses effets sont toujours là. M. Louis Gallois [ancien président d'EADS, commissaire général à l'investissement] a appelé à un"choc de compétitivité" pour la France, c'est le nouvel "impératif industriel". Je pense que c'est un début de lucidité économique.

Hollande at the Vel' d'Hiv'

François Hollande gave a superb speech, one of his best, at the site of the Vel' d'Hiv', where Jews rounded up by the French police in 1942 were taken to await deportation. Giving full credit to Jacques Chirac, who was the first French president to acknowledge the responsibility of the French state--the French Republic--in this crime, he went even further than Chirac had.

Some people on the right are not happy, however. Henri Guaino is one of them. From Guaino we hear the familiar refrain that Vichy was not France, that the true France was in London with de Gaulle, etc. etc. One can understand the argument at a symbolic level, however feeble the actual adherence to the idea, let alone the reality, of resistance in 1942. What is not acceptable, however, is Guaino's further suggestion that Hollande's acceptance of responsibility in the name of France is motivated by an alleged affinity between Hollande and the collaborators of the 1940s:

Peut-être que M. Hollande se sent plus proche de la France des notables apeurés qui se sont précipités à Vichy après l'armistice? Ce n'est pas ma France.
This is a slur on anyone whose reading of history is different from Guaino's. It is tantamount to an allegation that anyone who does not believe that l'Appel du 18 juin exonerates France--the state and the nation--of all responsibility for what happened during World War II is "objectively" a collaborationist. Such a charge is unworthy of M. Guaino, who is a student of history. He should know better, however commendable his commitment to the Man of June 18.

Friday, July 20, 2012

Euro Falling Again

The markets are not happy with the Spanish bailout:

And the euro is falling again:

Interview with Doug Henwood

Doug Henwood, the perspicacious mind behind the Left Business Observer, interviewed me the other day for his radio program. You can find a recording here. I'm the first guest for the July 19 broadcast.

The Montebourg Enigma

Arnaud Montebourg: grande gueule and showboat, as his detractors say, or pourfendeur des patrons et protecteur des veuves et des orphelins, as Audrey Pulvar no doubt imagines him? Perhaps a little of both. The two are hardly incompatible. In any case, the omnipresent Arnaud has riled up the Peugeot family, Copé, and perhaps a few Socialists a little jealous of his Sarkozyesque flair for putting himself in front of cameras and microphones at every turn. The real question, however, is not whether Montebourg is too theatrical--of course he is--but whether theatrics can be more effective this time than when, say, Eric Besson, with similar effets de manche, called in the CEO of PSA to jawbone him out of outsourcing some productive functions to Eastern Europe. Because you can't simultaneously fault Peugeot for its failure to develop a winning business strategy and for its failure to face down the previous government when a business strategy that might have proved effective ran counter to the government's wishes.

To be sure, Montebourg's specific charges include an excessive withdrawal of capital from the firm by family interests, which arranged to pay themselves too much in dividends rather than plow the cash back into a failing company. But let's face it: a Socialist government trying to manage a neoliberal economy is frequently going to find itself hoist by its own petard. Outsiders who watch the shadowboxing exhibitions mounted for the diversion of the public can't really form a clear picture of what's going on. Montebourg might have some idea, but then again he might not. He might give himself a better shot at acquiring a clear idea if he adopted a less aggressive public line, if he sought to reconcile company executives, union representatives, suppliers, and other interested parties for the purpose of reaching a consensus as to what a viable strategy might be. This would be the German approach, but neocorporatism wasn't built in a day, and it may not be compatible with French mores. So what alternative does Montebourg have, realistically speaking? If he finds the right combination, he may be destined for great things. If, as is more likely, he doesn't, he may find himself the first ex-minister of the Ayrault government.

UPDATE: Apparently there will be subsidies to manufacturers for producing the "right" kinds of cars:

Ce plan passera par un "soutien massif" aux véhicules "innovants et propres",mais le gouvernement exigera des "contreparties" des constructeurs, selon le ministre du redressement productif. "Nous écartons la prime à la casse et nous nous dirigeons vers des formes de soutien massif vers les véhicules (...) hybrides et électriques", avait expliqué M. Montebourg. "Nous sommes très tentés d'accentuer les mesures liées au bonus malus écologique", avait-il ajouté.
Renault a fait de l'électrique un axe majeur de son développement, tandis que PSA Peugeot Citroën privilégie l'hybride. "Nous souhaitons pousser cet avantage, donc finalement favoriser les constructeurs qui travaillent sur le territoire français", avait déclaré M. Montebourg.
Is this the "right" strategy? Without knowing more about where the research & development efforts of the respective companies stand at the moment, it's hard to say. Competitive new technologies cannot be put in place overnight. PSA's partnership with GM may be key here, but what PSA has in mind does not appear to be a Euro version of the Chevy Volt. If it is going hybrid, it will be competing directly with Honda and Toyota, which have a substantial advance. Unless PSA has a winning product up its sleeve, one might question the wisdom of this choice.

The New ISF in Images

Under the Socialists, the rich will pay more in wealth tax, more in income tax, and more in the CSG. In short, the entire fiscal program of Nicolas Sarkozy has effectively been repealed. The image shows the increase in wealth tax for various levels of wealth.

Thursday, July 19, 2012

The IMF Is Alarmed

“The euro area crisis has reached a new and critical stage. Despite major policy actions, financial markets in parts of the region remain under acute stress, raising questions about the viability of the monetary union itself. The adverse links between sovereigns, banks, and the real economy are stronger than ever. As a consequence, financial markets are increasingly fragmenting along national borders, demand is weakening, inflation pressures are subsiding, and unemployment is increasing. A further intensification of the crisis would have a substantial impact on neighboring European countries and the rest of the world.”
More here.

Wednesday, July 18, 2012

Whither France?

The growing strength of the Front National was vividly driven home to me today. Some years ago, as a result of my blogging, I was contacted by a young Frenchman, a student then 18 or 19 years old, who was a passionate supporter of Ségolène Royal. He intensely disliked Sarkozy and was such a Ségo enthusiast that he ran a Web site devoted to her doings. We would gChat from time to time. It was interesting to me to make contact with this young man from the provinces, quite interested in politics, a little untutored, to judge by his frequent grammatical errors, but reasonably well-informed. Over the past two years or so, he stopped contacting me, and I more or less forgot about him, until today, when he turned up on my screen. I said I recalled his prediction that Sarkozy would lose in 2012, which at the time was by no means a sure bet. And he replied that yes, the Left had won, but he could no longer support the Left because he had gone over to Marine Le Pen. He liked her patriotism, her defense of the French worker, and her strong image, while he disliked the Left's "betrayal" of what he considered to be the traditional values of the Left. I reminded him that he had once been such an admirer of Royal's that he had asked me to pass her a note when she came to Harvard, which I did. He didn't like to recall those days, when he was "naive." Now, having passed his nursing school exams, he plans to apply for a position in the Gendarmerie.

When one reads about the progress of the FN in the abstract, it's one thing. When one sees the effect on a person one knows, however remotely, it's quite another, and actually startling.

Tuesday, July 17, 2012

Overtime Taxed Again

Another Sarkozy reform disappears: taxation of overtime pay will resume on Aug. 1. There will be no retroactive tax, however. Overtime tax exemption did increase pay for a substantial number of workers, but it probably (the point is mildly controversial) encouraged employers to substitute overtime for new hires, so that its impact on employment was likely somewhat negative.

Saturday, July 14, 2012

Happy Bastille Day!

I'm off for a few days on Block Island, but I want to wish you all a joyous 14 juillet.

Thursday, July 12, 2012

French Auto Industry

Mediapart has an informative article on the state of the French auto industry and the positioning of various firms vis-à-vis the global market.

PSA Closure, Montebourg, etc.

With the news that PSA will close its Aulnay plant, I refer you back to this earlier post of a little more than a year ago. You may recall that, at the time, the union claimed that PSA was going to close the Aulnay plant, but the company said that the documents obtained by the union were only contingency plans. Besson and Fillon called in PSA executives and received "assurances," Fillon said, that the plant would not be closed.

Undoubtedly, as I wrote at the time, the plans were well advanced, and the only "assurance" Fillon received was that the plant would not be closed before the presidential election of April-May 2012, which would have been a major embarrassment to Sarkozy, since the state had subsidized PSA during the crisis. Is it any wonder that "trust" among the French social partners is low, given this record?

On the other hand, is it any wonder that PSA is outsourcing its auto assembly, as I also wrote at the time? French unions, unlike German, Spanish, and Italian unions, have been unwilling to make changes in work rules and to adapt to the changing scale of auto production around the world. And the trade figures have reflected this. As I have also repeatedly emphasized, French auto imports have been increasing. This category is one of the most alarming trouble spots in French trade data.

So there is plenty of blame to go around here. The ball is now in Arnaud Montebourg's court. hew ill be on TV tonight, and on July 25 he will announce a "support plan" for the French auto industry. But realism is in order. The government cannot alter global realities in the auto market by fiat (no pun intended, even if Fiat has been more pro-active in this area than French firms). Nor can the unions expect the new government, merely because it is of the left, to respond to their understandable grievances by granting them all their wishes. Change is required, and change cannot be expected to be rational, or to succeed, if the parties distrust one another so deeply that essential information is concealed. This whole episode has been a sorry one in French industrial relations. Let us hope that Montebourg draws the correct lessons from the previous government's egregious mishandling of the situation.

Wednesday, July 11, 2012

The Endless Quest for an Antiliberal Left

Mathieu Laurent proposes an interesting analysis of what he calls the "antiliberal left." Since the demise of communism, this segment of the electorate has undergone endless "recomposition," with militants and voters shifting from party formation to party formation. Absolute numbers wax and wane with the political fortunes of the day, but the distribution of these forces varies as one new beacon after another rises, only to disappoint the hopes of followers. What is the deep reason for this phenomenon? Two suggestions: Philippe Raynaud sees the absence of the "scientific" core of certitude that underlay what he calls "the communist illusion," while Daniel-Louis Seiler sees "hostility to the system" without offer of "a clear alternative":

Comme le note Philippe Raynaud, qui a étudié la littérature de la gauche radicale : “Chez aucun des auteurs, brillants ou laborieux, que nous avons étudiés, nous n’avons rencontré ce qui faisait la force de l’illusion communiste : la certitude d’être au service d’une cause à la fois juste et scientifiquement fondée, qui devait inéluctablement conduire à l’émergence d’une société radicalement différente” . De la même manière, pour Daniel-Louis Seiler, “les partis étudiés ici se caractérisent plus par l’hostilité au système ou à ses abus que par la proposition d’une alternative claire” . La gauche antilibérale, si elle veut gagner en densité politique, devra réussir la synthèse entre plusieurs projets de transformation sociale : entre la rupture révolutionnaire prônée par l’extrême-gauche, la “révolution par les urnes” du Front de gauche et la “simplicité volontaire” des objecteurs de croissance, le travail de synthèse s’annonce ardu.

Le Maire Discovers la Langue de Bois

Bruno Le Maire is a bright guy. I liked his memoir of his years with Villepin. I have no doubt that he's an able fellow. I've said several times that I think he's destined for leadership on the Right. And he's begun to make his move, starting with this lengthy interview in Mediapart--not by any means a cozy venue for a man of the right. But oh my God, quel carambolage! This may be the most extended exercice de style langue de bois I've seen in many a year. A fair sample:
Il faut rebâtir brique par brique, lentement, avec méthode.
La première brique, ce sont les idées. La deuxième, l’organisation du parti qui en découle. Ensuite, il faudra nous mettre en ordre de bataille pour gagner les élections locales de 2014. Les élections nationales viendront plus tard. Notre vision de la société doit défendre une unité de la nation française. Car un des problèmes majeurs auxquels nous nous heurtons est la balkanisation de la société française : des communautés juxtaposées les unes aux autres, des citadins qui ne comprennent plus les habitants des communes rurales, des ruraux qui ont un sentiment de relégation, des habitants des quartiers privés des opportunités nécessaires. Nous devons répondre à ce nouveau paysage français.
Yes, we get it. His thing is "ideas." He tells us that at least a dozen times. But what ideas? Ah, there it becomes a little more difficult to pin him down. Because he doesn't want to alienate anyone in the UMP, whether it be Patrick Buisson, Nicolas Sarkozy, Jean-François Copé, François Fillon, or whomever you might care to name. Heck, he doesn't even want to alienate the centrists, so he has some nice words for the Christian Democrats. Just about the only "idea" he has no use for is the stigmatization of "l'assistanat," and it's not hard to divine what lies behind that rare moment of candor: Laurent Wauquiez, the other jeune espoir of the UMP, the other bright, ambitious énarque reaching for the brass ring. So Wauquiez merits un coup de griffe.

But otherwise, it's all one big happy family. "We bear a collective responsibility for our loss." "Droitisation? What droitisation?" We're even entitled to another lyrical flight on the subject of "security":

Q. Le discours de Grenoble se situait pourtant sur le terrain des idées, en détaillant toute une batterie de mesures ultra-droitières en matière de sécurité, de récidive, de vidéo-surveillance, de nationalité ?
A. Qui peut nier les attentes en matière de sécurité ? En revanche, ces attentes ne seront pas les mêmes d'un point à un autre du territoire. Voilà la difficulté pour la droite républicaine : apporter une réponse unie à des situations régionales diverses.
Right. The problem wasn't poaching on the territory of the FN,  it was lack of attention to "expectations that won't be the same in one place as in another."

I wish you luck, M. Le Maire, but you're going to have to step up your game if you want to play on the national level.

Tuesday, July 10, 2012

Fake Tocqueville Quotes Never Die

Here is one of the more persistent ones. As a translator of Tocqueville, I frequently receive queries about this or that remark that Tocqueville is alleged to have made. By now I can recognize the common forgeries, which are frequently found posted on conservative Web sites, because they enlist Tocqueville's authority on the conservative side in some contemporary policy controversy. Tocqueville, don't you know, opposed Obamacare, tax increases on the wealthy, regulation of financial markets, what have you. Except he didn't. The forgeries usually contrive to dress up the reactionary wisdom of the moment in some sonorous verbiage intended to make the reader think that some supposedly imminent danger to the Republic was long ago foreseen by the French sage.

It's more difficult when I'm asked about a passage that I don't immediately recognize as one of the standard forgeries. Although I've translated a lot of Tocqueville, more than 3,000 pages altogether, I haven't translated let alone read or memorized all twenty-some volumes of his collected works. And it's hard to prove a negative. Tocqueville held many views on many subjects and sometimes contradicted himself, so it's perfectly possible that he said some things that may appeal to this or that contemporary political observer even if they aren't consistent with the main thrust of his thought, because he wasn't always consistent with himself. But be forewarned: if you see a Tocqueville quote which does not come with a specific reference to chapter and verse, don't count on its reliability.

Le socialisme gestionnaire

Out of power, the Socialists pretended that France's competitiveness problems could be solved by "innovation." Creativity, after all, costs nothing, while the idea of nurturing it can justify the hiring of 60,000 additional schoolteachers. In power, however, the need to compete now, not ten years from now, has seemed more urgent and compelling. So, heeding calls from the Medef and left-leaning former EADS CEO Louis Gallois, among others, François Hollande has signaled his readiness to reduce employer contributions to social security and shift the burden to the CSG, which will broaden the tax base (including to income from capital) while presumably--presumably--allowing companies to reduce prices. Of course the additional burden on taxpayers may reduce demand as well (but, since every cloud has a silver lining, a reduction in demand for imports would in fact be welcome). Apparently, an increase in the VAT has been ruled out, for reasons that are unclear (to me, at least).

Whatever the merits of the move, this is the kind of reversal of direction that makes many people despair of politics. The ease with which firm principles and convictions are shed as a party moves from opposition to government easily leaves the impression that most political debate is Kabuki theater. Alas.

UPDATE: And right on cure, the UMP shows that it, too, can play this mug's game. Although only yesterday it was ready to approve a social VAT, today the idea of a "tax increase on those who work" is anathema:

"Une augmentation de la CSG, pour moi, c'est criminel", a déclaré mardi 10 juillet l'ancien ministre UMP Laurent Wauquiez sur France 2, en commentant la conférence sociale qui se déroule depuis lundi à Paris."La réalité, a-t-il poursuivi, c'est qu'on s'apprête à nous habiller sous des grandes phrases une hausse brutale d'impôt, et à augmenter la CSG mais surtout sur ceux qui travaillent".

The Spanish Spending Spree

The Spanish central government was exemplary in its budget discipline before the crisis, but the same cannot be said of regional governments, which availed themselves of cheap funding from northern Europe to go on a spree based on grand illusions. (h/t Glyn Morgan)

The European Disunion

It's no wonder France, Germany, and the Netherlands can borrow at negative interest rates. The situation with respect to Spain and Italy is so confused that investors can hardly do anything but flee those countries. Not only can the Europeans not agree about what to do, they can't even agree about what they've agreed to. The Eurogroup finance ministers issued a statement meant to clarify things. There would indeed be direct subsidies to banks without sovereign guarantees: Then, there will be no sovereign guarantee required,” Thomas Weiser said at the press conference.
But… hang on now. Even when the eurozone-wide banking supervisor is all agreed and ready to go, will the recaps made after that point really not add to sovereign risk? German finance minister Wolfgang Schauble doesn’t think so. He also made a statement in the early hours of this morning. From the WSJ:

“We expect that the final liability of the state will remain” even once the banking supervisor is up and running, he told journalists. He added that what mattered was that the bank support wouldn’t add to a country’s debt—something that he said would be possible even under a scenario where the government retained liability for potential losses.
If you were trying to sabotage the agreement, if there was an agreement, you couldn't do it more effectively. So what exactly did the Germans agree to at the summit? Did they go the full Monti, as Monti claims, or did they leave sovereigns on the hook for any bailout aid to their banks? We may never know, since this "agreement" is likely to be rendered inoperative and supplanted by another even before the "comprehensive supervisory authority for banks" on which the bailout recaps are conditional is up and running.

Monday, July 9, 2012

France Borrows at Negative Rate

Good news for France, which just borrowed €6 billion in short-term funds at an interest rate of -0.005 to -0.006 %. Not such good news for Europe, since the negative short rates now enjoyed by France, Germany, the Netherlands and a few other countries reflects investors' lack of confidence in Italy and Spain, which desperately need their money to roll over their existing sovereign debt and buy new issues. What's more, the ECB's decision to stop paying interest on deposits has money-market funds so nervous that some are limiting withdrawals. Once again, a European summit has failed to calm the markets for more than a few hours, and the flight to (relative) safety has become a massive transhumance of the investing herds and flocks.

Love Is Never Having to Say You're Sorry

Should Hollande finally apologize to Algeria for France's treatment of the country. Jonathan Laurence considers all the angles. 

With a soupçon of diplomatic courage, Hollande and his team could help turn the remaining two years of the Algerian president's term into something more than the twilight of a lame duck. Bouteflika himself announced in May that the country's political class resembled an "overripe orchard" -- i.e.,time to make room for the next generation to blossom -- and that he would not run again for president. Saying sorry now would provide closure to the Algerian leadership, many of whom personally fought in the war of independence, and help transition the FLN to a post-revolutionary era.
Even if France didn't believe this Algerian regime deserves the honor of a unilateral apology, withholding one strengthens the hand of nationalists who portray a hostile and conspiratorial Western bloc to justify their grip on power. In May, the prime minister drew connections between "the colonization of Iraq, the destruction of Libya, the partition of Sudan and the weakening of Egypt" as all being "the work of Zionism and NATO."
Hollande needs to find a way to issue French regret in a show of respect for the historical parties in power, while addressing the Algerian people's yearning for internal reform as a counterpoint to French contrition. This bilateral relationship is critical in matters of security cooperation -- from counterterrorism to the chaos in Mali -- and it is worth billions in trade and natural gas contracts. Only once France and Algeria look beyond the colonial era can their vital collaboration work on behalf of the shifting regional dynamics -- and not against them.

Financial Management of Sciences Po Questioned

By the Cour des Comptes.

Where Are They Now?

A reader complained to me recently that there hasn't been enough gossip and tittle-tattle on this site since I swore off DSK-blogging. So here's some, and it may also slake the thirst of those who lament the fact that Nicolas Sarkozy, erstwhile czar of France, has disappeared from the national consciousness as swiftly and completely as George W. Bush disappeared from the American. It's an interesting aspect of our lately vituperative and polarized democracies that all-in-all mediocre figures are inflated to rather absurd proportions by the blockages that their terms in office create, only to diminish into mere mediocrity once their terms have ended. In any case, here is the Sarkozy scuttlebutt, straight from that paragon of honest reportage, The Daily Mail:
The book has also made claims about Bruni's present husband, former French Prime Minister Nicolas Sarkozy who refused to buy a luxury Paris apartment with Bruni - because it was next door to her old flame Mick Jagger.

The 'jealous' former President backed out of the purchase after the couple went house-hunting in the French capital three years ago.
Sarkozy is said to have initially fallen in love with the lavish ten million pounds penthouse once owned by fashion designer Yves Saint Laurent.
But he was then informed by his aides that the Rolling Stones rocker that Bruni dated for eight years owned another flat in the same block on Paris' trendy Left Bank.
Anderson writes: 'The president fell under the charm of this apartment in Paris.But as they were preparing to buy it, his security detail informed him that Mick Jagger owned a flat in the same building. Sarkozy then backed out of the deal.
Be sure to check out the article for the views of Donald Trump, Eric Clapton, and Mick Jagger on the former First Lady.

The CGT on the Eve of the Social Conference

The "social conference" promised by François Hollande begins today. Guy Groux looks at one of the major participants, the CGT, one of France's two leading trade unions, now in the throes of a crisis of succession. But even more important than that, Groux argues, is the difficulty the CGT has had in developing a response to the economic crisis:

La crise économique, financière et budgétaire bouleverse une CGT dont la stratégie revendicative demeure souvent très motivée par la défense résolue des acquis. Or la crise économique et budgétaire rend plus précaires et limitées, l’existence de pratiques redistributives ou celle de nouveaux financements publics ; elle renforce des formes de négociations collectives fondées sur des concessions mutuelles comme celles initiées dans l’Europe du Nord, par exemple. Or, si la CGT a récemment admis le principe de la négociation collective pour aboutir à de réels résultats à l’égard des revendications des salariés, est-on sûr qu’elle est aujourd’hui souvent prête à accepter des compromis impliquant de réelles concessions syndicales ? On peut en douter au regard des postures de dénonciation qu’elle adopte sur les accords liant l’emploi et la compétitivité des entreprises, la réforme des retraites, la récente augmentation du SMIC, la baisse envisagée des effectifs de fonctionnaires, les projets gouvernementaux sur la régularisation des travailleurs sans papiers, l’existence d’un pacte budgétaire européen, pour ne citer que ces exemples majeurs. Au fond, la culture historique et revendicative de la CGT se défie profondément des tendances à l’œuvre dans le capitalisme d’aujourd’hui tandis que la crise économique actuelle met en cause, et plus que jamais, l’essentiel des stratégies revendicatives de la centrale fondées sur un fort attachement aux acquis collectifs, statutaires ou juridiques des salariés. D’où un hiatus profond entre l’organisation de Bernard Thibault et le contexte économique où elle agit.

Economists' Petition

From Mark Thoma comes word of a sensible petition on the euro crisis by German, Austrian, and Swiss economists:

In support of a European banking union, done properly: A manifesto by economists in Germany, Austria and Switzerland, by Michael Burda, Hans Peter Grüner, Martin Hellwig, Mathias Hoffmann, Gerhard Illing, Hans‐Helmut Kotz, Tom Krebs, Jan Pieter Krahnen, Gernot Müller , Isabel Schnabel, Andreas Schabert, Moritz Schularick, Dennis J Snower, Uwe Sunde , Beatrice Weder di Mauro, 9 Jul 2012: The EU Summit decision on banking union is being questioned by some economists in Germany. This column argues that a banking union is a critical step in ending the EZ crisis and building a more stable EZ financial architecture. It is a translation by Michael Burda of the German-language manifesto drafted by the First Signatories listed below and signed by over 100 economists.
The financial crisis has exposed a fatal flaw in the design of European monetary union which can be removed only by decisive policy action. Policymakers in Europe now have an opportunity to change the game. A central aspect of this problem is the conflation between debt of the private sector and that of European national governments.
In the course of the crisis, fiscal budgets are being tapped to refinance systemically relevant financial institutions. At the same time, financial institutions continue to play a central role in financing national governments, lending money to them and holding their debt. An unavoidable consequence is that bank failures have led to sovereign debt crises and sovereign debt crises have led to banking crises, leading to growing mistrust of both national banking systems and government finance. The situation is aggravated by the fact that international investors, driven by fear of total collapse, have withdrawn funding to struggling countries, both for governments and for banks.
This has in turn led to a balkanisation of national financial markets and threatens not only the European monetary union but the European integration project as a whole. Only by breaking the link between the refinancing of banks and the solvency of national governments will it be possible to stabilise the supply of credit in crisis countries. If the refinancing of banks – and the insurance of bank deposits – can be made independent of the financial state of the respective domiciling country, national sovereign crises can be decoupled from the private sector financing. In this way, contractionary demand shocks induced by corrective national fiscal policy can be softened by a broadening of the supply of credit. A European backbone to the refinancing of banks will dampen the impact of the coming fiscal consolidation. An indispensable requirement for this is a set of uniform regulatory banking standards which are implemented by a single European authority.
Deeper financial integration and a de-coupling of government and banking finance are essential elements for a more stable financial architecture in Europe. These steps are important for breaking the vicious circle between sovereign debt and banking crises. A monetary union with free capital flows cannot work reasonably without a unified banking framework. For this reason, the decisions of the last EU summit represent a move in the right direction. Now it is crucial to implement these decisions, in order to create a durable solution with uniform European structures. In no way does this endorse a collectivisation of bank liabilities. Rather it is essential to cede key powers of regulatory intervention in member countries to a banking supervision authority at the European level. This European banking supervision authority should have the ability to authorise rapid recapitalisation of troubled banks. In extreme cases, this may mean the expropriation of previous equity holders and the partial conversion of bank debt into equity. A unified resolution procedure must be capable of recapitalising, unwinding, or liquidating insolvent financial institutions in an impartial manner.
At the same time, creditors must be made liable for risky investments, so that the resolution of troubled financial institutions can be executed without taxpayer money. In order to secure the financial stability of a banking union, a common restructuring fund that can intervene and impose binding conditionality on reorganisation plans is needed. The ESM can play this role. A stronger Europe-wide deposit insurance system can also contribute to the long run stability of the banking system.
Only a European banking supervisory authority with sweeping intervention powers can break the linkage between the financing of governments and of banks. It would represent an important step towards solving the problems presently faced by the Eurozone. In contrast, it is much more difficult to intervene directly in the fiscal affairs of Eurozone states – this would require a process with democratic legitimacy, which remains a very remote option at the present. A banking union is thus only part of a complete solution. The mechanisms and budgetary controls that would be implemented in the framework of a European Fiscal Pact are also needed to restore public budgets to sustainable paths.
A banking union can help decisively to secure the financial integrity and stability of the European monetary union. For this reason, the signatories of this manifesto support the creation of a durable, unified framework at the European level which can serve to break the link between the funding of private banks and the public purse.
Editor’s note: This is the English translation of the manifesto that has more than 100 signatories; The original, German-language version can be found here.


Angela Merkel and François Hollande managed to project a little actual or simulated warmth yesterday as they celebrated 50 years of Franco-German entente. It's nice to see them thinking about something other than the euro for a change. The economic imbroglio, which has pushed all other aspects of the European project into the shadows for the past two years, was not allowed to obscure the importance of a partnership built on the ruins of three disastrous wars. The importance, and even the sacred memory: the two leaders joined in a service at the cathedral of Reims, and thus far I haven't heard any snippy remarks about violations of republican laïcité. For after all the cathedral itself, though a potent symbol of the French monarchy, was also a victim of one of those wars and therefore quite a suitable lieu de mémoire for a republican Catholic to meet with a German Protestant.

Now back to the euro. Because peace is not enough to ensure stability, as both leaders know well.

Sunday, July 8, 2012

A "Shock of Competitiveness"

What French businesses need to compete, the Cercle des Economistes seems to think, is a "shock of competitiveness":
L'ancien patron d'EADS Louis Gallois, classé à gauche, a fait l'unanimité en réclamant d'urgence un « choc de compétitivité », lequel devrait passer en France par une baisse massive des charges pesant sur les entreprises. « Il faut créer un choc de compétitivité sur les secteurs de l'économie française exposés à la concurrence étrangère. Il est impératif que le gouvernement transfère 30 à 50 milliards d'euros de fiscalité pour faire baisser les charges sociales de ces entreprises ».
"Il faut oublier les Etats. Ils en ont pour des années avant d'assainir leurs comptes et sont souvent dépourvus de vision à long terme." Yet it seems that the state is being called upon here to play an essential role by shifting the tax burden from firms to workers.

Parisot Foresees Wave of Bankruptcies

The head of the MEDEF (who has survived in her position for quite a long time) is painting a bleak picture of the state of French industry. There will be a wave of bankruptcies over the summer, particularly among small to medium firms servicing the auto industry, which has been in decline in France. Her proposal: competitiveness should be at the center of consultations among the social partners, and the burden of financing social protection schemes should be shifted from firms to the public via a "social VAT," a proposal already mooted under Sarkozy. It's very unlikely that Hollande will go for this.

New On-Line Journal

A new on-line journal entitled Contreligne has been launched. I am informed by the editor that it situates itself on the center left of the political spectrum and aims to be a generalist review of culture and politics along the lines of Commentaire and Esprit.

Saturday, July 7, 2012

French Trade

The French balance of payments in various trade categories (based on the Standard International Trade Codes) is shown below for both inter-EU trade and extra-EU trade. France is in increasing deficit with the EU27 but in rough balance with the rest of the world, despite a considerable deficit in the petroleum and other mineral fuels and lubricants category (POL). Note in particular the decline in French competitiveness in the Machinery and Transport Equipment and Other Manufactured Goods categories.

Friday, July 6, 2012

Jean-Marie Explains His Daughter's Success

She's a petite bourgeoise:
"Je suis un homme du peuple. Je viens d'une famille de paysans et de pêcheurs (...) J'ai été officier dans un régiment de parachutistes, j'ai eu une vie virile, c'est le moins que l'on puisse dire. Ma fille, quoi qu'elle puisse en dire, est une petite-bourgeoise", affirme l'ancien président du Front national, âgé de 84 ans.

Selon lui, l'élite parisienne le considère comme un être "grossier" et "inquiétant"mais accepte sa fille en raison de sa bonne éducation. "Mon image de diable s'est méthodiquement et avec ténacité imposée dans le monde politique français. Ma réputation d'antisémite a été créée artificiellement", déclare M. Le Pen au Times. "Mais ce n'est pas Jean-Marie Le Pen qui est le diable à leurs yeux, c'est le défenseur de la nation", ajoute-t-il.

Graph of the Day

Wednesday, July 4, 2012

Guaino n'aime pas Bachelot

Guilty of insufficient Sarkolatry.

Getting to Eurobonds

Many observers believe that, ultimately, eurobonds are the only way out of the euro crisis. But how to get there from here. This paper from Bruegel reviews the possibilities.

Tuesday, July 3, 2012

Gay Marriage for France

Jean-Marc Ayrault made several major announcements in his general policy speech today. One is that gay marriage and adoption will be legal in France from 2013. Another is that, as promised, foreigners legally residing in France for a requisite period will obtain the right to vote in local elections.

Elections do make a difference. Neither of these things--both major advances in my view--would have happened if Sarkozy had been re-elected.

Monday, July 2, 2012

Euro Crisis Survey

A survey of proposals to deal with the euro crisis, from OFCE.

Coming Up Short

Didier Migaud, a Socialist, comments on the audit conducted by the Cour des Comptes, which he heads. The report indicates that slowing growth has reduced anticipated revenues to the point where France needs to find an additional €33 billion euros in order to reach Hollande's self-imposed target of under 3% budget deficit by the end of 2013.

A combination of €33 billion in spending cuts and tax increases should not be impossible to achieve. It amounts to about 1.5% of GDP. The question is whether a decrease in the state deficit this rapid is warranted, or whether, as Paul Krugman and many others argue, it will only slow growth still further, probably tipping France into recession and deepening the state's fiscal hole. Absent some new source of aggregate demand, this downward spiral will almost surely be the result of rapid belt-tightening. Belief in "expansionary contraction" has been shown to be a pipe dream.

Is there any hope of a revival of demand to compensate for diminished government outlays? It's not likely to come from the private sector, which has increased its savings rate in order to rebuild its battered balance sheet. It's not likely to come from China, whose economy has been slowing. Exports to the US may increase somewhat, as the US economy continues its own excruciatingly slow recovery, and a continued fall of the euro might help here as well, but not much.

France's European trading partners won't be picking up the slack, as most of them are operating under imposed austerity regimes as well. Germans might of course buy more French goods if they wished, but French prices are unlikely to decline very much over the next two years. Germany may need to purchase more electricity from France as it closes some of its nuclear plants.

So Hollande is in a box. If he does what the Cour des Comptes says is necessary to meet his own goal, he will probably fail. If he doesn't, he will open himself up to the charge of reneging on his campaign promise, and the Right will lambaste him for irresponsible economic management.

The right thing to do, in my opinion, is to delay the budget reduction for a year, to announce forthrightly, while he still has the public's trust and mandate, that the goal cannot be met. So this is a test of both Hollande's grasp of the economic realities and his readiness to face slings and arrows in pursuit of the right policy.

Pirate Party

Those of you who follow politics in the rest of the EU are probably aware that the Pirate Party has been making waves in Germany. The Pirates, born in Sweden but spread to other countries, are sometimes dismissed as a "party of geeks," whose main interest is in the use of the Internet as a political forum, free sharing of software, music, and film, and opposition to laws allowing the state to monitor private Internet usage. But the German Pirates have expanded their purview to become a more broad-based anti-system party and defender of civil liberties. They have been receiving 6-7% of the vote in some elections.

In France, there is also a nascent Pirate Party, but it didn't fare well in the last legislative elections, garnering under 1%, despite fairly decent press coverage. This article describes the French Pirate Party and explains why it will have a hard time matching the performance of its German counterpart.

Eurozone Unemployment Hits 11.1%, a record

Toujours plus de chômage pour la zone euro en mai

Le taux de chômage dans la zone euro a atteint en mai un nouveau record, à 11,1 % de la population active, contre 11 % en avril. Selon les estimations d'Eurostat, 17,56 millions de personnes étaient au chômage dans la zone euro en mai, soit 88 000 de plus que le mois précédent.

La Guerre des Chefs

It's amusing to watch Jean-François Copé and François Fillon launch their guerre des chefs while solemnly pretending that there is no guerre des chefs. Copé was even more unctuous than usual last night on France2's JT 20h. He must have worked with a media consultant to cultivate a more "happy warrior" image. He was all smiles and, as usual, glib, wall-to-wall verbiage that added up to nothing.

Meanwhile, Fillon has enlisted the support of the party's chief wonks, Pécresse and Wauquiez, along with the folksier Bertrand. Only Lemaire is missing. And of course Juppé, who is playing his own quiet game. So it seems as if the battle lines are shaping up to pit "the base" against "the elite," which is merely a polite way of saying those who think the road to victory lies in going after the FN vote using whatever it takes and those who would prefer to talk about budgets, university reform, social policy, etc.

In other words, it will be ugly. Copé has yet to explain how his idea of la droite décomplexée differs from Sarkozy's--and, more importantly, from Buisson's. And he has yet to prove that pursuing an escalating rhetorical war on Muslims, insecurity, etc., will actually revive the UMP's fortunes rather than play into the hands of the FN. He cited his own record in Meaux in reducing the FN vote from a high of 23, but he didn't say what he had done to achieve this goal. In any case, he seems determined to bury Fillon under the weight of Sarkozy's failure while at the same time taking over the central themes of Sarkozy's failed campaign. The contradictions will be covered over with smiles and a verbal flow bordering on the hemorrhagic.

Fillon, on the other hand, remains the Knight of Doleful Countenance. It's hard to see how he overcomes his initial deficit in internal support. His phlegmatic appearance lacks Copé's beauf appeal. Right-wing parties everywhere are succumbing to populist fevers, and Fillon is not a natural populist. Copé--a corporate lawyer with the look of a high-pressure, low-ethic used car salesman--might not seem a natural charmer of the angry petite bourgeoisie either, but he's been honing his act for quite some time and seems to have made headway with the Café du Commerce crowd. But let's see if his smarmy manner can really survive five years of constant exposure as the leader of the Right. My guess is that it won't. But then I've never liked the guy.