Sunday, September 30, 2012

A Shameful Episode at Trocadéro

The French authorities are clearly nervous. Charlie Hebdo lit a fuse with its provocative cartoons, and certain zones of Paris have been placed off limits to demonstrators who might have a beef with the satirical newspaper. But the overzealous police seem to have taken the ban on demonstrations as license to cleanse the premises of anyone with the wrong racial identity. The treatment of the family described in the article is totally unacceptable in a liberal democracy, and the government should make amends to show that it understands this. (h/t Arun Kapil)

The Left of the Left Demonstrates

The Front de Gauche and allied groups will demonstrate today against the austerity policy that the government of François Hollande has embraced. Their anger is comprehensible. Hollande artfully campaigned on the notion that there was an alternative to austerity. He promised to renegotiate the Merkozy agreement, now respectfully rebaptized the TSCG and erected as a sine qua non of sound government. The gauchistes are also perfectly correct in their analysis of the consequences of austerity: there will be plant closings, business failures, layoffs, and suffering. To all of this Hollande now argues--or, rather, implies--that There Is No Alternative. This is the famous Thatcherite justification for retrenchment. So the only question is whether Hollande's implicit analysis is correct.

So what is the alternative? If France were to try deficit spending, would investors park their money elsewhere and send French borrowing costs higher? This is not absolutely certain. Germany cannot absorb capital indefinitely, and interest rates are already negative. To the extent that investors wish to remain in the euro, France would still be attractive even if it were to diminish the budgetary shock. Hollande seems to be gambling on "shock therapy": if he concentrates all the pain--a shock to GDP of -3%--in his first year, then things will improve over the remainder of his quinquennat. This would be a better bet if Germany were stimulating its economy, but it isn't, nor is anyone else in Europe. Hence the risk is a mutually reinforcing contraction that will steepen the slide and leave everyone in a deeper hole.

Politically, Hollande seems to be tacitly assuming that he can brave the anger from his left, because the left of the Left has no place to go. The Right can cavil, but he is essentially continuing the economic policy of Sarkozy-Fillon and in fact pushing ahead where they were too timid to go. His cuts are deeper, his tax hikes are sharper than the Right dared while it was in power. This is a big bet for an essentially cautious politician like Hollande, and it's not clear where he retreats to if things go wrong. Nor does he have any carrots to offset the lash of his many sticks. The likely outcome is a sharp rise in anti-EU, anti-German, anticapitalist sentiment.

Baroin Supports Fillon

François Baroin will support François Fillon in the UMP leadership fight. Fillon appears to have the support of more deputies than Copé, and he also enjoys greater support in the electorate at large, but it's the militants of the UMP whose votes are counted, and they appear to favor Copé. The vote will take place in November.

Saturday, September 29, 2012

The Budget

Taxes will be raised in France. Although the government has emphasized tax increases on high earners (75% on individuals earning more than  €1 million and creation of a new 45% tax bracket), a substantial portion of the increased revenue comes from freezing the current set of tax brackets (that is, not adjusting for inflation), a decision already made by the Fillon government. Call this a subterfuge or not, it extends the effective tax hike to some 36 million individuals. Coupled with spending cuts, this represents a serious contraction of the economy. France may have no choice if it is to keep its borrowing costs in line, but the likelihood is that this budgetary contraction will push France into recession next year. Since similar contractions are occurring across Europe, and since the countries of the EU trade intensively with one another, these national contractions will be mutually reinforcing. It is hard to see how Europe avoids a fairly sharp recession next year, and this may upset the budget calculations of any number of countries, including France.

A wave of layoffs is to be expected. Arnaud Montebourg, the minister of productive reinvigoration (I love that title!), has been ubiquitous on TV since taking office. He seems to be following a strategy pioneered by Sarkozy: nurse one's presidential ambitions by cultivating the media in a ministerial role. He chose discretion yesterday, however, avoiding an appearance at the auto show, where pickets from PSA and Ford loudly lambasted him for his failure to prevent layoffs by their firms. The previous day, however, he was on the spot at Arcelor-Mittal, assuring workers that he would somehow save their jobs. On dirait l'avatar de Sarkozy! Productive reinvigoration evidently does not encompass thought that there might be overcapacity in certain industries (steel and autos, for example), and that France's best course might be to shift capital and labor to other uses. The obvious gap between the government's embrace of austerity and Montebourg's one-man dervish effort to stimulate investment with lots of jaw-flapping but without actual funds is likely to end in embarrassment on both sides. Is Ayrault allowing Montebourg enough rope to hang himself, or is he simply using him as a fig leaf to cover the fact that his government has repudiated Keynes and placed its faith in what Paul Krugman calls the confidence fairy?

Thursday, September 27, 2012

De Long on the Euro Crisis

So we are left with a combination of the first three options, also known as “policies to restore European growth” – a phrase that appears in every international communiqué. But the communiqués never get more specific. Europe’s technocrats understand what adoption of “policies to restore European growth” means. So do some of Europe’s politicians. But European voters do not, because politicians fear that spelling it out would be a career-limiting move.

But if Europe does not adopt some combination of the first three options as policy goals over the next five years, it will face a stark choice: either lost decades for southern Europe (and perhaps northern Europe as well), or continued north-south payment imbalances that will have to be financed through fiscal transfers – that is, by taxing the north.

Northern Europe’s politicians should become more explicit about what “policies to restore European growth” actually mean. Otherwise, ten years from now, they will be forced to confess that today’s dithering imposed enormous additional tax liabilities on northern Europe. That might turn out to be the ultimate career bummer.
Indeed, but how?

The Future of Europe: Two Speeds or Complete Stall?

Jean-Claude Piris envisions the future of Europe and sees a "two-speed union" ahead. Most of all, he sees quite clearly the impossibility of advancing toward the kind of future that Chancellor Merkel would prefer. But with such profound divergences between the French and German positions, it is difficult to see how any progress is to be made at all:

Pour sauver l’Union européenne de ses crises à la fois de gouvernance et de politiques publiques, Jean-Claude Piris envisage quatre scénarios. Le premier consiste à modifier en profondeur les traités européens. Mais l’auteur n’y croit pas, dans la mesure où il voit mal les Vingt-Sept se lancer dans de nouvelles négociations longues après l’expérience de Lisbonne. Jean-Claude Piris a certainement raison bien qu’il ne faille pas négliger les déclarations d’Angela Merkel visant à réformer en profondeur les traités. Il est peu probable cependant que la France (sans laquelle il est difficile d’agir) puisse l’accepter, lorsque l’on observe combien le Président de la République et le Premier ministre ont déjà du mal à faire accepter à leur majorité la ratification du traité budgétaire européen. Le projet politique raisonnable qu’incarnent les deux chefs de l’exécutif ne reflète en effet que marginalement l’attente de bien des Français qui ne souhaitent aucunement que leur pays partage avec d’autres le long terme de la nouvelle marche du monde. La nostalgie des Trente Glorieuses (y compris chez ceux qui ne l’ont pas vécu) conduit, au contraire, à considérer que les refus de l’Europe et de la mondialisation sont les meilleures recettes d’un avenir meilleur. Les Français entretiennent ainsi, y compris lorsqu’ils sont de gauche, l’utopie de la grandeur coloniale, en considérant qu’une France partageant son sort avec d’autres parce qu’elle serait devenue plus petite, équivaut au plus horrible des renoncements. Ils ont ceci en commun avec les Britanniques, bien que ces derniers craignent surtout pour leur système politique, alors que les Français craignent pour leur condition économique.

Copé Shows His True Colors: White

Jean-François Copé has dredged up the concept of "anti-white racism" for use in his quest for the leadership of the UMP and ultimately for its presidential nomination. This strategy of poaching on the territory of the Front National didn't work well for Sarkozy, of course, so Copé has had to up the ante, making himself a little more overtly obnoxious.

Wednesday, September 26, 2012

Bill Clinton for President ... of France

He says he could (h/t Greg Brown):

Bill Clinton told Piers Morgan that he could be president again, just not in the United States.
Said Clinton: "There are only two countries I'm eligible to run for the leadership position is if I move to Ireland and buy a house, I can -- I can run for president of Ireland, because of my Irish heritage."
"And because I was born in Arkansas, which is part of the Louisiana Purchase, any person anywhere in the world that was born in a place that ever was part of the French empire, if you move to -- if you live in France for six months and speak French, you can run for president."
"However, I once polled very well in a French presidential race. And I said, you know, this is great, but that's the best I'd ever do because once they heard my broken French with a Southern accent, I would drop into single digits within a week and I'd be toast."
I haven't checked the Constitution of the Fifth Republic to see if this is true.

UPDATE: Seems it ain't so.

Types of Taxation

Via Dylan Matthews:

Aglietta on the Euro Crisis

French economist Michel Aglietta writes on the euro crisis in The New Left Review. For a summary, see The Current Moment.

Critiques of GMO Study

Critiques of that sensationalized GMO study keep coming. See here, here, here, and h/t to Arthur Charpentier here.

Taxing Virtue

Well, I've heard of sin taxes, but the Germans have now decided to tax virtue: you have no right to join a church unless you pay the church tax. Perhaps this was adopted on the theory that society ought to tax things it wants less of, like cigarette smoking and greenhouse gases. In France, however, a church tax wouldn't net much revenue. A tax on unauthorized use of the imperfect of the subjunctive might do better.

Tuesday, September 25, 2012

RGPP Declared an Innovative Failure

Sarkozy's "General Revision of Public Policies," the RGPP, which was supposed to shrink the size of the French government, yielded some 11 billion euros in savings but failed to achieve its goal, according to a report commissioned by PM Ayrault.

Résumant des critiques récurrentes, les auteurs estiment que si la RGPP a constitué une démarche« novatrice » et un effort « sans précédent », l'absence de concertation, la précipitation et la focalisation sur les mesures générant des économies rapides se sont avérées « inconciliables avec l'ambition initiale de révision des politiques publiques ». A ces critiques sur la méthode s'ajoutent celles, toutes aussi marquées, sur la mise en oeuvre des réformes. Le rapport déplore « une communication lénifiante » et estime que « l'accumulation de réformes de nature et de portée très inégales a rendu leur mise en oeuvre plus complexe et en a affaibli le sens ». Autre critique : « La gestion des ressources humaines n'a pas été à la hauteur. » Les moyens ont été « trop limités » pour accompagner les restructurations et les politiques de fusion des corps et de retour catégoriels « n'ont pas permis de surmonter les obstacles à la mobilité »,ce qui a débouché sur « l'aggravation des désajustements entre missions et effectifs » et engendré une forte résistance du terrain.

Financiers of the UMP

Mediapart names names.

Air France Will No Longer Buy French Newspapers

Air France is going all-digital and will no longer buy copies of French newspapers to give to passengers on its flights. This is bad news for the papers, since AF has been a major buyer, consuming as much as 14% of Libé's daily output, for example. Another nail in the coffin of print journalism.

Germany Pushes for Closer Political Union

Germany has quietly begun negotiations aimed at creating a closer political union and more powerful central government in Europe:

Ainsi, le groupe Westerwelle sur « le futur de l’Europe », institué à l’initiative du ministre des affaires étrangères allemand, au début de l’année, a rédigé un rapport rendu public le 17 septembre (ici en anglais .pdf). Outre l’Allemagne, les Pays-Bas, la Belgique, le Luxembourg, le Portugal, l’Espagne, l’Italie, l’Autriche, la Pologne et le Danemark ont envoyé leur chef de la diplomatie pour participer activement à ces travaux ouverts aux bonnes volontés. La France n’a rejoint cette enceinte informelle que tardivement, au lendemain de l’élection de François Hollande, et seulement à titre « d’observateur ».

Taxes: Taking a Bigger Bite

Henri Sterdyniak analyzes the French tax structure and wonders if Hollande can really take a deeper bite without severely reducing household demand. This is the dilemma of austerity and pro-competitiveness measures, and Sterdyniak argues that France is at the upper limit of what it can tax its citizens and firms.
Le gouvernement doit marcher sur une crête étroite entre les préoccupations de justice sociale et celles de préservation de la demande des ménages, celles de compétitivité des entreprises et de santé financière des banques et le risque d’évasion à l’étranger des plus riches.
Fears of fiscal escape abroad may be exaggerated, in my view, but fears of falling demand are more reasonable. Sterdyniak:
Les mesures de hausses d’impôt déjà prises ou annoncées par le nouveau gouvernement représentent 20 milliards d’euros en année pleine (voir tableau 3). Elles ont permis de rendre notre système fiscal plus juste, en augmentant la taxation des revenus du capital, en supprimant des niches fiscales ou sociales injustifiées, en luttant contre l’optimisation fiscale, en augmentant la taxation des successions. Seule la suppression des exonérations des heures supplémentaires touche les classes populaires et moyennes et risque d’avoir un effet important sur la consommation, mais ces exonérations constituaient une niche fiscale et sociale économiquement contestable et brisaient l’universalité de la CSG.
Toutefois, le rétablissement du barème antérieur de l’ISF, mais sans bouclier fiscal, aboutit à des prélèvements importants sur certains ménages que le Conseil constitutionnel n’a accepté qu’à titre temporaire : l’ISF devra être repensé. Du point de vue de l’équité fiscale, il serait souhaitable qu’il frappe ceux qui échappent à l’IR : les propriétaires de l’appartement qu’ils habitent et les bénéficiaires de plus-values non-réalisées.

And still it won't be enough:

Reste une quinzaine de milliards d’euros à trouver pour satisfaire aux objectifs fiscaux du quinquennat, parmi un ensemble de mesures envisageables qui pourrait rapporter jusqu’à 40 milliards d’euros, frappant surtout les ménages.
Ces mesures poseront toutes des questions d’acceptabilité par les personnes concernées, que ce soit les retraités, les fonctionnaires, les non-salariés. Leur impact sur la consommation risque d’être important. Imposer à la CSG-CRDS les loyers fictifs des propriétaires-occupants pourrait rapporter plus de 10 milliards d’euros mais serait très impopulaire. Remettre en cause certaines avantages fiscaux des revenus du capital (exonération des PEA et de l’assurance-vie, l’abattement forfaitaire sur les dividendes) pourrait rapporter 2 milliards d’euros. La remise en cause de la TVA à taux réduit des hôtels, cafés, restaurants rapporterait à elle seule 5 milliards d’euros. Faut-il procéder par petites touches, au risque d’accumuler les mécontentements ? Faut-il une grande réforme abolissant toutes les niches fiscales afin de revoir à la baisse les taux du barème ?

Swiss Bond Buying Aids French

The Swiss National Bank has been buying French debt in an effort to reduce the value of the Swiss franc. This, according to some reports, has been a major factor in decreasing French borrowing costs.

For numbers, see this post.

Austerity: Madrid Locks Trash Barrels to Prevent Scavenging

The woman, 33, said that she had once worked at the post office but that her unemployment benefits had run out and she was living now on 400 euros a month, about $520. She was squatting with some friends in a building that still had water and electricity, while collecting “a little of everything” from the garbage after stores closed and the streets were dark and quiet.
Such survival tactics are becoming increasingly commonplace here, with an unemployment rate over 50 percent among young people and more and more households having adults without jobs. So pervasive is the problem of scavenging that one Spanish city has resorted to installing locks on supermarket trash bins as a public health precaution.

The Fear of China

Sophie Meunier examines growing French fears of Chinese competition:

57% des Français pensent que la Chine est désormais la principale puissance économique du monde, contre 29% seulement pour les Etats-Unis. Pour les Français, le monde « post-américain » est une certitude et a déjà commencé, même si les perceptions sont bien loin de la réalité.

Monday, September 24, 2012

EDF Invades Britain

The London Review of Books has a fascinating piece by James Meek about the privatization of the British electrical power system. It seems that the big winner is EDF, the French electrical power giant, which now supplies a large share of Britain's electricity. Meek's piece is relentlessly, mercilessly critical. He despises neoliberalism and sees nothing but harm coming from loss of local control over power generation by a host of antiquated plants. Any efficiency gains that may have resulted from privatization are not ignored precisely, but disparaged as cheese-paring economies by a Leviathan multinational bent only on fattening its own profits. But the story that Meek tells is fascinating in its detail, despite his biases. He shows how the single market has created opportunities for investors and even brought benefits to British labor: the CGT, which is EDF's union, insisted on unionizing workers at British plants the company acquired and created a sort of European Works Council at one of them. No doubt there are unintended and perverse consequences to the phenomenon but as far as I can see nothing to justify the dark tones in which the picture is painted here. But the piece is worth reading nonetheless for a glimpse behind the scenes of a major industry.

Hollande's (Dis)Approval Rating

A president should of course ignore his or her approval rating. The public is fickle, and short-term thinking is a sure recipe for failure. But France2 reported last night that Hollande's approval had fallen 11 points in the month of August, from 54% positive to 43%. His fall from his post-election high of 67% positive is the fastest on record. Sarkozy at this point in his presidency was still above 50, and he did not drop to 43 until after the "casse-toi pauvre con" incident, almost 9 months into his term (after which, to be sure, he never recovered).

Clearly, "normality" is not enough, and not being Sarkozy is not enough. There is a danger to winning an election because the electorate is disenchanted with the incumbent, as first Obama and now Hollande have discovered. There is an expectation of improvement that comes simply from the fact that the thorn has been removed. But when the thorn has caused an infection, positive action needs to be taken, and if it isn't, the hurt only grows worse, and is magnified by disappointment.

Sunday, September 23, 2012

Ayrault Defends the TSCG

Mediapart once again leaps to the head of the pack in French journalism. The online "paper" has published a long interview with Jean-Marc Ayrault, the first in-depth defense of the TSCG by the Socialist government, which is now pushing for ratification by the parliament of an agreement negotiated by Sarkozy, which Hollande had promised to "renegotiate" but which is being presented to Parliament word-for-word as it was drafted by Merkel and Sarkozy. Ayrault, who is not unafflicted with la langue de bois, argues essentially that this agreement is but a step toward needed changes in European institutions. He presents the recent initiatives of the ECB as an example of such a change:

L’Europe est un combat, mais les peuples ont le sentiment que ce combat leur échappe. Il est illisible, mené d’en haut, technique… Or l’espoir suscité par la campagne électorale était aussi celui d’une repolitisation de ce débat européen. C’est une habileté tactique d’avoir promis une renégociation, qui est devenue une réorientation, et un pacte de croissance en complément, qui reprend des projets déjà engagés, sans objectifs précis d’emplois et de croissance ? Pourquoi avoir cédé au bout d’un seul sommet ?Ne faites pas l’impasse sur l’évolution du rôle de la BCE. Jusqu’à l’élection de François Hollande, c’était un sujet tabou. Là, elle s’installe progressivement dans un rôle qu’on souhaitait lui voir jouer. Ensuite, je vous ai dit qu’il fallait aller plus loin et porter d’autres investissements…
Now, this is more than a little disingenuous. It's true that the ECB's decision to support southern-tier sovereign debt is a positive step, which has averted imminent disaster. But it's also true that the conditionality of that support--contingent on austerity imposed on the recipient countries and enforced by threats of a cut-off of aid--sets an institutional precedent that social democrats may not wish to support. It's also true that the ECB's change of direction had little to do with Hollande's election and everything to do with the fact that the markets had lost confidence in the ability of the southern-tier countries to survive. Investors have now changed their views but only because the ECB is implicitly guaranteeing a floor price on the bonds they are acquiring.

Mediapart is correct to point out, in the very next question, that promises of future changes in European institutions are cheap talk of a kind that has long plagued European institution-building. If the process is to move forward democratically, the French government needs to lay some concrete proposals on the table and make room for public debate. Ayrault is essentially asking for a blank check: to reject the TSCG, he rightly says, would precipitate an immediate European crisis. True enough, but it's past the time when this sort of blackmail should be allowed to underwrite Socialist policy. What is needed is at least an outline of an institutional reform that makes sense in terms of allowing a unified currency zone to continue. Does Hollande have a plan? Are there discussions with the Germans? Have the Germans put forward a plan of their own? What are the ECB and IMF suggesting? Ayrault addresses none of these issues, but even this feeble effort is more than we have seen to date, and it does signal that the necessity of a reform process has been recognized at the highest level. How that process is managed will reveal a great deal about the Hollande administration. Decisions cannot be put off indefinitely, and the public deserves to hear about what is being considered in private.

Cohn-Bendit Resigns From EELV over TSCG

Daniel Cohn-Bendit has resigned from EELV because the party voted by over 70% to denounce the TSCG (aka Merkozy fiscal pact), which DCB regards as a refusal to support the European project and a strategic error, whatever reservations he may have about the wisdom of the fiscal pact. He accuses his former party of having taken a "gauchiste" turn:
Pour lui, sa position est "profondément pragmatique" : "rappeler nos convictions et trouver le bon chemin (...) vers mieux d'Europe" et une Europe "plus démocratique". "Ce traité, on ne l'aime pas mais c'est la base", a-t-il indiqué peu après avant d'ajouter : "J'entends les non, la colère des peuples, mais demain on fait quoi ?"

The EELV, for its part, has sought to distinguish its "no" to TSCG from Jean-Luc Mélenchon's.
Un "non" que les ténors d'EELV ont pris soin de dissocier de celui de Jean-Luc Mélenchon. A l'instar d'Eva Joly qui, après avoir appelé à "un refus fondateur", a redit qu'elle n'irait pas manifester le 30 septembre aux côtés du Front de gauche. "Il faut refuser de laisser instrumentaliser l'Europe dans la constitution d'un front du non", a lancé l'ancienne candidate à la présidentielle à la tribune.

Friday, September 21, 2012

Le Pen's UltralaÏque Offensive

Is Marine Le Pen reverting to the ways of her father? She soft-pedaled the anti-Semitism in her presidential campaign, but now she has launched an offensive against both the veil and the kippa in public places. This artfully poses "balance" as a criterion in advancing an agenda directed at what she calls "foreign fundamentalists" in France. The moment is well chosen to coincide with heightened fears of an incident following the provocation from Charlie Hebdo.

Le Pen also shrewdly implies that her move is simply an extension of existing anti-veil regulations, but this is not true. Only the burka is banned in all public places. The veil cannot be worn in schools but can be worn elsewhere. With this escalation, the Front National signals that it is not going to allow the value of its traditional xenophobic fonds de commerce to decline simply because it has also discovered economic populism.

One wonders what internal tensions in the FN may have contributed to this shift.

Thursday, September 20, 2012

Gaming the OMT

Yanis Varoufakis explains why he thinks Mario Draghi's threat to enforce harsh austerity in exchange for unlimited liquidity is not credible.

Acemoglu and Robinson on Saving Europe

Here. I agree. I will be discussing this question as it relates to France at a conference in Syracuse at the Maxwell School Center for European Studies tomorrow and Saturday. Limited blogging until I get back.

Sarkozy Is Learning English

Maybe the Republicans should replace Romney with Sarkozy. He's a much better politician.

But Sarko might not fit with Republican mores:
Un mois plus tard, il est chez son ami Jean-Michel Goudard, à Mollégès dans le Luberon, dans la propriété que le publicitaire a rachetée à la veuve du PDG de M6 Jean Drucker. La maison a le confort des grands hôtels, la perfection esthétique des magazines de décoration et Nicolas Sarkozy s'est toujours amusé de ces mannequins à longues jambes et à conversation réduite dont s'entoure Goudard et qui paraissent posées autour de la piscine comme des objets de décoration.
And Carla? Is her conversation with the former head of state also "réduite?"

GMOs Again

A new study has been published with results said to be damning from one Monsanto-manufactured GMO, NK603, and the media are as usual off to the races. The government has reacted as well. Du calme, messieurs-dames. Let's allow the experts a chance to evaluate the study, by which I mean the statistics, not the lurid pictures of rats with bulging tumors. If I mention that there are other studies that draw different conclusions, I will be told that these were financed by Monsanto and therefore biased. Perhaps, but the critics fail to note that the present study was done by an avowed opponent of GMOs, so if interest is a priori evidence of bias, we cannot decide whom to believe. I will also be told that this study was of longer duration than previous studies. This may be significant but then again may not.

Tuesday, September 18, 2012

A Critique of Sarkozy's Special Regimes Reform

Bernard Girard calls my attention to this interesting critique of Sarkozy's reform of the special regimes at the RATP and SNCF. There were reports at the time that key interest groups were bought off with special "side payments" that were not publicly discussed. New research and a report by the Cour des Comptes appear to confirm this. Worth reading.

Chérèque Will Quit Leadership of CFDT

François Chérèque, who has led the CFDT since 2002, will retire in November and almost certainly be replaced by Laurent Berger, age 43. Chérèque's leadership will be remembered for his support of Fillon's retirement reform in 2002, a position he took without consultation with his members, leading to an eruption of internal and external opposition. But he survived and has reigned more or less tranquilly since then, to the point where his handpicked successor will undoubtedly be approved to replace him.

Hollande Denounces Religious Fanaticism

François Hollande made a strong speech today condemning the fanaticism that claims the mantle of Islam.

«L'honneur des civilisations islamiques est d'être plus anciennes, plus vivantes et plus tolérantes que certains de ceux qui prétendent abusivement aujourd'hui parler en leur nom. Il est l'exact contraire de l'obscurantisme qui anéantit les principes et détruit les valeurs de l'Islam en portant la violence et la haine.»
And he said this in the presence of wealthy Muslim donors.

NKM and Le Maire Are Out

Neither Nathalie Kosciusko-Morizet nor Bruno Le Maire has obtained enough parrainages to continue in the contest for the UMP leadership, which now becomes a duel between Copé and Fillon. Xavier Bertrand had previously announced that he was dropping out of the race in order to run for president, no matter who else might run, including Nicolas Sarkozy. I'm sure all of France and Navarre is delighted to hear the news and to know of Bertrand's resolute commitment to his restless ambition.

The Right to Vote for Foreigners

Seventy-five Socialist deputies have called on the president to make good on his promise to grant the right to vote in local elections to legal foreign residents of France. His interior minister, Manuel Valls, is hesitant to do so, however, because, as he euphemistically puts it, "there is no strong demand from the society" for such a move. Less delicately, he warns that any move in this direction would drive the right into the arms of the extreme right, possibly strengthening the enemy by weakening the deep internal division on the right that has done so much to empower the left. The reasoning is that, since foreigners would be expected to vote overwhelmingly for the left, even the non-xenophobic right would bitterly oppose the vote for reasons of self-interest rather than prejudice.

Yet a principle remains a principle. The 75 deputies are right. Hollande promised to grant the right to vote on principled grounds: legal residents of France should have a say in how they are governed. And if foreigners voted, all parties might be obliged to take greater account of their concerns and therefore take steps that could promote better integration.

Official Refuses to Marry Veiled Woman

An adjunct mayor in the Var refused to marry a couple because the bride was wearing a veil:

"Le foulard laissait voir son visage mais pas ses oreilles et la racine de ses cheveux", a-t-elle ajouté. Selon elle, l'adjointe au maire a estimé ne pas pouvoir vérifier l'identité de sa cliente. "On n'en fait pas une affaire d'Etat", a déclaré l'avocate, qui souligne que ses clients ne demandent pas de dommages-et-intérêts mais simplement "la célébration du mariage le plus vite possible". Elle avait déposé à la fin de la semaine dernière un référé d'heure à heure à l'encontre du préfet.
But what's unusual about a veiled bride? This was an "Islamic" veil, you say, not a good old-fashioned honest-to-God veil? Note that it wasn't a burka; the veil covered the bride's "ears" and "the roots of her hair." The official claimed that this made it impossible to verify her identity.


Monday, September 17, 2012

Banking Union

Charles Wyplosz considers the need for a European banking union and common regulator. His conclusion is that the ECB must act as lender of last resort for the Eurozone, but that the Commission is making a mistake by trying to set up a single regulator for the entire European Union:

Finally non-EZ countries are revolting because they are dragged into this business. They are right. They have their own central banks that can act as lender in last resort and therefore have no need for ECB intervention. The commission is making a grave mistake when it proposed an EU solution for a EZ problem. Even though there are some technical difficulties involved, this should be easy to solve because there are few private interests at stake.

Europe: The God that Failed?

Europe is very unpopular these days in the two countries generally considered to be the heart of the European Union. In France, where the Masstricht Treaty was approved in 1992 by a close 51-49 vote, it would lose massively today, with only 36% in favor. In Germany, 65% say they would be doing better if Germany had kept the Deutschmark and 49% say they would be doing better if the EU did not exist.

These are alarming numbers for leaders facing a summit in December at which the future direction of the EU will be decided. Economic logic says that the euro cannot be sustained indefinitely without a closer union equipped with tax-collecting and redistributive institutions, but this would require a treaty modification and ratification whose prospects seem dismal indeed given the above polling results. But the euro is "irreversible," dixit Mario Draghi. So Merkel and Holland find themselves between a rock and a hard place.

The euro crisis has become a crisis of the European Union.

Sunday, September 16, 2012

Europe Is the New Green

A group of 30 economists proposes a reinvention of Europe around a set of policies to preserve the environment. Eloi Laurent explains what they have in mind. See also here.


A small but telling sign of the times: when the Socialists were out of power, they referred to the European fiscal pact derisively as "Merkozy." Sarko was Merkel's lap dog, of course, as everyone knew, and Hollande had one word for the lickspittle: "Renegotiate!" But now that the Socialists are in power, the treaty has been rebaptized with its proper name: Traité sur la Stabilité, la Coordination, et la Gouvernance, or TSCG. Because, after all, how could the Socialist Party call for ratification of "the Merkozy pact," which rhymed with "pact with the devil."

A vote on the TSCG by the Assembly is shaping up to be the latest dramatization of the split that has existed within the left since 2005. This time, the Communists and Mélenchon will incarnate the No vote. We had an early preview of the script at the Fête de l'Humanité, which this year was boycotted by nearly all the Socialists, including Montebourg and Valls and Aubry, who put in appearances last year when they were running for president. But now two of them are ministers, and winks of connivence with the left wing will not do. Among ministers, only Vallaud-Belkacem showed up, and she was booed for her troubles.

Meanwhile, Mélenchon wants a showdown over the concept of "Europe":
« On veut maintenir ouvert le sillon de 2005, que tous nos adversaires font tout pour refermer, explique-t-il. Le oui et le non ne sont pas “réconciliables”, il n’est pas question de se réconcilier, on n’est pas fâchés, on est juste en désaccord politique. » Selon lui, le premier but de la mobilisation anti-TSCG a un premier objectif, à défaut d’obtenir un référendum ou un vote contre au Parlement : « Il faut que nos concurrents expliquent pourquoi ils vont au bout de cette logique européenne. »

French Divergences Over the Future of Europe

In an important article, Mediapart reveals that there are serious divergences within the French government over the future of Europe. Angela Merkel wants to work toward a closer political union, with greater central control over national budgets. She has allies within the French finance ministry, but the plan is met with skepticism at the Quai d'Orsay, where longtime Euroskeptic Laurent Fabius dominates:

Officiellement, Bercy a été chargé de faire des propositions. Un groupe d’experts, dominé par la puissante administration du Trésor, planche sur le sujet. On retrouve dans ce cercle le patron du Trésor, Ramon Fernandez, un ancien proche de Nicolas Sarkozy, sa numéro deux Claire Waysand ou encore Thomas Philippon, un universitaire spécialiste des questions financières, conseiller auprès de Pierre Moscovici. Mais parallèlement, le quai d’Orsay produit ses propres notes. Et incontestablement, les deux ministères ne sont pas sur la même longueur d’onde. « Entre la ligne Fabius et la ligne Mosco, il y a des différences, notamment sur le pouvoir de la Commission. Le quai d’Orsay a fait une note moins intégrationniste que Bercy et Moscovici », dit pudiquement un ministre du gouvernement.

Selon nos informations, Bercy plaide notamment pour la mise en place d’une assurance chômage européenne et défend un budget européen appréciable, qui renforcerait les pouvoirs de la Commission, à Bruxelles. Bref, un grand chambardement, qui pourrait préparer le terrain à un aménagement des traités. À l'invitation du think tank Bruegel, le 6 septembre à Bruxelles, Pierre Moscovici a détaillé les grandes lignes de sa vision de l'Europe, qui pourrait en faire tousser certains côté PS : « Les gouvernements devront faire preuve de volonté politique, et s'assurer d'une légitimité démocratique suffisante, pour dépasser les failles institutionnelles de l'euro, en renforçant l'union budgétaire. Ce qui pourrait déboucher, peut-être, au bout d'un certain temps, sur du fédéralisme. »

Cette perspective suscite la plus grande méfiance de Laurent Fabius et de son ministre délégué aux affaires européennes, Bernard Cazeneuve, tous deux défenseurs du « non » en 2005.« D’un côté, on a un lobby techno à Bercy qui veut aller beaucoup plus loin en terme d’intégration avec un budget important et des dépenses de transfert, notamment dans le social, une plus forte surveillance budgétaire avec, à terme, la Commission européenne comme seule instance crédible. De l’autre, on a une option très prudente plutôt incarnée par Laurent Fabius qui dit qu’on est déjà allé très loin », décrypte un haut fonctionnaire. Aux yeux du Quai, les « fédéralistes » de Bercy passent pour de doux rêveurs, qui ne se rendent pas compte des risques politiques qu'il y aurait, pour l'exécutif, à s'engager sur la voie d'une nouvelle convention européenne.

Saturday, September 15, 2012

Sans commentaire

(h/t LB)
Le vendredi 14 septembre, la Ville de Paris lance le concours inédit « Paris Capotes Création », un concours de design ludique et utile pour inciter les jeunes à se protéger. Le lauréat verra son visuel apposé sur les pochettes protégeant 350.000 des 500 000 préservatifs distribués gratuitement par la Ville tout au long de l’année 2013 et recevra un iPad 64Go.

Les participants ont jusqu’au 3 novembre pour proposer leurs créations sur . Le visuel gagnant sera sélectionné par un jury composé d’acteurs de la santé publique, de la communication et de la jeunesse selon des critères d’esthétisme mais aussi de pertinence du message tout en respectant l’identité et les valeurs de la Ville de Paris. Les 2ème et 3ème lauréats remporteront chacun 1 an de préservatifs, soit 120 préservatifs (estimation du nombre de rapports sexuels moyens en France, selon une étude de l’Institut Harris Interactive).

C’est dans le cadre de sa politique de promotion de la santé sexuelle, que la Ville de Paris mène cette action pour sensibiliser les Parisiens et notamment les jeunes à l’utilisation du préservatif, le « tout en un » de la sexualité sans risques.

Plus vite, hélas! que le coeur d'un mortel

I never go to the Champs-Élysées, so I suppose I have no right to mourn its demise, chronicled today by Steven Erlanger:
André Malraux, the novelist and minister of culture under Charles de Gaulle, told a French-American journalist in the 1960s that the Champs-Élysées — then considered the most beautiful avenue in the world — had “an American basement.” Today, American business and its brands are prominently aboveground on a Champs-Élysées that has largely lost its distinctive character and has become far less French.

The subject line is from Baudelaire's Le Cygne:

Le vieux Paris n'est plus (la forme d'une ville
Change plus vite, hélas! que le coeur d'un mortel)

Friday, September 14, 2012

Euro Rallies After QE3

It's infallible: I buy a ticket to France, and the euro goes through the roof:

More on the Dutch Elections

Here and here.

Hollande Opposes Fracking

François Hollande has rejected 7 applications for fracking permits in France. I remain undecided about the wisdom of fracking, which has seriously transformed the U.S. energy equation. There is some evidence of environmental damage, but the claim that such damage is worse than that associated with other forms of energy supply has not been proven. At first glance, Hollande's rejection seems to be based not on a cost-benefit analysis but on implacable opposition to the technology.

Thursday, September 13, 2012

The OECD Looks at Higher Ed

England's tuition-fee reforms of 2006 produced the most "advanced" student-support system of any developed nation and have not deterred poorer students, while low-fee nations such as France, Spain and Italy are performing poorly.
Those were the among the messages from analysis by the Organisation for Economic Cooperation and Development, accompanying its latest survey of educational statistics in its 34 member states.
The annual report, Education at a Glance 2012, which mainly looks back to data from 2009, shows that the US lost its lead as the biggest spender on higher education.
The US spent 2.6 per cent of its gross domestic product on higher education institutions in 2009, down from 2.8 per cent in 2005. Drawing level was South Korea, which also spent 2.6 per cent, up from 2.3 per cent in 2005. Close behind was Chile, spending 2.5 per cent (2010 figures), up from 1.8 per cent in 2005.

Dutch Elections

The Dutch election results are unequivocal: the pro-EU parties of the center-right and center-left won a resounding victory, Geert Wilders' xenophobic and Europhobic extreme-right party will lose 1/3 of its seats, and Emile Roemer's Euroskeptic Socialists fared poorly.

To be sure, the Netherlands is one of the lucky ones: a northern economy in trade surplus. Still, it's interesting that wherever "Europe" has been put to a test vote, a referendum on the Europe question, as this election was billed, Europe has won--even in Greece. This should give pause to those who argue that Europe is an anti-democratic project, that the European Central Bank has become the supreme autocrat, and that "the people" would reject Draghi's program if only they could. These are the sentiments of people who confuse their own judgments with "the people's." The latter are often confused, ambivalent, and far less certain of what they want than their self-appointed spokespersons. And this, as I say, has been the case not only in the fortunate Netherlands but also in the unfortunate Greece, albeit less univocally. The people just want this torment to end.

The ECB's recent actions will of course become wildly unpopular--unless they work. Since there seems to be nothing else afoot at the moment, the people are not about to be panicked by the cries of "anti-democratic" usurpation of power. Their approval may be quiet, but it is approval. Not only the Dutch but the German Constitutional Court seem content with only the mildest of checks on the bank's power (future increases of ESM funding must be submitted to the Bundestag, the court said). And for now, that is where things stand, pending either an easing of market tensions or a heightening of social tensions. I'm sure there is a pithy Tocquevillean generalization to be uttered about democracy's response to the deep redistributional dilemmas posed by a major financial crisis, but the right formula eludes me at the moment. It seems that the people are more forbearing than they are sometimes given credit for, more willing to experiment in times of high uncertainty, and perhaps rather more optimistic than they have a right to be that things will work out in the end.

They are not, however, eager to plunder the rich, as they are sometimes accused of being. They know that the banks have already taken serious writedowns, and they also know that their own savings are tied up in the banks. They may want to help those in difficulty but are wary of bankrupting themselves in the process. So they temporize while rejecting the extremes. As Tocqueville might have observed, such inaction lacks the decisiveness of the hotheaded aristocrat sure of himself and persuaded that he knows where honor lies. Sometimes patience is a virtue. Could this be one of those times?

Wednesday, September 12, 2012

The Dutch Elections

Now that the German Constitutional Court has approved the ESM, the next hurdle for the EU is the Dutch election, held today. Here is a good summary of the debates (the article is worth reading in full):

Debates should be great opportunities for populists. Although normally boring, the populist may spark some fire in a debate by making bold and harsh attacks on the mainstream. A debate gives an opportunity to stick out and to juxtaposition the elite interests of traditional politics with the ones of the man on the street. Furthermore, populists get unedited access to a fairly sizable portion of the common people they want to represent. With little journalistic intervention, what is being said gets straight to the audience. This begs the question of how the two populists on the far right and the not-so-far-anymore left anymore of Dutch politics have actually been performing over the past weeks. Did the debates help their campaigns?
The simple answer is no. So what happened, and why did Geert Wilders from the Freedom Party (PVV) and Emile Roemer from the Socialist Party (SP) apparently fail to seize the opportunities provided by a sheer debate marathon?
Wilders, like him or not, he is a great debater. With largely prepared one-liners and bold attacks on multiculturalism and Europe, Wilders is always good for laughter and for spectacular debate moments. No different this time, Wilders certainly had his moments. For instance referring to the Labour Party – the Partij van de Arbeid – as the Partij van de Arabieren, the Party for the Arabs, or in a debate about health insurance costs saying rising costs should be paid for by the Greeks, not by the sick people – de rekening bij de Grieken, niet bij de zieken. But there were also moments when this strategy appeared to be working less well. A moment in the RTL debate for instance, when, although the topic was a different one, Wilders slipped in this year’s mantra, a strong anti-EU message. People started laughing, not about his statement but about the ridiculous boldness with which Wilders repeats this message in the most unsuitable situations. They were not laughing with him, they were laughing at him. The campaign did not help Wilders in the polls, but did not damage him either, showing a stable 12 percent of the electorate supporting him. It seems as if people are getting tired of his style, his rhetoric, so more than the core of his voters would not be mobilized (which is not to say that he was irrelevant – the PVV and Wilders were just not the big players in the campaign).
Former primary school teacher Roemer in terms of appearance and expression is much closer to ordinary man than Wilders. The campaign showed dramatic consequences for the SP. In the debates, in particular the first debates, Roemer had to face a strategic problem. The positioning as the populist left opposition had boosted the SP into hitherto unknown heights in opinion polls. For some weeks during the summer it looked as if the SP would become the biggest party, with Roemer having a good chance of becoming Prime Minister. So he had to look “prime ministerial”. By going in that direction, Roemer lost authenticity in the first debates and dramatically lost support in the polls after the first debates. The SP electorate wants a populist, and if they don’t get the populist they can just as well go with the more serious alternative on the left. And with PvdA candidate Diederik Samsom there was an alternative that became more and more viable, closing a 10-percentage point gap between the Labour Party and the Liberal front-runner VVD within a matter of two weeks.
If one were to advise the PVV and the SP on the strategy for the next campaign, on basis of what we saw over the past weeks, one should probably tell Roemer to go back to who he was when he was successful, a left-wing populist, and tell Wilders to go out and re-invent himself if he wants to continue playing a significant role in Dutch politics. But let’s see whether the polls are in fact reflected in the outcome tonight.

Sartorius Report

The Sartorius Report on the status of the auto maker PSA (Peugeot) blames poor management for the loss of market share in Europe:

Management may be to blame, but Emmanuel Sartorius is in no doubt that the company must shed workers in order to survive (and perhaps be acquired by another firm, its most likely fate at this point). And the government is--rightly, I think--not putting up a fight. It will seek to create new opportunities for the workers idled at the Aulnay site, but it won't try to force PSA to keep the plant open. L'État ne peut pas tout. Jospin lost the presidency because he said this out loud, but it remains true. Some potential investments are bad investments and should be avoided.

German Constitutional Court Approves ESM

The German Constitutional Court has approved the European Stability Mechanism (bailout fund) with only one minor condition: that the Bundestag be consulted if the planned contribution is to be increased.

Sighs of relief are heard in all European capitals.

Harlem Désir Named to Head PS

Martine Aubry, with the support of Prime Minister Ayrault, has proposed Harlem Désir to succeed her as head of the Socialist Party. The other leading candidate was J.-C. Cambadélis.

Tuesday, September 11, 2012

A Dictionary of Political Insults

This might help while away the time during a long political speech:

A Blast from the Past

Giscard meets Schmidt:

SPIEGEL: Will Europe be among the global powers of the 21st century?
Giscard: Yes. It has what it takes. And we should give it an opportunity to become one.
Schmidt: I would be somewhat more cautious here. The European Union will hardly coalesce to become a genuine global power. And Europe doesn’t have to be a global power.

Villepin Questioned by Police

Dominique de Villepin is currently "assisting police with their inquiries," as they say in England. In garde à vue, as they say in France. The affair has to do with the prestigious hotel chain Relais et Châteaux, of all things. Régis Bulot, the former CEO of the chain and friend of Villepin, is facing various charges, and the police want to know if Villepin was somehow involved in his alleged wrongdoing.

To stay out of trouble in France, it seems, a politician has to stay in office, although sometimes even that is not enough.

The "Populist" View of Emigration

Bernard Arnault is in the news as France's most famous potential émigré. But Tibor Skardanelli thinks that most people who emigrate from France do so in search of opportunity rather than tax avoidance. He expresses well a certain "populist" resentment of the kind of "elite" that France promotes, while deterring in his view ambition of other kinds:
Demandez à ma coiffeuse (il n’existe plus de coiffeurs pour ainsi dire) pourquoi elle n’embauche pas une personne pour l’aider : elle vous répondra qu’elle ne veut pas se trouver pieds et poings liés par les lois du travail ; si elle s’aperçoit que la personne qu’elle a embauchée fait fuir sa clientèle, est trop souvent absente ou tout bonnement insupportable, elle devra la conserver comme employée ou s’épuiser en démarches administratives et judiciaires sans fin. Ne parlons pas des simples périodes de gros temps où il faut savoir réduire la toile.

La France n’aime pas la réussite individuelle. Elle est le pays des administrations, des entreprises d’État et des grands groupes. La France méprise l’artisan, qui le lui rend bien et arnaque ses clients autant qu’il peut, se disant que c’est toujours ça de pris. La France regarde de haut les petits patrons, ces êtres mesquins qui ne pensent qu’à leurs fins de mois et essaient de faire travailler leurs employés (dans tous les sens du terme).

La France préfère les médecins, les professeurs et les artistes, ces gens désintéressés qui, eux seuls, mériteraient finalement des salaires décents. La France a un respect instinctif pour les beaux messieurs des grandes administrations et des grandes entreprises formatés par nos Grandes Écoles finalement devenues endogames.
[emphasis added--ag]

Cohen on the BPI

Economist Elie Cohen takes on one of Hollande's pet projects, the Public Investment Bank. This supposed innovation, which Cohen shows is largely a recycling of old ideas, is built on yet another form of Germany-envy. The strength of German industry is the Mittelstand, the small-to-medium sized firms that specialize in high value-added production for the export market. France is weak in this area, and its PME/PMI are undercapitalized and overindebted.

But the Socialist solution, Cohen  argues, threatens to reproduce the wrongheaded policies that produced the calamity of the cajas in Spain and the Landesbanken in Germany. It will foster a crony capitalism at the regional level, administered by Socialist regional governments, which will attempt to induce regional banks to invest in favored industrial projects.

Cohen does not point other differences between the German and French economies that make success in this sort of venture unlikely. The leading French export industries, apart from the luxury sector, are in capital-intensive industries such as chemicals, pharmaceuticals, high-speed rail, aviation, and nuclear power, as well as financial services and insurance. There are certainly smaller-scale high-tech niche industries that might benefit from regional aid: for instance, laser technology is well-developed in France. But is it really the case that dynamic small firms are having trouble obtaining financing? Or will the BPI be encouraged for political reasons to lend to firms in declining sectors in the name of job protection? A misguided industrial policy, abetted by a public bank subject to political influence, may well misdirect capital that could be put to better use elsewhere. The track record on this type of development strategy is not good.

Monti Worried About Rise of Populism

Mario Monti has called for an extraordinary session of the European Council to confront the rise of populism in Europe:
"Nous sommes dans une phase dangereuse", a-t-il dit en marge du Forum Ambrosetti, organisé à Cernobbio sur le lac de Côme, après avoir rencontré le président du Conseil européen, Herman van Rompuy.
"Il est à la fois triste et paradoxal qu'au moment où l'on espère achever l'intégration, voici que se forme un contre-phénomène dangereux qui vise à désintégrer" l'Union européenne, a noté M. Monti dont les propos étaient rapportés par l'agence italienne LaPresse.

Monday, September 10, 2012

The News You've All Been Waiting For

DSK (allgedly) has a new girlfriend:
Plusieurs photos dans VSD montrent l'ex-patron du FMI enlaçant une femme qui se prénomme Myriam, "pétillante quadragénaire", "célibataire", "occupant un poste à responsabilités dans une grande chaîne de télévision", selon le magazine.

"Culture is the Hard Disk of Politics"

The minister of culture, Aurélie Filipetti, has delivered herself of an oracular pronouncement. Her actual words were: "Encore une fois, je défends l'idée que le patrimoine et la création sont le disque dur d'une politique générale." This is surely the most inelegant remark about culture ever made by a person in this position, and I'm sure that André Malraux is spinning in his grave faster than the 10,000 RPM of a first-rate hard disk.

I have no idea what Filipetti means by these words, and I'm not sure she does either. No doubt they emerged from her lips because le numérique is much on her mind. But it gets worse:

Quand on numérise les archives départementales du Tarn, c'est 65 millions de pages vues dans l'année. La culture est le ciment du pays.
I'm sure that digitizing the 65 million pages in the AD Tarn will be of great use to future historians, but is this really the "culture" that hardens into "the cement of the country?"

Ah, well, never mind. There are other priorities, such as shutting down certain costly pet projects of Sarkozy's, such as the history museum and the museum of Lascaux cave painting and the photo museum and a new theater for the Comédie Française. Austerity hits home. But exactly how were these priorities determined?

Arnault Sues Libé

Bernard Arnault is suing Libération for publicly insulting him with a headline that obviously paraphrased the words of a former president of the Republic: "Casse-toi riche con!"

Le patron de LVMH, Bernard Arnault, a décidé de porter plainte contre le journal "Libération" pour "injures publiques proférées à son égard", selon un communiqué, après la Une choc du quotidien lundi "Casse toi, riche con!" qui fustigeait sa demande de naturalisation belge.
An interesting legal conundrum: Can you sue someone for injures publiques when the injure in question is borrowed from a head of state?

L'Europe, la grande absente

I mentioned the other day a certain nombrilisme in the French press, which devotes much less attention to European issues than, say, the German or Italian press. In this respect, François Hollande was representative of his countrymen in his TF1 interview last night. Although he claims Jacques Delors as his second mentor, after François Mitterrand, both of whom were committed "Europeans," and although he enjoys a reputation as a staunch European himself, there was not a word about the crisis of the euro, the Draghi plan, or the fiscal pact in Hollande's discussion with Claire Chazal. France's budgetary problems were presented in strictly Franco-French terms. The need for labor-market reform was discussed as a "competitiveness" measure, without describing the nature of the competition or the strategy for adapting the structure of French industry to meet it.

The avoidance of Europe is comprehensible, given the sourness of French public sentiment toward the EU at the moment. In every respect, the EU is seen as a fetter on French autonomy, so it is easy to understand why a "normal" president who wishes to enhance his reputation for "action" would avoid touching on anything that might inhibit his freedom to act. But this is no way to build support for Europe, which is badly needed and may become an explosive issue as the austerity measures implicit in the Hollande budget wreak their anticipated havoc. The French will ask why they must suffer this pain, and Hollande had better have answers. Those answers must include a robust defense of the EU as the vehicle for eventual French success in global competition. The argument can be made, but Hollande has been remarkably reticent about articulating it, creating an enormous opening for Europe's vociferous detractor J.-L. Mélenchon--and soon, presumably, Marine Le Pen, although she has been strangely silent since the election.

Interesting Electoral Data from INSEE

INSEE has published data on participation in the 2012 presidential election. The young and the old were most likely not to vote, either because they were not registered (in the case of the young) or abstained (in the case of the old). Since older voters were expected to be a core group in Sarkozy's base, this high abstention rate is surely one factor in his defeat:

(h/t Laurent Bouvet)

Sunday, September 9, 2012

Kurzarbeit in France's Future

One little-noticed point in Hollande's interview with Claire Chazal was his mention of la possibilité "de recourir au travail partiel en cas de période difficile." In other words, what the Germans call Kurzarbeit, or sharing of available work hours among workers in order to avoid layoffs in hard times. There are multiple ironies here: Sarkozy tried to extend overtime hours by exempting employers from taxes on them, a reform that Hollande has canceled. The Right has blamed the 35-hour week for everything wrong with France from the economy to the decline of the baguette, but now even further working-hour reductions may be deemed necessary in an emergency. And at this point the implementation details remain vague: who will determine when time-sharing is permitted; how will hours and wages be allocated; how might firms adapt?

Hollande's TF1 Interview

 Le Monde's summary can be read here. To my ears, this was not an interview likely to allay doubts about Hollande's method or halt the rapid fall in his approval rating. He stated his goals forthrightly enough: he wants to turn the economy around within two years, reduce unemployment, and simultaneously reduce the budget deficit. We have known that all along. But are these goals compatible? And what exactly does he intend to do?

Well, he says that by the end of the year, by hook or by crook, there will be labor-market reform. He hopes this will come about through negotiations between unions and employers and even referred to this as "an historic compromise," harking back to the era of Eurocommunism, which had its own version of the necessary compromise between labor and capital. If this doesn't happen, he says, the state will step in to ensure that it is easier for employers to lay off workers when the layoffs are "anticipated." How palatable workers will find this promise (or is it a threat?) remains to be seen.

The CSG will be established on a broader base, but this is not a new proposal.

He promised to find an additional 30 billion in revenue by demanding greater effort from those who "have enough." Apart from Bernard Arnault, those earning over 1 million a year (not including capital gains), and unnamed "firms," the sources of this new revenue were not specified. Meanwhile, he promised that those in the two lowest income brackets would receive tax reductions or rebates, which further clouds the revenue picture.

He indicated that a "normal" presidency could also be an "action" presidency and tried to embody this with a certain rhetorical resolution--so resolute, in fact, that he frequently stepped on Claire Chazal's questions or answered as if he had anticipated them.

I'm not sure what the point of this exercise was. To be sure, the president told us that he means business and will achieve both growth and deficit reduction within two years, but he gave into his habit of talking rather quickly and breathlessly, as if he needed to get back to work at once on the details, which were once again as elusive as they were throughout his campaign.

Et tu Twitter?

Will Twitter make le tutoiement universal. This is the momentous issue of the day considered here:

Antonio Casilli, le chercheur cité par la BBC, explique comment l'emploi du "vous" sur Twitter peut aujourd'hui passer pour aussi déplacé que celui du "tu" dans des circonstances inappropriées. "Vouvoyer quelqu'un - ou s'attendre à ce qu'il vous vouvoie - implique une hiérarchie. Il s'agit donc d'une brèche de taille dans le code de communication [des réseaux sociaux], une tentative de réaffirmer des rôles sociaux asymétriques, une distance qui compromet la cohésion sociale".
To which I say a hearty "Who cares?"

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.

Friday, September 7, 2012

Poverty on the Rise in France

Laurent Mauduit reviews the latest INSEE study of the French income structure (as of 2010; data for 2011 are still being processed). Poverty (with threshold set at either 60% or 50% of the median income) increased sharply over the Sarkozy years:

The Draghi Effect

Man moves markets:

Mario Draghi promised unlimited purchases of short-term debt of distressed sovereigns, but his maneuver seems to have brought long-term rates down dramatically as well. So far the markets think he means business. And some lucky folks just made a ton of money on Spanish bonds.

Thursday, September 6, 2012

Hollande Bashing

Le Monde today features a piece on "Hollande bashing." Le dénigrement, the paper helpfully explains, for those who don't understand franglais. The article presents the phenomenon as a media fashion, and I suppose I'm guilty in my own small way of joining the bandwagon of bashers. I haven't exactly warmed to either Hollande's policies or his style of governance thus far. All the positive has been in the contrast with Sarkozy.

But I don't consider myself a Hollande basher. I think he faces a very difficult situation and is still feeling his way. I don't think he had a clear road map in mind when he was elected, and I believe that he's been relatively slow in trying to put one together since then, in part because the Socialists are rusty at government, having been out of power for so long. His team is inexperienced and ideologically heterogeneous (consider Montebourg and Moscovici). And no defining opportunity has presented itself.

On the other hand, Hollande deserves credit for remaining within himself, avoiding blunders, and mostly eschewing cheap effects. To be sure, he has kept campaign promises, some of them costly and of dubious merit, but the bashing would be worse if he hadn't. The chief concern is that opportunity is slipping away, but that is based on the notion that a presidency is defined by its first 100 days, which is sometimes true but not always, and can be overblown.

What Hollande needs, what Europe needs, is a galvanizing shock, an event that will create a moment to be seized. If that moment comes, and if Hollande can make the most of it, he will perhaps be able to dispel the morose climate and define himself. But not every president is fortunate enough to be presented with such a moment, and few are capable of taking advantage of it if it comes. Bill Clinton gave a brilliant speech last night at the Democratic Convention, but he was far from a brilliant president. Circumstances must conspire with the man to make a great president. So we should be patient with Hollande. His moment has not yet come--nor has it yet passed.

Wednesday, September 5, 2012

Yglesias on the ECB

Matt Yglesias accuses Mario Draghi of preparing a massive power grab:

What the ECB is doing, in essence, is setting itself up as the shadow government of Italy, Spain, Portugal, and perhaps Ireland. If the governments of those countries do what Draghi wants, Draghi will provide them with generous subsidy. If the governments of those countries don't do what Draghi wants, he'll use a monetary laser to destroy their budgets. Fear will keep the peripheral states in line.

Intergenerational Contracts

With French unemployment hitting levels not seen since 1999, the government is accelerating its announcements of countermeasures. Today we have the contrat de génération, or intergenerational contract, which promises to give money to firms to subsidize the employment of older workers who will attempt to pass on their knowhow to the younger hires who will eventually replace them.

I find myself unable to muster much enthusiasm for this plan. While the notion of apprenticeship may appeal to the tradition-minded, and the idea of passing on tacit knowledge and "feel" acquired in long years on the job may seem the soul of wisdom, I can't help feeling skeptical that this simplified image of the contemporary work process corresponds to reality in many industries. One of today's primary competitive challenges is the rapidity of technological change. Work flow in many industries undergoes constant transformation and adaptation to shifting global supply chains. Skills that older workers acquired over long careers may no longer be relevant, and the kind of training that younger workers need may be best imparted in ways other than through direct contact with older workers nearing retirement. There is something artificial and abstract about the whole notion of the intergenerational contract. Its inception probably owes less to the needs of industry and more to the need of government to find work for young people while keeping older workers employed longer and therefore contributing longer to the pension funds that must sustain them in old age. Perhaps it will work, but I wonder how much of the expected €2.5 billion a year to be invested in this plan will actually be squandered.

Tuesday, September 4, 2012

Monti and Hollande Call for Greater Growth

We've heard the words before, but is there more substance this time? Perhaps. Mario Monti and François Hollande met in Italy and called for greater growth. More to the point, however, they agreed that a high-speed rail line would be built between Lyon and Turin. This is the kind of concrete infrastructure project that can actually create jobs and usefully absorb public funds. Exactly how the project will be financed remains unclear, however.

Mediapart's Scoop

Mediapart has a scoop. According to the online newspaper, the recent flap between Moscovici and Montebourg is the result of the former's use of an emergency procedure to select the consultant who would advise the government on setting up the public investment bank that was one of François Hollande's campaign priorities. Montebourg was deliberately cut out of the loop:

Selon nos témoins, les banques sollicitées tombent pour beaucoup d’entre elles des nues. Car il ne s’agit pas d’un appel d’offres, comme elles en voient souvent passer et auxquels elles cherchent périodiquement à concourir : aucun document écrit n’est transmis aux banques sollicitées ; et il n’est pas demandé à ces mêmes banques de produire elles-mêmes un document. Non ! Pendant tous ces premiers jours du mois d’août, tout se passe de manière orale. Et alors qu’il s’agit d’un projet majeur pour le quinquennat, c’est une procédure d’urgence qui est choisie, très peu souvent usitée. En clair, c'est à la va-vite, un vendredi, juste avant un week-end, que des banques sont démarchées, afin qu'elles se prononcent dès le mardi suivant sur l'un des grands projets du quinquennat, sur lequel elles n'ont au préalable jamais travaillé ni réfléchi. Ubuesque...
Pour finir, toujours sans que le cabinet d’Arnaud Montebourg n’en soit informé, quatre banques d’affaires viennent à tour de rôle ce mardi 7 août exposer à Bercy leur vision de la BPI et les honoraires qu’elles pourraient solliciter. Tout cela est bâclé, les banques candidates n’ont eu aucun délai pour travailler au sujet – sont-elles d'ailleurs compétentes ? –, mais enfin, les quatre établissements, dont la banque Lazard, la banque Rothschild, Crédit suisse et une quatrième banque d’affaires, ont une heure chacune pour convaincre les hauts fonctionnaires devant lesquels ils planchent.
What's more, the paper suggests that Moscovici, once close to DSK, sought to cover up the unusual circumstances of  his choice of the Banque Lazard, headed by Matthieu Pigasse, another former associate of DSK, by shifting suspicion to Montebourg.

Longtemps proche de Dominique Strauss-Kahn, dont le même Matthieu Pigasse a été dans le passé le collaborateur, veut-il écarter le soupçon que le choix de Lazard était largement joué à l’avance ? Le plus étrange dans l’histoire, c’est que cette mauvaise manière faite à Arnaud Montebourg et à son cabinet, qui ne sont pas associés à cette consultation, se double d’une faute. Selon le témoignage de l’un des hauts fonctionnaires que nous avons consultés, l’article 6 du contrat de mission passé entre l’APE et la banque Lazard prévoit expressément que l’APE devra s’assurer que l’affaire n’est entachée d’aucun conflit d’intérêts. Alors pourquoi le cabinet du ministre du redressement productif n’est-il pas destinataire des notes de l’agence ? Et pourquoi faudra-t-il que l’affaire éclate au travers de cet article du Nouvel Observateur ? C’est le côté obscur de l’histoire car en ne procédant pas à un appel d’offres classique, en veillant à ce que la procédure se déroule avec le moins de traces écrites possible, le ministère des finances et l’APE prêtent le flanc au soupçon.
Ont-ils voulu placer Arnaud Montebourg dans l’embarras ? Ou ont-ils pensé que l’intéressé mettrait son veto au choix de Matthieu Pigasse comme banquier d’affaires ? D’un phrase, c’est ce que l’intéressé a suggéré en faisant valoir qu’on ne peut pas créer une banque nouvelle en s’appuyant sur les recommandations d’une banque ancienne, engluée dans les mœurs financières qui ont conduit à la crise que l’on connaît.
There's a lot of inuendo here. Is any of it true? Hard to know. But it does seem that Montebourg, who was to have joint authority over the BIP, was deliberately circumvented. What's more, Montebourg allegedly wanted both a different structure for the BIP and a much larger capitalization:

Et puis surtout, selon les témoignages que nous avons recueillis dans les directions financières de Bercy, Arnaud Montebourg souhaite que la force de frappe de la nouvelle banque soit non pas de 30 milliards d’euros mais de… 200 milliards !

OK, so by now you're saying to yourself what I'm saying: this article, by the tireless Laurent Mauduit, has the earmarks of a plant by Montebourg--full of leaks designed to discredit his rival Moscovici and put himself in a highly favorable light. And no doubt that is what it is. But what is interesting here is the substance of the alleged interministerial conflict: a conflct that goes to the heart of the Hollande presidency. Will Hollande make a serious effort at a Keynesian stimulus--€200 billion is serious money? Or will he settle for window dressing (€30 billion is window dressing)? Has Keynes definitively lost the battle, or was this episode just a skirmish in a larger war? Where does Holland stand on all this? And--one last question raised by the article but not discussed: Is DSK lurking somewhere in the wings, feeding signals to the players still in the game, from which he has been barred for life?

Laurent Mauduit and Mediapart deserve credit for raising these questions, even if they can't provide all the answers. By contrast, Le Nouvel Obs, which first broke the story, seems to have been a willing tool in Moscovici's game.

Monday, September 3, 2012

"The Markets" as Imaginary Ogre

Charles Wyplosz argues that the much-maligned "financial markets" are actually more comprehending of the need for patience in restoring budget equilibrium than French political leaders are. I think this is correct, but it's worth asking why French leaders, including Hollande as well as Sarkozy, have been so eager to portray the markets as implacable monsters that cannot be reasoned with. If one envisions the need for implementing unpopular policies, it's of course easier to say "we have no choice, there is no alternative." So if wage restraints, benefit cuts, and general welfare state retrenchment are part of a government's overall plan, then it's always useful to have a bogeyman. What the markets want more than dramatic and draconian promises is a comprehensible and credible path, but for rhetorical purposes it's more useful to confront an Evil Empire than a battery of accountants.