The Payoff

Affaire du Sofitel : DSK prêt à verser 6 millions de dollars à Nafissatou Diallo

A New York, un accord financier devrait être signé le 7 décembre afin d'éteindre la procédure civile.

DSK Will Settle with Diallo

Well, the US end of the DSK saga may finally be coming to an end. It has been reported that a settlement is in the works with Ms. Diallo. No monetary figure has been mentioned, but we can count on the usual irresponsible sources to begin bandying numbers about. Fantastical tales about what actually did or did not happen will be respun. But no one cares anymore. This story has burned itself out. Good riddance.

Behind the Scenes

Every once in a while, Le Monde publishes an article that pulls back the curtains on public life to reveal some of the private networks that shape the politics we are allowed to see. Ariane Chemin has just written such a piece, revealing what other journalists probably know quite well but we outside observers cannot fathom until some insider is willing to lift the veil, even just a little. Here, we glimpse some of the very interesting relationships that grew out of the Rocardism of the Mitterrand years. "We were the sabras of Rocardism," says one of the group, Stéphane Fouks, who first came to my attention as DSK's publicist after the Sofitel affair. Fouks was part of a trio with Alain Bauer, DSK's security chief, and Manuel Valls, now minister of the interior. The article offers a fascinating glimpse of an evolving nexus of personal and political relationships. With Valls now frequently mentioned as a prime ministerial prospect (despite Mélenchon's audacious self-promotion for the job), this piece is of particular interest for insight into the background of his politics.

Sciences po: La Guerre Continue

Two articles in  Le Monde today on the ongoing Sciences po controversy: one by Bruno Latour, the other by Nicolas Jounin. The issues in this imbroglio are complex, confused, entangled, and heavily laden with old grudges and conflicts of personality as well as with important issues of pedagogy, selection, and social change. I'm not about to sort them out in a blog post, but I do think that it's important to note that reforming an institution like Sciences po takes a strong hand, a willingness to make powerful enemies, and perhaps a certain contempt for entrenched traditions as well as rules both reasonable and unreasonable. To judge a reformer like Descoings, one would have to know a lot more about the inner workings of the institution than I do. I can therefore understand Latour's defense of both the man and his project, even if I cannot be sure that he is right to call the many critiques that both have engendered an "assassination." No doubt there is excess, as there always is in cases like this, and just as certainly some of the grievances are surely justified. But what matters here is the future of an institution that plays a crucial role in the selection of French elites and the kind of governance they provide. The choice of a new leadership and a new direction should focus on the desired goals and take account of past errors only insofar as necessary to correct future aims. Richard Descoings should be allowed to rest in peace. His successor need not be cast in his image but should partake of his toughness. (h/t George Ross)

Catalonia Elections

Following up Brent Whelan's guest post on Italian elections, here is a report from The Monkey Cage on the recent elections in Catalonia--a victory for separatists.

Copé and les Pieds-Nickelés

For those with a Mediapart subscription, this may be amusing. But of course the "deal" brokered by Sarkozy to hold a referendum on whether there should be a new leadership election (really? is nothing too absurd to propose any more?) has already been scotched by Copé, who agreed to it, on the grounds that Fillon's formation of a separate parliamentary group and filing of a lawsuit are incompatible with the comity necessary to hold a pre-vote referendum. Yes, indeed, if Copé is good at anything, it is turning low politics, ballot-box stuffing, manipulation of party rules, and strong-arm tactics into high rhetorical principle.

Look, the bottom line here is that both sides cheated. Both sides always cheat in party elections. There would have been no problem if the cheating hadn't resulted in a dead heat. Now Copé is worried, probably because he cheated more than Fillon (see Bernard Girard, who really should correct his inaccurate spelling of Copé's name--perhaps he is confusing JFC with Benjamin Constant and the Coppet group, although that would be a stretch). But if Copé could not win even when he was in control and thought nobody was looking too closely at his tactics, he is undoubtedly afraid that he will lose outright in a fair (well, fairer) election. So he will do what he can to prevent it, especially since he has suffered more in polling than Fillon (who has also lost ground and tarnished his reputation, however). The longer this drags on, the more likely becomes a coup de théâtre such as a Sarko comeback, at least as interim leader.

The spectacle is riveting, though far from edifying.

DSK, The Play: A Must Miss

Read about it here.

Mittal-Hollande Summit

Arnaud Montebourg, who has made a specialty of undiplomatic and unproductive pronouncements, accused Lakshmi Mittal of reneging on commitments made to France, precipitating a crisis. Mittal is on his way to France to thrash the matter out with President Hollande. Now, it is true that Mittal has closed certain operations in Gandrange and Florange that he had promised some years ago to keep running and even beef up with new investments, but his promises were contingent on certain economic conditions, which have not been met. European steel consumption has declined sharply in the crisis, and this may or may not justify Mittal's decisions, depending on the precise nature of the understanding he had with Sarkozy.

Beyond the narrow issue, however, is Montebourg's apparent general view that virtually nothing can justify a plant closure. At a time when the government is emphasizing the need for pro-competitiveness measures, such a position seems short-sighted. I won't pronounce on the economics of the steel industry or the proper way to address overcapacity in steel production. There are complex factors to be considered. But it is economically suicidal for France to insist that capital that could be invested in cutting-edge sectors be poured down rabbit holes. Is there any reason to believe that Mittal is acting in bad faith? If so, I haven't seen it. If Hollande wishes to establish his bona fides with business interests, he must rein in Montebourg, who is serving his own interests with his ill-advised jawboning and not the interests of the government or even of Mittal workers.

A Discussion of the Euro Crisis

Five noted scholars debate the euro crisis and its political ramifications at Harvard's Center for European Studies:

Guest Post: Brent Whelan on Italian Elections

Although this blog is devoted to French politics, the wider European context is always of interest and particularly so in this time of trans-European crisis. Although I try to follow political developments in other countries besides France, an illness for which I am currently undergoing treatment has diminished the time available for keeping abreast of the news. So I am pleased today to present this guest contribution from Brent Whelan, a Boston-based observer of the European political scene and frequent commenter on this blog. As will be clear, Brent's political views differ from mine, but his particular perspective is helpful in illuminating the current state of play in Italian politics.

European political observers accustomed to regarding the Italian electoral system as a comic sideshow might want to take a closer look after yesterday's Democratic Party primaries. What is gradually taking shape in advance of the March/April national legislative election is a classic face-off between two highly credible spokespersons: on the center-right, the darling of the European financial class and its conservative 'reform' program, Mario Monti, on whose behalf strenuous efforts are underway to keep him as premier without the messy business of standing for election; while on the center-left, Pier Luigi Bersani, a reconstructed Communist, centrist minister in Prodi's reform cabinet, and chair of the PD, seems headed toward nomination in next Sunday's runoff. But first Bersani must finish off the frankly Blair-ite mayor of Florence, Matteo Renzi (who prefers to call himself an 'Obamist'), a generation younger, post-ideological, and indisputably charismatic. (Renzi spent the morning of yesterday's first-round election running a half-marathon before greeting voters at the polls.)


Much of the interest in that run-off concerns Nichi Vendola, the not-so-reconstructed Communist, fervently Catholic, openly gay and radically environmentalist governor of Puglia, whose small Left Ecology Freedom (SEL) party is officially affiliated with the PD and whose 15% in the first round will provide the margin of victory for Bersani or Renzi. And Vendola is already exerting that leverage, promising to 'listen carefully' ("ascolteremo con puntigliosa attenzione le parole di Bersani e di Rienzi e orienteremo il nostro sostegno di conseguenza") before throwing his support to either candidate. Will Vendola succeed in pushing Bersani far enough to the left that Italy has a real Left/Right showdown in the spring (the one that Hollande seems determined to avoid in France as he turns his back on the Front de Gauche and promotes austerity policies)? As both Bersani and Vendola are deeply committed to the European project, will they team up to define the 'Other Europe' that Mélenchon and the FdG allude to but seldom describe? With Bersani already leading in national polls, will Italy be the site of a resurgent Left, or its last hurrah? Some though not all of these questions will be defined as Vendola makes his move on Bersani in the next few days.

Hatred

Fillon and Copé must hate each other with a passion to have chosen the suicidal course that is undermining both of them and their party with it. In normal times, one assumes that political passions run across party lines. To be sure, Sarkozy threatened to hang Villepin from a butcher's hook, and the Right has numerous fratricidal episodes in its past. Those seemed different, however, because the protagonists were heavyweights. Fillon and Copé are still politicians of the second rank hoping to make the passage upward. Perhaps that's why their contest is so bitter. Others are calling for a new vote, and the result might indeed be different, because so many militants are disgusted with the leadership that they might sit this one out, if they have not already resigned.

Curiously, the PS treated us to a similar spectacle a few years ago. Few now remember that in the leadership contest to succeed Hollande, Aubry and Royal ran neck and neck, and, then as now, there were widespread (and credible) allegations of fraud. Yet eventually Royal withdrew. She seems to have been promised nothing for her sacrifice, and to have gotten nothing, although we can't be sure that there wasn't a deal involving DSK and Aubry, in which Royal would have gotten a ministry under a DSK presidency. But any such deal would have been rendered moot by subsequent events. The problem for the UMP is that Fillon has already served as prime minister for five years. The only job he wants now is the top one, and Copé is not about to give it to him.

The UMP Goes to Court

The UMP is now headed to court, Fillon having filed a complaint after Alain Juppé gave up his mission of reconciling the warring Fillon and Copé clans. It is hard to see how the UMP continues as a party after this. If it splits, the big loser is Jean-François Copé, who is more powerful inside the party than in the right-wing electorate as a whole, much less with the general population. But clearly this is a saga that will not play out in a day. The danger, of course, is that the Front National has now achieved its goal of dividing the Right and may seek to pick up bits and pieces of what remains after the explosion. Some will be tempted.

What will Sarkozy do? Will he be tempted to mount his white horse and ride in as unifier? It's not out of the question, but I don't think he will like the lay of the land as it now stands, and he still hasn't amassed the fortune he wants, though he's well on his way, having delivered four major speeches to international business groups for undoubtedly handsome fees.

The rest of us can only sit back and enjoy the spectacle.

The Failure of EU Budget Talks

Analyzed here. Like every previous French leader, Hollande defended the Common Agricultural Policy rather than brave the ire of French farmers. Is he preparing a more ambitious negotiating position for the crucial December summit, or is he merely playing a tired, cautious, and conservative game to minimize political risk?

UMP on the Brink

As expected, Copé is not going to roll over for Juppé and is resisting the conditions laid down for mediation. This makes a split in the UMP more likely, if not inevitable.

My Novel in Print

My novel Shooting War can now be ordered in print from Amazon and other book stores. There is also a corrected Kindle edition, but this has not yet gone live. The earlier Kindle edition can still be ordered. The printed book is also available through Amazon in the UK, France, Germany, Italy, and Japan.

A Juppé-Fillon Axis?

Alain Juppé has stepped into the Fillon-Copé dogfight. He will lead an "independent commission" charged with sorting out the mess created by the 50-50 vote split and allegations of errors and irregularities in any number of bureaux de vote. Juppé, one of the founders of the UMP, is unhappy with la droitisation of the party, first under Sarkozy and his advisor Patrick Buisson and now under Copé. Although Fillon, despite having "renounced" the presidency of the UMP, leapt eagerly on Juppé's announcement, Copé was understandably reluctant. But Juppé then issued an ultimatum, and Copé, whose position seemed increasingly untenable, finally gave in, although he will presumably fight tooth and nail to have any recount supervised by the Cocoe, where his supporters are numerous. But Juppé is too canny to accept such a one-sided deal and will undoubtedly press for a compromise, because, as he says, it is no longer the presidency but the existence of the UMP that is in question. All in all, one of the most incredible spectacles of recent French political history.

Sarkozy "témoin assisté"

After a twelve-hour interrogation by un juge d'instruction (a position he tried to abolish in 2009), Nicolas Sarkozy was declared "un témoin assisté." What does this mean?

Ce statut hybride entre témoin simple et mis en examen signifie que s'il y a bien des indices qui suggèrent qu'il aurait participé à une infraction, ils ne sont ni graves ni concordants. A moins que le juge Jean-Michel Gentil, qui arrive au terme de son enquête, ne découvre de nouvelles charges dans les prochaines semaines qui rendent nécessaires de faire évoluer son statut, M. Sarkozy ne sera donc pas renvoyé devant le tribunal en fin d'information.

Interpret that as you will, it's still not a pretty position for an ex-president, although we're getting used to it as par for the course. Savor the photo of Sarko unshaven after his long day at the courthouse, to which he traveled by private jet. Who paid for the flight? Mme Bettencourt?

UMP Finances in Disarray

It seems that there are important financial stakes in the UMP leadership fight. The party is deeply in debt, and François Baroin, who has been surprisingly outspoken in attacking the Copé "victory," is maneuvering to form a second parliamentary group, which would deprive a Copé-Jacob-led rump of one source of financing. (h/t Laurent Bouvet)

Sciences Po: Regime Change

Geneviève Fioraso, the minister for higher education, has stepped into the Sciences Po succession controversy. Following the selection of Hervé Crès to succeed the late Richard Descoings, many faculty members associated with the institution protested the choice, and the Cour des Comptes issued a devastating report on the management of finances, calling for possible prosecution. Fioraso therefore suspended the nomination of Crès and has called for the appointment of a person "beyond reproach" as interim director. This is the culmination of a long series of critiques of the manner in which Sciences Po has been run. It appears that the time for a change of regime has come.

La Droite Forte

An interesting analysis by Françoise Fressoz of the influence of Patrick Buisson, ex-FN, on the Droite forte current within the UMP. Copé claims to embody this ideology, but perhaps he is merely its tool. In any case, it may well split the UMP.

Chris Bickerton sees a fulfillment of Marine Le Pen's strategy to divide and conquer by provoking a split in the UMP.

Sarkohack?

Computers at the Élysée were allegedly broken into by US cyberwarriors. More details here.

The UMP Saga Continues

Astonishingly, the UMP vote-counters forgot the votes of 3 overseas départments. Had they been counted, Fillon would have won by 26 votes rather than lost by 98. But according to Copé, the actual vote count is irrelevant, because the result has already been "proclaimed" and "there are rules." Meanwhile, Fillon has "renounced" any desire to preside over the UMP, since he notes, rightly, that neither he nor Copé can claim the requisite moral mandate. He proposes to place Alain Juppé, "une personnalité incontestable," at the head of the party while the two factions fight for its soul. Meanwhile, the rancor seems to be growing, and talk of "une scission" is everywhere.

On France2 tonight, Copé's baratin struck me as even more preposterous than usual. Unflappable salesmanship sets a tone that is quite incompatible with the gravity of the crisis. Meanwhile, Bruno Lemaire, to date nonaligned, let it be known that an end to the "circus" is imperative. But suppose there is none. Which way will he jump? As I said yesterday, any number of reconfigurations of the Right now seem possible. The "circus" may in fact mark the beginning of a new era in French politics. Interesting times.

Droites Innombrables

René Rémond saw three main currents of right-wing political culture in France. To judge by the results of the UMP elections, there are now at least twice that many. Looked at more closely, however, the many currents reduce to two: one that wants to make race and national identity a key tenet of the Right, and one that does not, that regards such a move as unwise "both politically and morally" (as François Fillon said in his statement following Copé victory in the leadership contest; my italics).  For all the creative nomenclature (Droite forte, Droite humaniste, Droite gaulliste, Droite sociale, Droite populaire, Droite anti-division), the key tactical question is, How do we beat the Front National? And the respectable Right has two answers: go after their voters where they live, or else continue to reject the FN program and leadership as beyond the pale of reasonable discourse.

Beyond the issue of identity, there is nevertheless a spectrum of views on how to counter the FN's program of protectionism and support of the working class. Here, the nuances among the various currents of the UMP (and of Borloo's neocentrist movement) become slightly more interesting. A number of deputies expressed fear that the victorious Copé would try to lock down the party, suppress dissenting voices on these issues, and press forward with his own version of Sarkozy's droite décomplexée. If he does, they threaten to leave the party--and the threat is not idle. Copé's narrow victory lends substance to Borloo's contention that there is no longer any justification for a single party to claim a monopoly of the right-wing electorate. We can look back to the good old days of the UDF-RPR rivalry.

As for those who believe that Copé is merely a stalking horse for a Sarkozy comeback in 2017, I say this: while it is true that Sarkozy retains substantial support among UMP militants, I have my doubts about a future candidacy. He goes before the judges tomorrow. Even if he survives the several investigations into shady campaign financing allegations, he is likely to succumb to his own desire to earn large amounts of money by capitalizing on his political connections. He stated this as his ambition post-politique. I suspect that he will not be too scrupulous about how he earns that money, and that his choices will make it impossible for him to resume a political career.

As for Copé, I think the UMP has just made a fatal choice. The close vote reveals a deeply divided party, and Copé is far less popular among the broader electorate than Fillon, despite years of exposure at the national level and continuous cultivation of the press. Although Copé "magnanimously" offered Fillon the meaningless position of "vice-president of the UMP," Fillon, who emerged from the contest stronger than he entered it, indicated no particular desire to associate himself with the Copéisé UMP. He now stands equal to his rival as the standard-bearer of the Right and has numerous options to consider in a reconfigured right party lineup. I think we are in for an interesting period of realignment. Copé's victory will be short-lived. One sign of this was the remarkably strong rejection of Copé today by François Baroin, who normally plays his cards closer to the vest.

Copé Wins, Alas

The new leader of the UMP is the old leader, J.-F. Copé, who won by a mere 89 votes out of nearly 180,000 cast. In other words, the party is deeply divided. Copé's election renders more likely a flirtation or worse with the Front National. The ultimate prize is the presidential nomination in 2017, of course, and much can happen between now and then.

Miracle Soap

Who says the French lack entrepreneurship? A firm has begun marketing miracle soap made with water from the cavern of Lourdes. But the entrenched interests are fighting back. Rather than allow free entry into the miracle marketplace, Les Sanctuaires de Lourdes, the incumbent monopolist of the healing powers of the place, has issued a warning to the upstart competitor.

New PS Leadership

Harlem Désir has installed a new leadership group at the head of the Socialist Party. The left wing has been excluded. Most of the names of the new leaders are unfamiliar, since all the familiar names are in the government. Does this move have any significance? For the future of French politics, no doubt it does, but I'm far too distant from the scene to read the tea leaves with any confidence. Perhaps some of you are more familiar with the inner workings of the party and would like to comment.

Here's a statement from Désir:

La nouvelle équipe doit porter «une orientation claire, celle du socialisme du réel et du réformisme ancré à gauche», a expliqué le premier secrétaire. La feuille de route est simple – c'est celle du président de la République – et le PS lancera la semaine prochaine «une grande campagne pour soutenir les réformes engagées par le gouvernement».

Back in the good old days of the General, this was what was called un parti godillot, a rubber stamp for presidential action. At the time, Socialists didn't think this was what politics ought to be like. I guess times have changed.

Renault Wants Concessions from Labor

Renault is offering French workers "job guarantees" in return for concessions on work time flexibility, work rules, and wages. The company is playing hardball, having already pressured lower-paid workers in its Spanish plants to make similar concessions by invoking competition from still worse-off Romanian workers. So a race to the bottom is on, and in the current climate of no growth and high unemployment, many workers feel they have no choice but to agree to the clawbacks. It's an ugly situation, and it's hard to see how it can endure, given the magnitude of the labor cost differences between north, south, and east in the Renault empire.

Europe Blows It

Europe's initial resistance to the crisis was aided by the automatic stabilizers built into large welfare state budgets, but then European leaders panicked as the very stabilizers that should have prevented collapse swelled deficits and came into conflict with post-Maastricht treaty commitments. Germany enforced a herd mentality. And Paul Krugman documents the result:

Stimulus has disappeared in the Eurozone and the UK, and both are in recession. The US continues to stimulate, and its economy is growing again, albeit slowly.

The German Vision

François Bonnet has an excellent piece in Mediapart analyzing Franco-German relations. He calls it "the Merkel problem." And the nature of the problem is easily summarized: Frau Merkel no longer looks forward to a Greek exit from the euro. She has been convinced that German prosperity depends on the maintenance of the EU. But she also believes that the EU can only be maintained by capitulating to the world view of the German Right:

C’est le problème. Le grand plan désormais proposé par l’Allemagne d’une redéfinition de l’union politique et monétaire n’a rien d’un projet politique. Il sera sur la table du sommet européen de la mi-décembre et cristallise déjà les désaccords. L’ambiguïté tient largement au vocabulaire utilisé : intégration, gouvernance, contrôle démocratique. On pourrait y voir un nouvel étage de la construction politique de l’Europe pour enfin sortir d’une paralysie institutionnelle éloignée des peuples. Or ce n’est nullement de cela qu’il s’agit. Mais bien plutôt de remodeler des institutions en fonction d’une vision économique exclusive de ce que doit être l’Europe : celle de la droite libérale et conservatrice.

And the bottom line:

La question posée aux socialistes peut ainsi se résumer : l’Europe peut-elle être relancée par un projet qui ne soit pas celui du néo-libéralisme ou celui du social-libéralisme ? Une reconstruction peut-elle être engagée, bâtie sur un approfondissement démocratique et laissant le champ libre à de possibles alternatives sociales ? Tant qu’un tel projet – régulièrement brandi par des eurodéputés ou, à sa façon, par le parti socialiste européen – ne sera pas porté haut et fort par l’exécutif français, le problème Merkel perdurera.

Zaretsky on the Socialist Dilemma

Rob Zaretsky uses history to explain the impasse in which the Socialists find themselves.

The IMF, the ECB, and the Germans

The Troika--IMF, ECB, Germany--managing European financial affairs is analyzed in this post by economist Joseph Joyce.

The Beginning of the End for Austerity?

No sooner did François Hollande forthrightly embrace austerity as the policy of his administration than hundreds of thousands of people took to the streets in dozens of cities across Europe, primarily in the southern tier but also in Belgium and France. The magnitude of the protests, the violence that broke out around the edges of demonstrations in many countries, and the sheer visibility of the pain that austerity has inflicted suggest that things may not hold together much longer. What is more, the likelihood of a Greek default, not in spite of but because of austerity, which has actually decreased Greek GDP and increased debt, only exacerbates the situation. Is a disorderly end to the euro in store. Once again, the possibility seems real, as does the prospect of major political upheaval.

Revolt at Sciences Po

Here.

ECB Governance

Sebastian Mallaby faults the governance structure of the ECB--one member, one vote. Germany, he argues, originally saw the ECB as an extension of the Bundesbank and an instrument for promoting its own economic views. But he believes that German influence has been overwhelmed by the sheer number of opponents.

There is some truth in this, but the argument is overstated. Throughout its history, the ECB has for the most part acted in consonance with German views. Its charter limits its freedom of action, its staff, drawn from national finance ministries, is dominated by Germans, and its directors have always had to pass muster with German vettors, even if they have on occasion demonstrated a certain independence, which is only to be expected.

Still, it is true, as Mallaby also indicates, that the crisis has introduced new tensions into the relationship between Germany and the ECB. But where has the crisis not introduced new tensions? And perhaps these tensions are productive, in that German views about economic management need to evolve if the dilemmas that Mallaby evokes are to be overcome.

Le Hollandisme: Hollande l'assume

Austerity and competitiveness: these are the banners that Hollande has chosen to fly. He promised to reduce government expenditures by €60 billion (3% of GDP) over the next five years, and he praised the Gallois report.

The staging of the press conference seemed to take a leaf from the White House playbook: Hollande, like Obama and Bush before him, arrived at the podium by way of a long, plushly carpeted corridor. He stood, alone, before several hundred journalists, emphasizing the singularity of his position. His tone was mild, but his words were firm, if at times nebulous.

It was an exercise in power projection as a media consultant might conceive it, but to me it was not a role for which Hollande was cut out. Does it matter? Probably less than a media consultant might think.

The German View of France

According to Jean Quatremer, the reforms announced by J-M Ayrault in the wake of the Gallois Report have pleased the Germans.

Munchau: France Has Misdiagnosed Its Problem

Wolfgang Munchau thinks that France has misdiagnosed its labor market problem by analyzing in terms of competitiveness. He argues that the success of the German model, also misunderstood, is the reason for France's misunderstanding of its own situation. For Munchau, the problem in France is one not of wages but of total factor productivity. In other words, France needs to rejigger its product mix and move up the value chain in the composition of its output. I have taken a similar line in previous posts, but the point needs to be substantiated with a good deal more argument than Munchau provides here (or than I have provided). Munchau further clouds the issue by introducing youth unemployment, which is indeed a major problem but a separate issue from TFP.

Hollande's Moment of Truth

Tomorrow François Hollande will attempt to explain to the country where he is headed. I am eager to find out the answer. In anticipation, I can imagine two possibilities. First, Hollande might announced that he has had a conversion experience on the road to Damascus, that he now believes, as David Cameron does, in expansionary austerity. This seems unlikely, since it is not a doctrine widely embraced by the left, he didn't believe in it before, and no evidence that has emerged in the last six months is likely to have changed his mind--on the contrary. Or, second, Hollande may say that although he would like to stimulate the economy with deficit spending, his hands are tied with several strands of rope: the lack of confidence of the markets, the intransigence of Germany, and the difficulty of crafting a stimulus that will not allow additional government spending to leak out beyond France's borders to stimulate her neighbors rather than create employment at home.

Of course, he's unlikely to take this second position either, because it is a confession of weakness, which is the last thing he can afford right now, with his "presidential image" being questioned right and left. Indeed, he had vowed not to have news conference at the Elysée, but France2 last night reported that his PR advisors had recommended using the palace in order to demonstrate his physical occupation of the seat of power. The hope is that the majesty of the surroundings will magnify and solidify the quavering Flanby.

So what I expect is an onslaught of equivocation, a series of announcements of new initiatives in R&D, worker retraining, etc. There will also be, I expect, a moving paean to solidarity as a way of justifying both tax increases on the wealthy and the shift of the financing of social security to broader-based taxes (both CSG and VAT). There are some fine rhetorical opportunities here to disguise what is essentially a bitter pill that the left's base will be forced to swallow.

In any case, the occasion will be a moment of truth for Hollande, who has the unenviable role of leading the country in a time of profound retrenchment.

Risk Sharing: US and EU Compared

Over at VoxEU, Mathias Hoffmann has a very interesting piece comparing risk sharing among US states compared with risk sharing among member states of the EU. One recommendation that follows from his argument is that European integration could be furthered without complex and politically impossible treaty modifications by taking steps to encourage more cross-border equity ownership in Europe. Currently, European investment takes the form primarily of direct investment or bank borrowing by large firms. Trans-European stock ownership is feeble compared to the US. For Hoffmann, equity ownership is one channel via which asymmetrical shocks can be alleviated by transmission to other states. Worth reading.

The Jospin Report

The Jospin Commission has submitted its report, which recommends limiting but not banning le cumul des mandats, electing 58 of 577 deputies via proportional representation (which favors third parties and is backed by the FN, for instance), and requiring 150,000 citizen signatures rather than 500 signatures of elected officials for a presidential nomination.

No sooner was the report submitted than it was attacked in Mediapart by one of the commission members, the constitutionalist Dominique Rousseau, who submitted his own minority report. Rousseau faults the commission for lacking audacity, limiting its ambitions to what it knew in advance the political class would tolerate, and failing to recognize the degree to which the "bond" between citizens and representatives has frayed. In his view, much more sweeping changes are needed.

Hollande-Netanyahu Imbroglio

President Obama has had his difficulties with Benjamin Netanyahu. Sarkozy found him insupportable. Now it's François Hollande's turn: in what was supposed to be an "off the record" conversation with journalists aboard his plane (so what happened?), Hollande acknowledged that he was irritated with Netanyahu for allegedly transforming the memorial service for the victims of Mohammed Merah into a "campaign rally."

Elie Cohen Analyzes the Gallois Report and Its Aftermath

Here. A shrewd if somewhat jaundiced reading of the Gallois report and the government's response.

Nissa rebela

I confess to a faible for the city of Nice: the curve of the coastline, the old market, the feel of the streets, the loveliness of the Mediterranean--what's not to like? The politics, perhaps. Now it emerges that the Front National is flirting with the Bloc identitaire of Philippe Vardon, the leader of Nissa rebela, a regionalist/separatist movement. The marriage has not been consummated, however:

"Il n'y a pas d'accord avec le Bloc identitaire, nous avons trop de différences de fond". Ajoutant que si "certains considèrent qu'ils sont plus proches de nos options, ils peuvent nous rejoindre", excluant ainsi toute double appartenance. Ce qui veut dire concrètement que la condition posée par le FN a toute adhésion de M. Vardon au FN est l'abandon de ses engagements à Nissa Rebela (dont Philippe Vardon est président) et du Bloc identitaire qu'il dirige avec Fabrice Robert.

"La Comm'"

In my previous post, I dissed "le storytelling de Hollande." Now, if you want an example of a successful coup de comm', you have no farther to look than to this article in Le Monde. Here, Manuel Valls manages to take credit for the "social VAT" while at the same time modestly--and no doubt quite accurately--eschewing any actual role in bringing it about. Clearly, the consensus behind the revamping of social-security financing in France is far broader than any single politician's campaign position on the VAT. But Valls effortlessly manages to take credit for the change while denying any responsibility for its details. Hollande's people should study this act of remarkable finesse.

"Le Storytelling"

Hollande attempts to burnish his image. Harrumph. Somehow I don't think that dragging a bunch of ministers to provincial venues to sign "contracts for tomorrow" is really going to arrest the slide in Hollande's popularity. If this is what the Left thinks "le storytelling" is, they're in trouble.

Piketty on the Gallois Report and Government Reaction

Here. I see here, clearly articulated, one line of emerging critique of the government's plan: it is intellectually incoherent, Piketty argues, "illegible," unclear, etc. Bernard Girard echoes the thought here. Given the total irrationality of fiscal debates in the US, I think "illegibility" is a rather mild criticism, though one can understand the disappointment of intellectuals who had hoped for a complete overhaul of the tax system. A fine idea in principle, but such ambition requires a more resounding mandate than Hollande received (for a program quite different from the one he has enacted, moreover) and a party more united than the PS about where it wants to take the country. Given the political constraints, I'm rather pleased that Hollande has moved, with some dispatch, toward a policy that holds out some promise of mild improvement. Of course the cost-shifting is merely a short-term response to a deteriorating competitive situation; the long-term response will be the real test, and it may be that a government forced to pinch its pennies ever tighter will be tempted to skimp on the investments in R&D, infrastructure, and education that are ultimately more important than the "legibility" of social-security financing.

Gallois Theory

Évariste Galois was a young mathematician who wrote down his famous Galois theory on the eve of a duel in which he died. Louis Gallois, haut fonctionnaire and former head of EADS, has seen his own Gallois theory immortalized almost as instantaneously. He delivered his report yesterday; today the government accepted it, in essence if not in fine detail.

And so the Hollande administration has been brought in short order to a total reversal of its own stance on the "social VAT." One of its first acts was to abrogate the increase in the VAT enacted under Sarkozy, in the last days of the old regime. And now, barely six months later, Hollande will pay for the €20 billion tax credit to employers (in lieu of the elimination of payroll charges advocated by Gallois) by raising the VAT. Is it any wonder that voters are confused about where Hollande is headed? (And to add insult to injury, Mediapart claims, in a somewhat overwrought article, that parts of the Gallois report were written by a card-carrying member of the UMP--the horror!)

On the other hand, the destination is perfectly clear. Hollande has embraced a view of French competitiveness problems that is widely shared by economists, employers ... and politicians of the center-right. Unfortunately, it is a view also only recently attacked by Hollande himself as shot through with "injustice." The choice of the VAT over the CSG to finance the measure is apparently in part due to technical advantages but in part due to the plain political fact that a hike in the CSG appears on each employee's weekly pay stub, whereas a hike in the VAT is felt in a more diffuse way at the eheckout counter. And bear in mind that the financing also depends on an additional €10 billion in government spending cuts, on top of spending cuts already promised to reduce the budget deficit. The arithmetic of the Hollande budget is beginning to look as shaky as Mitt Romney's.

A propos of which, I must go off to vote for Obama before the lines get too long at the polls.

Competitiveness

I feel compelled to mark the beginning of "competitiveness week" in France. As everyone who pays any attention to these things already knows, Louis Gallois has delivered his commission's report, and the government has promised to "do something" in response, though undoubtedly less than the commission has asked for (fracking, for instance, has already been rejected). It's worth recalling a few simple facts: France's balance of payments has been sinking into the red for a decade. France's unit labor costs are high compared to those of some of its neighbors. French labor market rules are relatively restrictive. And France's social safety net is financed, to a greater extent than is the case in neighboring countries, on the basis of payroll taxes.

So the Gallois commission recommends some changes, the most important of which is the transfer of the social safety net burden to broader-based taxes such as the CSG and the VAT. One can quibble about the details and the amounts, but the basic principle is not unreasonable. Elements of the left that argue that the welfare state should be based on solidarity rather than charity are at odds with themselves when they protest that such a change would shift the burden from "corporations" to "people" or "workers." In fact, the burden borne by corporations is already passed on to consumers, and a broader-based financing is more consistent with the principle of solidarity.

To take the argument any further, however, is to get into the deep weeds of economic analysis. One has to ask about the elasticity of demand for the various components of France's national production. One has to wonder about the sensitivity of imports and exports to relative prices. One has to ask whether France would be better served by shifting its resources into new product areas or by defending those in which it has been losing market share, such as automobiles. There is plenty of room for disagreement. What is to be hoped is that the government will begin to lay out a detailed strategy rather than a blunt rejection or approval of the Gallois proposals. Everyone agrees that changes are necessary, but the time for generalities is over.

Shooting War

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