Wednesday, May 30, 2012

Doomsday chorus!

The doomsday chorus is getting louder. Read Martin Wolf and Joschka Fischer (h/t Bernard). Both blame Germany. The diversity of German views is actually wider than one might think, but expression of them is blocked by the apparent consensus within the current government and with the Bundesbank and ECB. Will this consensus crack if Spanish banks fail? Perhaps, but it may be too late to do anything useful in response.

EC Warns France

With Spain on the brink of banking collapse, the European Commission's warning to France will not get much attention. How many battalions has the EC anyway? Still, it would be wrong to dismiss the EC's concerns as merely another expression of "neoliberal" orthodoxy. French wages have been rising faster than productivity. French global market share has been falling. French industrial competitiveness has suffered. French social spending remains extremely high. And after five years of Sarkozy's "battle against all conservatisms," the French labor market remains much as it was under Chirac. With high and rising youth unemployment, one does indeed have to think twice about raising the minimum wage. With a budget deficit still too high, one does have to think twice about pushing the early retirement age back to 60 for hundreds of thousands of people.

Not that the Socialist government was unaware of these dilemmas before receiving the EC report. And not that being told to do these things by the largely discredited and disrespected EC is very useful in actually getting them done. But Hollande has been very reticent in explaining exactly where he would like the French economy to go. In his appearance last night on France2, he repeated the themes of his campaign but added no strategic direction. He was at pains to emphasize his "normality" by pointing out that he came to the studio rather than having the TV cameras come to the Elysée, but of course this was anything but "normal" for a president. What he really meant was that he intends to maintain his "simplicity," to govern as he led the party and ran for office, without giving himself airs. He is now president, however, even without the monarchical trappings. That makes him responsible. He may prefer to "lead from behind," but he still has to lead. As refreshing as the change of style is, he must take care, lest "simplicity" turn into emptiness.