Monday, March 31, 2014

Changement de cap?

Naturally, there are many voices this morning calling for a change of course in government policy. Benoît Hamon and the Greens have written a letter to Hollande asking him to renounce the Responsibility Pact and concentrate on increasing the purchasing power of workers. François Bonnet in Mediapart suggests that the victory in Grenoble of a Front de Gauche-EELV alliance, which increased its advantage over the PS candidate (who refused to desist in the second round), points the way to a viable policy alternative. Laurent Mauduit, writing the same paper's editorial, says that the problem is that while previous left-wing governments going back to the Popular Front have been forced to "pause" their reforms after running into obstacles, Hollande paused before he began; he veered rightward on day one of his presidency.

All this is a bit hasty. Hollande's real problem is that he has to change his deep nature, his very character. He is at heart a compromiser and temporizer. By compromising and delaying, he has disappointed everyone rather than choose his enemies and make them angry while pleasing others. Now he must decide whom he is going to confront.

Why not confront Brussels? He can do this by reneging on the promise to cut €50 billion from the budget after implementing the Responsibility Pact. The cut in employer social charges should not be rescinded. It won't do any harm to firm competitiveness, though it won't help as much as some expect either. The budget deficit is larger than the government predicted for last year, €4.9 billion rather than 4.1, because expansionary contraction did not work. Spending the €50 billion will add to the deficit, to be sure, but it will put some people back to work and avoid taking money out of the pockets of others. Brussels will be livid, of course, but Hollande can afford to irk Brussels; Merkel will cut him some slack because she's a politician and recognizes reality, not a market ideologue like the Brussels gnomes. But Hollande can't just spend the money. He's got to dress it up with a credible logic of stimulus, investment, R&D, and relief for the most miserable victims of the crisis. Most of all, he has to show that "Europe" is not an immovable obstacle against which states must hurl themselves regardless of the consequences.

In addition, he needs to have a serious talk with le patronat. They're not going to give him a quid pro quo for the break he's given them on social charges, nor should they. But he should require of them a credible growth strategy. How do they plan to compete in their respective sectors? The automobile sector is a case in point. The German companies have revamped their supply chains, outsourced to east and south, and figured out ways to reduce costs without cutting wages at home (restraining wage growth, to be sure, but not cutting). Do the French companies have an answer to this, or are they content to be outcompeted in Europe while salvaging the future by building plants abroad that will contribute nothing to the French economy? Supply-chain restructuring can preserve French jobs, but not all of them, and it will entail considerable disruption at home, hence considerable opposition. Hollande should coordinate his strategy with the companies as the price of their tax breaks.

Finally, he needs to get out more. If people disliked Sarkozy for being always in their face, they dislike Hollande for having disappeared from view. Since Gayet-gate, cartoonists like to depict him hiding under his motorcycle helmet. It's an apt image.

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