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TFI Daily News

World News for World Changers

Jun 5

The Economic and Political Decline of France

By Mathieu von Rohr, Der Spiegel, June 4, 2013

Judging by the imperial magnificence of the Elysee Palace, France has never ceased to be a world power. Rooms with five-meter (16-foot) ceilings, gilded chandeliers, candelabras and elaborate stucco work are guarded by members of the Republican Guard, who parade in front of the palace gates with their plumes of feathers and bayonets.

The man in charge, on the other hand, seems lonely and small in his palace. He is surrounded by court ushers who make sure that glasses and writing sets are perfectly arranged, and when he enters a conference room, they call out grandly “Monsieur le Président de la République!”, to give his attendants time to stand up for him.

François Hollande never intended to become a king, but rather a “normal president,” as he put it, and now he has to play one nonetheless. He occasionally seems like an actor who has somehow ended up in the wrong play.

Outside, throughout the country, unemployment reaches new highs each month, factories are shut down daily, hundreds of thousands take to the streets to protest gay marriage, and the French are increasingly outraged over a barrage of new political scandals as the country hovers on the cusp of waning global relevance. Yet this roar of dissatisfaction doesn’t permeate the walls of Hollande’s world. Here, it is quiet, very quiet.

Shortly after moving into his new official residence, Hollande warned his staff that in a palace it is easy to feel protected, and he insisted that he did not want to be “locked in.” But that is precisely what is happening, as evidenced by the documentary film “Le Pouvoir” (The Power), which recently debuted in French theaters and whose creators accompanied Hollande during the brutal first eight months of his presidency.

They paint an image of a likeable man who seems to spend a lot of time rewriting speeches prepared by his staff. As you watch him in the movie, you start to wonder: Does he do all the important things when no one’s watching or does he really spends most of his time on the unimportant? However, the main subject of the film is not the president, but rather the reality bubble in the country’s top echelons. Not just Hollande, but also most of his cabinet ministers, still reside in Parisian city palaces that predate the French Revolution, and perhaps that’s a problem.

A justice minister who spends her days in the Hôtel de Bourvallais on Place Vendôme, next door to the Hotel Ritz, a culture minister who goes to work at the magnificent Palais Royal, a prime minister whose offices are in the grand Hôtel Matignon and a president who resides at the Elysee Palace, they all need a great deal of inner strength to avoid losing their connection to reality. It’s a difficult proposition, because Paris’s settings of power convey the message that France is big, rich and beautiful.

But the mood hanging over the country is depressed. France is in the midst of the biggest crisis of the Fifth Republic. It feels as if the French model had reached an end stage, not just in terms of the economy, but also in politics and society. A country that long dismissed its problems is going through a painful process of adjustment to reality and, as was the case last week, can now expect to be issued warnings by the European Commission and prompted to implement reforms.

France’s plight was initially apparent in the economy, which has been stagnating for five years, because French state capitalism no longer works. But the crisis reaches deeper than that. At issue is a political class that more than three quarters of the population considers corrupt, and a president who, this early in his term, is already more unpopular than any of his predecessors. At issue is a society that is more irreconcilably divided into left and right than in almost any other part of Europe. And, finally, at issue is the identity crisis of a historically dominant nation that struggles with the fact that its neighbor, Germany, now sets the tone on the continent.

The French economy has been in gradual decline for years, without any president or administration having done anything decisive about it. But now, ignoring the problems is no longer an option. The economy hasn’t grown in five years and will even contract slightly this year. A record 3.26 million Frenchmen are unemployed, youth unemployment is at 26.5 percent, consumer purchasing power has declined, and consumption, which drives the French economy, is beginning to slow down, as well.

There is a more positive side of the story, which sometimes pales in the face of all the bad news. France is the world’s fifth-largest economy, and interest rates for government bonds have been at historic lows for months. The country is far from being on the verge of bankruptcy and cannot be compared with Italy or Spain, and certainly not with Greece. Nevertheless, France is ailing. And looking weak is something the French themselves hate more than anything else.

This mixture of factors could jeopardize the entire European structure. For one thing, if France continues to decline, more and more responsibility will be shifted to Germany. “Germany cannot carry the euro on its shoulders alone indefinitely,” writes Harvard University economist Kenneth Rogoff. “France needs to become a second anchor of growth and stability.”

Another problem is that the European Union is losing its standing in France at a more dramatic pace than in any other EU member state. According to a study by the Pew Research Center, the public approval of the EU in France has declined from 60 to 41 percent in only a year. This might be owed to the uncomfortable fact that Brussels is increasingly treating France as a problem and not as one of Europe’s supporting columns, and many French citizens have started to see the terms ‘Brussels’ and (German Chancellor) ‘Angela Merkel’ as synonymous.

But is the EU to blame for the France’s crisis? Can Europe truly be held responsible for the fact that the government is behind 57 percent of total economic output in France? That government debt has risen to more than 90 percent of the gross domestic product? Is it Germany’s fault that, for decades, French administrations have failed to make the country’s business environment more competitive? And has anyone in Brussels demanded that a fifth of all workers in France be employed by the government?

France has an illustrious past, of which it is justifiably proud, but its historic success also prevents it from clearly recognizing the need for reforms. The omnipotent, bloated central government, which also controls the economy, should have been reformed long ago. The privileges of the Paris political elite are so outdated that they have become intolerable, and many bribery and corruption scandals are undermining an already fragile political legitimacy.

It cannot be accidental that France’s leading politicians increasingly refer to their country as the “grande nation.” Since the election campaign, President Hollande has hardly missed an opportunity to invoke the nation’s greatness. With some dialectical malice, one could see this as evidence that France’s greatness is now becoming a relic, but it certainly reflects the self-hypnosis of a nation whose stature is in the process of shrinking.

Since this spring, Hollande has been viewed by most commentators as the nice “Grandpa” in the Elysee Palace, who lacks the gumption to address the country’s serious structural problems. The French constitution grants the office of the president more power than is allotted any other leader of the Western world. Besides, his Socialist Party holds significant majorities in the National Assembly, the Senate and even in regional governments.

In other words, Hollande could get down to business on any day he chooses. He could reform the country as he wished, if only that were his objective. But no one—not citizens, not journalists and possibly not even his cabinet ministers—knows what he wants and if indeed he wants anything at all.

To comprehend the way of thinking that has shaped France for decades, it’s worth having a conversation with a man who is sitting in the First Class car of a TGV high-speed train traveling in the direction of the Alps, from Paris to Chambéry. He looks splendid as always, with his perfectly fitting tailored suit, his blue eyes and his bright white teeth. Arnaud Montebourg is 50 but looks much younger. He is France’s industry minister, but his official title is more apt, because it sounds as grandiose as the minister himself: Minister of Productive Recovery. A visit to a dying factory is on today’s agenda.

His destination is the Rio Tinto Alcan aluminum plant in Savoy, which its owners plan to shut down because they believe that operating the plant is no longer economically viable. Montebourg, who has never worked in industry himself, disagrees. He has even found a German company that wants to keep the factory and its jobs afloat, with government support. The purpose of his visit is to garner support for his rescue plan with German assistance.

"France once had a glorious industry," says the minister. He adds that he personally combats the nightmare scenario that author Michel Houellebecq described in his novel "The Map and the Territory," set in 2035, when all of France has become nothing but a theme park for tourists.

To avert this fate, Montebourg, since coming into office, has been hectically travelling around a country whose industrial base is in jeopardy. More than 1,000 factories have been closed in the last four-and-a-half years, and industry’s share of value added is now only half as large as it is in Germany.

The minister believes in the state. Although it has “no divine power,” he says, it can “accomplish a lot.” France is a “world power,” and it refuses to be forced into a game of “cat and mouse” by international corporations, continues Montebourg. Part of his portfolio is to publicly berate big business leaders, which includes telling people like steel baron Lakshmi Mittal that he is no longer welcome in France. Although such statements attract attention, it is not clear how many jobs they have yet preserved.

At the beginning of the year, Montebourg engaged in a public correspondence with American corporate leader Maurice Taylor, whom he had asked to acquire a Goodyear tire factory threatened with closure. Taylor responded: “How stupid do you think we are?” He wrote that he had no interest in investing in a country where “so-called workers” spend “only three hours” a day actually working and in which he would be constantly battling with unions.

Montebourg’s second opponent is Germany. The German economic model is “uncooperative, dangerous for France and suicidal for Europe,” he wrote in his book “Votez pour la démondialisation!” (Choose De-Globalization). During the train ride, Montebourg says that austerity in Europe needs to end and the European Central Bank should start acting like other central banks and “monetize parts of the debt,” which basically means printing money so as to reduce government debts, which he says will never be fully repaid anyway. “It is Germany that should withdraw from the euro if it refuses to accept doing what the other countries are doing to resolve the crisis.”

In the traditional French concept of economic policy, no company is ever entirely private, because businesses are bound to serve the Republic. In this sense, Montebourg embodies a worldview that, in a somewhat watered-down form, can be found among many members of the elite. He is an intellectual heir of Jean-Baptiste Colbert, who served as finance minister under Louis XIV in the 17th century and lent his name to a doctrine known as Colbertism, which holds that the state establishes manufacturing companies, directs the economy and pursues a protectionist trade policy.

This legacy continues to influence France today. Every president from Charles de Gaulle to Nicolas Sarkozy has been inspired, at least in part, by Colbertism. Free trade, the market economy and liberalism are expletives in France. Is Montebourg Colbertism personified? “Colbert wore a wig, but I don’t,” he says, laughing out loud over his joke, and adds: “That was a good one, wasn’t it?”

The French political class suffers most of all from the fact that, in a German-dominated euro zone, it can no longer implement its traditional notions of an economy financed by state debt, if only because of constant pressure from the financial markets. As a result, Hollande is on his way to a European policy similar to that of his predecessor Nicolas Sarkozy, even though he promised voters a new direction. This makes some Socialists irate, a feeling they expressed publicly in recent weeks when prominent party members called upon the president to seek “confrontation” with Germany.

But when Merkel and Hollande met in Paris last week, they put on a unified front. They even presented, for the first time since Sarkozy was voted out of office, a joint Franco-German paper for the EU summit in June.

Nevertheless, this does nothing to change the fact that, in the eyes of many Socialists, Germany is to blame for the crisis. They fault both the now-weakened austerity mandate in Europe and the German economic model, arguing that the Germans pursue an unfair, egoistic export policy.

The French left paints Germany as a place afflicted with deep social problems. Even members of Hollande’s staff are quick to cite German poverty figures in private talks, even though they are not much higher than French figures.