Wednesday, October 22, 2014
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The French Way of Crisis

PARIS – France is in disarray. According to opinion polls, Nicolas Sarkozy’s popularity is at the lowest point seen in decades for a French president. Last week, two ministers resigned, but a parliamentary and media-sustained storm continues, fueled by conflict-of-interest charges against a minister suspected of corruption when raising money for Sarkozy’s presidential campaign.

Some ministers don’t care much about public perceptions when using public funds, and it is clear that the political atmosphere has become poisonous. The atmosphere in parliament is execrable, and may be enough to topple the government in a no-confidence motion. But the constitution established by General Charles de Gaulle is strong, and Sarkozy will keep his position until the end of his mandate in 2012. The main opposition Socialist Party’s weak electoral prospects are also helping Sarkozy.

The size of France’s political crisis seems to be out of proportion with the country’s real situation. To be sure, France has been severely hit by the global financial crisis and economic downturn. But the consequences have been somewhat less dramatic than in many other European countries.

Two of the three Baltic countries and Greece are in deep financial distress. Much the same is true of Portugal, Spain, Hungary, and Iceland. Ireland, Belgium, Italy, and the United Kingdom are still under threat, owing to large public debts or current-account deficits. But the Netherlands, and Austria – and, to a lesser extent, Germany and France – are faring slightly better.

In the short term, the situation in Germany is less severe than in France. Its trade balance is positive, and total public debt is not as high as it is in other countries. Despite high unemployment and low growth, Germany does not face a short-term threat to macroeconomic stability, though the country’s population is declining and aging, implying huge challenges in the decades ahead.

The short-term situation for France is more worrying. The fiscal deficit is higher than 6% of GDP, the trade balance is negative, and public debt – albeit lower than in all other European countries except Germany and the Netherlands – is nonetheless 80% of GDP. France urgently needs structural reforms – and thus a strong government.

Of course, unethical behavior by officials – the root of the current crisis – is unacceptable. But if growth were higher and unemployment were falling, such scandals would not be treated as such a drama.

Two factors are intensifying the pressure on Sarkozy. First, the public is increasingly aware that urgent and straightforward policies are desperately needed in the areas of pension and healthcare payments, and in state organization.

Second, in recent decades the French have been 10%-20% more pessimistic than the rest of the world when asked about their happiness and their attitudes toward the future for themselves or for France. Not only is the market economy less popular in France than in all other European countries or the US, but it is less popular than in Russia or in China!

Is the future more promising? All emerging countries answer “yes.” That is also the answer of a large majority in the US and in Europe. But in France, the majority says “no.” This deep pessimism militates against any public debate or reform, and exaggerates the importance of the current political crisis.

Since the first polling companies were created in the US, the UK, and France in the 1930's, they have asked questions about happiness and attitudes about the future. At first, the French gave the same answer as other people. But, in June 1940, the sky fell on their heads. This very centralized and proud country, where the state matters more than elsewhere and the military had won so many wars, witnessed the complete collapse of both in the span of just two weeks. A non-elected government that capitulated to Hitler offered a parochial, vassal-like future.

The French never really recovered from that trauma. Despite a beautiful rebirth after the war, the moral defeat of the elite and the hesitancy of the political system remain. Dire pessimism has become permanent, making consensus nearly impossible to reach – an impasse made worse by the under-development of civil society in France.

So expect big shocks. Balancing cuts in public spending in order not to endanger growth and employment requires a stable and smart government – and time. The UK and Germany are, with their excessive restrictions, are preparing the ground for recessions at home. Will France address the issue with greater subtlety and avoid this risk?

The grumpy, moaning, and intractable people of France have demonstrated many times that they can wake up and meet the challenges of the day. The Enlightenment, after all, was born in France. There is the French Revolution, the Napoleonic epic, the Battle of the Marne – won in 1914 thanks to spontaneous initiative when the government and the state failed – and the great revival of 1945-1950.

France also has a higher birth rate than all other European countries, and is the only one that renews each generation. Thirty years ago, there was not a single French enterprise among the world’s top 100 enterprises, whereas today there are 15. France’s education and health-care systems, despite difficulties, are still among the best in the world. Its intelligentsia and its scientists remain very creative, and are among the best in many fields.

So don’t bury France just yet. The French will undergo major shocks in the years to come, but France might be the only European country standing tall 30 years from now.

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