Nothing Left to Lose?
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In a recent article at Reuters, the hope was expressed that the approval rating of France's president
Francois Hollande (lately renamed 'LOL-lande' in the French press and
'Niemandshand' in the Dutch press for reasons explained further below) has by
now finally fallen to such an extremely low level, that he has nothing to lose
anymore by engaging in meaningful reform. Since he cannot sink any lower, he
can only win, or so the reasoning goes. What has inspired this epiphany is the
recent revelation by a French tabloid newspaper that the president is involved
in a secret nocturnal affair, sneaking out under the cover of darkness to
presumably offer the services of his conjugal dipstick to an unknown female.
It was noticed that the allegation has failed to move
the needle on his approval-meter further into the red. 80% of the population
thought Hollande was a failure prior to the tryst coming to light, and 80% are
still thinking so. Apparently things are as bad as they are going to get. Hence
it is reckoned that he might be due for a metamorphosis, turning into a 'French
Blair' or a version of Gerhard Schroeder (can you imagine a mixture of Blair
and Hollande? One could probably quite easily make a successful horror movie
starring that creature).
“Yet with polls showing most French are blase about his private life, the
real question is whether he will use the media event to show he is ready to
tackle the double burden on the French economy: rising taxes and public
spending.
"As is often the case, there are good intentions. But we will judge
the deeds," said analyst Bruno Cavalier at Paris-based Oddo Securities.
The Socialist Hollande, who in his 2012 election campaign labeled the world
of finance his enemy, ignited speculation of a U-turn with a New Year's address
to the nation offering business leaders a "responsibility pact"
trading lower taxes and less red tape for company commitments to hire more
staff. Striking a new tone which has already raised hackles with unions, he
also declared it was time to stamp out abuses of France's generous welfare
state, and cut public spending so as to create room for tax reductions after a
series of rises. Some see echoes of the
about-turn made 30 years ago by Hollande's mentor Francois Mitterrand, who in
1983 halted a policy of nationalization and expansion of worker benefits just
two years into his mandate as public finances crumbled.
About time too, say those who argue that public spending at around 57
percent of national output – some 12 points more than Germany's – is a burden
the economy cannot afford. French
debt at 93.4 percent of GDP and rising is now "in the danger zone",
the national audit office warned last week.
The prospect of a policy shift has been applauded by France's main
employers federation Medef, due to start talks in coming week with Hollande's
government on tax cuts it hopes will restore corporate margins among the
weakest in Europe. Left-wing newspaper L'Humanite dubbed him "Francois
Blair" after the centrist British prime minister who dreamed up "New
Labour" pragmatism, while others asked whether Hollande would follow the
reforms implemented in Germany in the last decade.
"What indeed if, after 18 months of empty words and drift, Francois
Hollande became the French Gerhard Schroeder?" Marc Touati of the ACDEFI
economic consultancy asked, referring to the former Social Democrat chancellor
who implemented painful labour market reform in the 2000s.
But he predicted: "This is a sort of bluffing tactic
intended to gain time, soften up ratings agencies and investors but which will
not result in hard measures." Pension and labour reforms
implemented last year, while significant first steps, have hardly broken the
mould. Projected 2014 French growth of just one percent will struggle to create
private sector jobs.
So far, this year's budget foresees public spending cuts of 15 billion
euros or some 0.7 percent of GDP. Yet the government still has to explain how
the bulk of these will be achieved before it goes on to examine further
possible cuts. Moreover the rapprochement with business risks
alienating the moderate CFDT trade union which has so far been a vital ally to
Hollande, backing pension and other reforms despite resistance from other, more
hardline, labour organizations.
"I am issuing a warning: the trade unions have got to be players in
all this," CFDT Secretary-General Laurent Berger said last week, insisting
there could be no "blank cheque" for companies without benefits to
labor as well.
[…]
Hollande may conclude he has nothing to lose now from taking a few risks. A survey by pollster Ifop released in the Journal du Dimanche
newspaper this weekend showed little impact on his poll ratings from the
allegations of a secret affair.
With Hollande currently enjoying little more than 20 percent of support,
Ifop deputy chief Frederic Dabi noted: "He is already so unpopular that it
hasn't changed anything."
(emphasis added)
Admittedly, such metamorphoses do sometimes happen. A
wily politician may well come to the conclusion that he has nothing to lose by
changing course. And it is possible that Hollande will indeed decide to follow
in Mitterand's footsteps and nix the socialist program in favor of a more
pragmatic approach to economic policy. The reality is though that little is
known about his views. We don't even know whether he truly understands the
economic problems faced by France and why what he has hitherto done has made
them worse. After all, he is a lifelong bureaucrat/politician and his actions
to date indicate that he believes that governments are not subject to economic
laws and that he 'can order nature around' as Fred Sheehan once put it.
We also cannot really tell how much of an ideologue he
is. In any event, we do know that he occasionally casts a wary eye in the
direction of those who try to overtake him from the left of the political
spectrum and has done his best to preempt them and remain in the good graces of
typical socialist client organizations such as the unions. Note the remark by
union leader Laurent Berger above: "I am issuing a warning: the
trade unions have got to be players in all this." Will Hollande
risk a confrontation with the unions? We kind of doubt it actually.
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