Jay Ruskin: The Economy

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Neoliberal Moisi chafes as France balks at reforms (FT)

1.

Comment & analysis

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FRENCH ÉLITE MUST UNITE WITH THE ESTRANGED PUBLIC
By Dominique Moisi

Financial Times (UK)
August 18, 2005

http://news.ft.com/cms/s/d4cf4b9e-1012-11da-bd5c-00000e2511c8.html

"I will not fiddle quietly with locks in Versailles while France is getting increasingly angry." So said Nicolas Sarkozy on Bastille Day. By making a direct comparison between the dithering Louis XVI and the present French president, Jacques Chirac, was the ambitious interior minister implying that France was on the eve of a new revolutionary situation?

Could we be in 1789 again or at least in 1788 -- and would the rapid coming to power of a young, popular leader in tune with the needs and frustrations of society be the only way to prevent "the people" from taking to the streets in classical revolutionary tradition? This is of course a "wishful nightmare" on the part of a politician in a hurry.

Yet it is undeniable that France is in a dual crisis of confidence that concerns its essence as well as its performance, a crisis that is part of but goes beyond the "European crisis." Britain is becoming a comparative mirror. On July 6, when Paris lost the 2012 Olympics to London, the disillusion was accompanied by a "what's wrong with us?" interrogation. In the 1970s a British newspaper ran the headline: "We used to behave like the French," referring to a spectacular French military intervention in Africa. Today many French would be tempted to think: "We used to behave like the British."

If the "cards of France," compared with those of Britain, are no longer what they used to be, it is for a combination of personal and structural reasons. One obvious difference is leadership. Re-elected for a third term, Tony Blair exudes confidence and incarnates both modernity and ethics. Rightly or wrongly, he has not shied from confronting public opinion and his party on Iraq. The terrorist attacks in London have united the country behind him. Mr. Chirac by contrast is undeniably France's legal president, re-elected in 2002 with 82 per cent of the votes, but his legitimacy is questioned. His unpopularity is unparalleled in the Fifth Republic's history. His name is more associated with failed efforts and wrong decisions than with successful outcomes. And above all he has been for so long at the forefront of politics -- he was prime minister 30 years ago -- that his message no longer gets through. A once very young premier has become an old and lonely president, closer to King Lear than Henry V.

France has a Chirac problem, but it would be simplistic to assume that with a new president it would be sailing along with pride and energy. France suffers from a serious structural political crisis. To express it differently, a gap now exists between the quality of France's economic and political élites. Among the first, one encounters creativity, dynamism, enthusiasm, and success. The "France that wins" is there. By contrast the incestuous relationship between the civil service and politicians, fostered by the dominance of the élite training school, the National School of Administration, has encouraged aloofness and technocratic bias within the political debate. The No vote in the EU constitutional treaty referendum was in part due to a growing divorce between society and the political class. If he does not destroy himself by impatience, the comparative advantage of Mr. Sarkozy over Dominique de Villepin, his most serious rival, is that he incarnates change.

But Mr. de Villepin, in his first weeks as prime minister, has distanced himself not only from his previous image of aristocratic aloofness and poetic romanticism, but also slightly from his mentor, Mr. Chirac. It would be dangerous for Mr. Sarkozy not to take Mr. de Villepin's challenge as serious. This man has clout and panache.

At a deeper level, France's problems stem from a combination of too much state and yet also too much personal selfishness. With a greater sense of collective solidarity -- in a Nordic way -- the French would not have to rely so much on the state in adjusting to new demographic and economic realities.

1789 is unlikely to be around the corner, though one cannot rule out a replay of the student and worker protests of May 1968 if frustration with unemployment and the political elite, exploited by extreme forces, were to paralyze the system. But these "dark scenarios" should not be overplayed, for there exist huge resources of energy, creativity and goodwill. These have to be put to good use by a new generation of leaders. France badly needs to be proud of its next president.

Mr. Chirac has failed to reconcile the French with politics. It will be his successor's task to demonstrate that, even in France, it is not a "mission impossible." It starts with telling the truth to a country living well beyond its means.

--The writer is senior adviser at the French Institute for International Relations.

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FRENCH GOVT READYING NEW MEASURES TO SPUR GROWTH, NO FLOATING TAX ON OIL

AFX News Limited
August 16, 2005

http://www.forbes.com/afxnewslimited/feeds/afx/2005/08/16/afx2182271.html

PARIS -- Prime Minister Dominique de Villepin said the government is preparing for this autumn a series of new measures aimed at spurring economic growth, adding that recent economic data show that the economy is back on a more favourable growth trend.

Speaking at a press conference with Finance Minister Thierry Breton, Villepin did not provide details of the programme, but said it would include targeted spending of revenues generated from the government's privatization projects.

Villepin also said he would examine measures to help various sectors deal with higher oil prices, which he expects to endure, and promised that excess revenues from taxes on oil products will be used to help those most exposed to the recent surge in oil prices, such as transport professionals or low-income households.

However, he ruled out a reintroduction of the TIPP floating tax on fuel and other oil products, a mechanism being called for by the Socialist opposition party, which would reduce taxes on oil products when prices rise. The TIPP was abolished in July 2002.

Villepin said he prefers measures that encourage job growth as opposed to increased consumption of gasoline and other 'polluting products,' as the government has made the fight against global warming one of its priorities.

The government will also pursue other measures to deal with high oil prices, such as promoting renewable energy investments and encouraging conservation efforts, and also called on Total and other oil companies to build more refining capacity, saying supply limitations were the main reason behind the recent price increases.

'Our refining capacities are currently saturated and do not allow the adequate satisfaction of French demand. It is for Total and other petroleum companies, which are generating significant profits, to rapidly begin this effort which our country requires,' Villepin said.

Soaring oil prices generated a 33 pct rise in Total's second quarter net profit, to 2.91 bln eur, following a record year of earnings in 2004.

Breton, for his part, said the government has assumed an average oil price of $50 per barrel next year as it prepares its 2006 budget, well above the $36 per barrel average that was used to calculate the 2005 budget.

Nonetheless, 'We clearly sense, for example with new business creations, industrial production, business confidence, that all these indicators are beginning to return to green,' Breton said.

'So we are much more confident for the second half,' he said, following weak growth so far this year. Last week, provisional figures from statistics office Insee showed a French GDP increase of just 0.1 pct in the second quarter.

paris@afxnews.com