GOING NO WHERE : FRANCE OPTS FOR MEEK REFORMS AND HOPE / DER SPIEGEL

09/17/2013 11:34 AM

Going Nowhere

France Opts for Meek Reforms and Hope

By Mathieu von Rohr

 

 

French President François Hollande's announced reforms have either been delayed or watered down so much that they will do little to address his country's pressing problems. Fearing unrest, he prefers hope over hardship.

Only rarely in a Western democracy does the head of state call together the country's business leaders to charge them with tasks for the future and to jointly evoke their country's greatness.
Precisely this, though, is what happened last week at the Élysée Palace in Paris, where President François Hollande got a tour of what French technology currently has on offer. The president held a robot, cast an approving glance at 3-D printers and electric vehicles, and received a run-down on such innovations as fuel-efficient "two-liter" cars and electric airplanes.

The high point of the day was a film shown in the presence of the president and his industry minister, Arnaud Montebourg. The dramatic string strains of Vivaldi's "Summer" accompanied images of things France has invented and "given the world" in the past -- among them the steam locomotive, the automobile, radioactivity and, finally, the high-speed TGV train and the supersonic Concorde plane.
 
The fact that all these innovations lie in the past serves to highlight the country's real problem: Over the last decade, French industry has lost over 700,000 jobs. Now the government has unveiled a new plan to encourage growth in 34 selected industry sectors, with the aim of bringing about a "third industrial revolution."

However, since the French government doesn't have the money to fund these projects, it is relying primarily on private investment. The "new industrial France" of Hollande and Montebourg is not a governmental investment program of the type seen in the past, although France does want to take the lead on industrial policy-making once again. Last week's event also seemed driven by the hope that recollections of a glorious past will provide the country with the courage it needs to pursue a better future. And, since France is currently faring so poorly despite some tentative signs of recovery, a better future is certainly needed.


Pseudo Reforms


The weeks following the summer recess were widely expected to be a time for Hollande to set a new course. The announcement of a coming large-scale pension reform was meant to demonstrate that the president was capable of taking decisive action on a fundamental issue. But that reform, which has now been unveiled, has primarily demonstrated one thing: that Hollande doesn't believe in large-scale reform.

The pension reform didn't touch France's retirement age or the special rules that apply to government employees. Instead, both employees and employers are to pay more contributions, with the number of years of contributions required before qualifying for a full pension being raised to 43 by 2035.

Making more profound change would bring with it "the risk that many people would take to the streets, without the certainty that we would be able to see the reform through to the end," Hollande told Le Monde in justifying his decision.

Instead, Hollande prefers to make small changes, as was also evident in his reform of French labor laws this spring. Now, on the pension question, all sides have been left unsatisfied anyway, with strikes and demonstrations taking place in Paris last week. Still, at least the issue is unlikely to lead to nationwide unrest.

This, though, leaves the precarious financial state of the country's pension fund beyond 2020 still unresolved. "The pension non-reform is a decision with far-reaching consequences," writes economist Élie Cohen, who usually supports Hollande. "It confirms that the president has no interest in making structural reforms and marks the end of any attempts at reform until the end of his term in office."

When European Economic Affairs Commissioner Olli Rehn criticized the slow pace of the reforms last week, French Finance Minister Pierre Moscovici issued a clear response: It's simply not possible to go any faster, he said.


New Tax Increases and Fees


In order to meet the Maastricht criteria limiting budget deficits to 3 percent of GDP by 2015, France plans to cut government spending by €15 billion ($20 billion). But a fundamental -- and urgently needed -- restructuring of France's bloated public sector, with its convoluted levels of government, is still not in the cards.

The government did promise the French people a "tax pause," but the very phrase seems to suggest a short period of rest that would then naturally be followed by new tax increases and fees. And, indeed, it emerged last week that the government is planning new surcharges on electronic cigarettes, energy drinks and sweeteners, and there are widespread fears that taxes will continue to rise, as well. In a prime-time interview on Sunday night, Hollande was seeking to reassure his fellow countrymen by promising there would be no new taxes whatsoever.

Meanwhile, the president is holding on to hope that economic growth will finally return to his country. At the moment, however, projected growth for 2014 is not even 1 percent.

What remains is a feeling of stasis, a general bad mood -- and serious concerns about upcoming local and EU-level elections next year. Politicians and polling institutes fear the current situation in France may lead to record results for the right-wing populist National Front.


Translated from the German by Ella Ornstein