Hollande Presses French to Embrace Social Revamp to Spur Growth

[steve2470]

Source: Bloomberg

President Francois Hollande pressed the French to accept reduced pension and welfare benefits as part of a national effort to revive a moribund economy and stem a rise in unemployment that has caused his popularity to slump.

In a national television interview last night that lasted more than an hour, Hollande promised to revise a 75 percent levy on salaries over 1 million euros and avoid any new tax increases next year while reducing state spending. The government will cut red tape for businesses and protect the defense budget, he said.

“We can’t wait for growth, we must go find it,” Hollande said. “I don’t want to just restore the public finances to order. I need to show we can do better.”

The changes to jobless benefits and a proposed cut in payouts to families would be unprecedented in France, while a plan to lengthen the number of work years would extend moves begun by Hollande’s predecessor, Nicolas Sarkozy. The measures underline the challenges the Socialist president faces as he seeks to balance demands of voters with pressure from bond investors and France’s European partners to overhaul the region’s second-largest economy.

Read more: http://www.bloomberg.com/news/2013-03-28/hollande-presses-french-to-embrace-social-revamp-to-spur-growth.html

[DFW]

1. "Dure est la réalité"

A technocrat like Hollande wasn't going to deliver anything else. A few slogans, maybe, and a few over-the-top symbolic gestures (75% tax on income over €1 million? Where did he THINK the millionaires were going to go? The Belgian border is a 75 minute drive from Paris, mon vieux). But that was about it.

And so a reality check puts him in the unenviable position of being forced to implement measures of the sort that lost Sarkozy the presidency in the first place. Only, Sarko would have faced up to it earlier, and the French economy would have had a chance to start getting out of the mud 9 months earlier. I'm in Paris twice a month for work, and speak the language. The French complain about their government no matter who is in power, but better to have someone who tries to stick to his policies than someone who will say anything for votes, no matter how outlandish, and then get a reality check at his leisure once in office. In the USA, we call people like that "Republicans."

[ucrdem]

25. Ha.

Well if he survives his honeymoon he might be good for a second term. It worked for Obama, and I'll concede that Hollande is not Obama, but what he lacks in heroic stature he makes up for in charm, or at least that's been my impression. Might be wearing thin though.

p.s. 'good work if you can get it' comes to mind. Thanks for the dispatch and please keep us posted.

[DFW]

26. The honeymoon is long over

But for all their cynicism, the French fall for romantic ideas as much as any other country. Hollande was a bag of air from day one, and only the fact that he wasn't Sarko got him elected, and even then just barely.

Think of it this way--say someone has been flying first class and living in a mansion all his life. Suddenly, he is told he has to fly coach and live in an apartment. Nothing crummy, just a step down from where he was before, because the money just isn't there any more. Some will accept it, and some will say is there any way I can get out of the downgrade? That's where the French economy is, and Holland got the "is there any way I can get out of the downgrade?" vote. No there isn't any way out of the downgrade, and now that he's being forced to start to admit it, he's losing support. But it's support he never deserved to get in the first place. Sort of like Bush Lite telling the USA he'd preserve Clinton's surplus. It got him in, but he never delivered (in Bush's case, it was worse, because without Iraq and the tax cuts, he could have).

But never underestimate the power of an electorate to fall for an unrealistic promise, and never underestimate the ability of a bureaucrat-politician not to deliver on one. That goes for any country.

[ucrdem]

28. Nicely put, and in fact that accords with my own experience

for what it's worth. I can't recall meeting a single Hollande voter in my limited encounters with French citizens in the US, France or points between, and a few of those conversations took a chill when his name came up and revived if they did when I changed the subject. It took me a while to catch on as I was delighted to see Hollande's star rising after DSK's fell and he showed a lot of ability as a campaigner and debater.

Eventually I realized that les français I'm likely to encounter who are also interested in discussing French politics, even in coach class or at modest soirées, are not likely to be in Hollande's demographic. He conspicuously campaigned in the banlieues and while he won most départements, cities and outre-mers it was apparently a close shave and I gather the banlieues remain his base of support.

My guess is that as long as he doesn't lose them, and short of pulling a Dr Jekyll and joining the National Front I don't know how he would, he should be able to get himself reelected, though his fellow socialists might not. It seems French voters can be unforgiving as Ségolène Royal's surprise defeat last May (a surprise to me anyway) illustrated but I'm hoping that wasn't a harbinger.

[CTyankee]

27. I've been mulling over your post and wondering if the idea of rich French people fleeing

to Belgium is being over-hyped. I am reminded of similar alarums being sounded about California just a while back, which hasn't really panned out. Krugman has pretty much debunked that old notion, anyway, and he does so again in this morning's NYT...

Brussels isn't Paris and never will be, despite a couple of over the hill French movie stars who have "left" France in protest. Don't get me wrong: I loved my trip to Brussels. The food is quite superb and the culture fine. But I don't see lots of millionaires flocking out of France, when there are many other ways of "protecting" their assets in other places around the world.

[bemildred]

2. He won't be around long with those sorts of worn out ideas.

Neoliberalism all the way.

[TygrBright]

3. This is hard to understand.

France has some of the most brilliant innovators, scientists, social engineers, designers, etc., in the world. France has a vibrant culture, diverse population, fabulous infrastructure, natural resources, and generally excellent neighbors.

Are they trying to say they can't make a decent economy out of that?

Really?

Or is this just more code for "Wait, our beloved Oligarchs aren't getting rich enough, so they don't wanna play, and we their butt-cleansing helots can't imagine life without them, so pony up, everybody?"

Because, the latter...?

:sigh:

merde

wearily,
Bright

[DFW]

4. The difference is between "can't" and "won't"

They have a HUGELY bloated public sector--way more civil (who are often uncivil) servants than they need in administration, and they are very good at self-perpetuation. Even in the private sector, the system of getting to the top by "vitamin C" is at least as prevalent as the merit system. Their Napoleonic system of justice (if you are accused, you are guilty until proven innocent) tends to be a disadvantage to the little guy, since the ones guilty of big crimes can afford to "prove" their innocence.

The oligarchs in France don't need protecting. But the public sector protects itself, and with other people's money. It grows and grows, and at some point there aren't enough "other people" to pay for it. That's where France is at now. It's ridiculous, because France pretty much DOES have most of what it needs to get along fine on its own, as you pointed out. But the French will be the first to tell anyone willing to listen that they are world class experts in ruining a good thing.

[bemildred]

5. We like hugely bloated public sectors here, you know.

The government has a lot to do in modern economy, and we support all of it. If I have to choose between Oligarchs and Public Servants, you know which way I'm going to go.

[DFW]

6. Too much of either is a bad thing

And when public servants turn to public disservants, they are as useless to a society as a power-hungry oligarch. In France it has long reached that point.

[bemildred]

8. And not enough of either would be terrible too.

Any other platitudes?

[CTyankee]

9. And yet France is known to have one of the best health care systems in the world. And

that is part of the "public sector." I'm all for cutting waste, fraud and abuse, but I am wondering if this is entirely about that problem.

When I hear about the "bloat" in government, I wonder how much of that is a cry for austerity, only now one cannot say that word because is has rapidly become synonymous with "poverty inducing." How does France avoid that fate, which we have seen play out badly in real time?

[TygrBright]

7. aaaahh... Thank you for explaining. It's a "Public Sector" problem...

....so obviously it can be solved by getting rid of that dadburn bloated gummint.

Because fucking the public schools, eliminating infrastructure support budgets, allowing business to take over the regulatory oversight function, and other "gumming-shrinking" measures has done such WONDERS for the US economy.

Poor France.

Poor, poor, France.

Y'all are soooooo screwn, mes amis.

sadly,
Bright

[CTyankee]

13. Paul Krugman recently reminded us of this slogan:

"The beatings will continue until morale improves."

When I hear "public sector" in this context, it is painted as a large monster consuming everything in its destructive path. When you get right down to it, it is really made up of people who want and need jobs. Cutting off unemployment benefits and cutting wages only depresses economies further, again as Dr. Krugman informs us, and drives an already suffering economic situation into Depression.

[quadrature]

10. growth? what does France need, that it

doesn't have now?

more empty houses?
more empty commercial real estate?
more closed factories?
more zombie banks?

[GliderGuider]

11. The global economy is out of gas.

The situation is probably permanent. Nobody wants to say so, and pols will do anything in their power to keep people from noticing. Nobody has a recipe for de-growth, because this is the first time in the history of civilization that we've run into a situation of global limits to growth. Expect much political groping and flailing, much finger-pointing and laying of blame, and much shrill punditry coming from the sidelines (including from blogs like this) for the next 10 or 20 years - until people get around to admitting that the wheels actually fell off the bus back in 2008.

[CTyankee]

12. For some reason, France is having this problem but Sweden does not and is actually

running a budget surplus. Both have rich social safety nets. There must be another reason or set of reasons that this is the case. Unless you think that even Sweden will eventually fall into disarray due to limits to global growth. And I get that this is just part of a much bigger picture, but I would hate to think that human ingenuity and persistence cannot overcome much, as it did when such limits were being exceeded, even as much of the population thought they could not be (e.g. circumnavigation of the globe by a few despite the overwhelming majority who thought it was impossible).

We can't think our way out of this situation and give up at the same time.

[GliderGuider]

14. Well, yes, I think France is early and Sweden will follow later.

I think that we are at a point of global limits to growth, and the most vulnerable nations like Greece, Cyprus, Spain, Portugal and now France will show the symptoms first.

We thought our way into the situation, and the fact that we are not changing our thinking in any fundamental way (like deciding that further growth is a bad thing to bqa avoided at all costs) means we can only think ourselves in deeper, not think our way out.

Who has a recipe for de-growth that any nation will be willing to follow voluntarily? That's what a "Limits to Growth" situation like this requires, IMO.

[CTyankee]

15. well, with all due respect, I don't think you are the only one thinking about "limits to

growth" situations. I think we ARE seeing that austerity is not/will not work. You cannot simply say that people's problems are caused by having "too much health care," for instance, when the real problem is in the funding, distribution and management of health care. You cannot say that people have too much welfare or food when the real problem is job creation and investment in education. Do you see where I am going with this?

[GliderGuider]

16. I'm not saying that people have too much health care or any other particular social benefit.

I think people (all people) take too much of absolutely everything. Tinkering with austerity programs is like putting a Band-aid on a sucking chest wound. The real problem is too many jobs, too much investment, too much energy use, too much resource use, too much human activity in general, and perhaps even too many people. A situation this big, interlocked and deadly is not solvable with austerity measures, by cutting peoples' health care and retirement benefits.

I'm not saying that we should legislate reductions to all those things, because the other thing that has trapped us is the belief that legislation and kindly, activist politicians will save us. Piecemeal legislation never attacks the root cause, it just targets the symptoms.

What we might do instead is to recognize that a continuing decline in GlobCiv is inevitable, and put legislation in place to ease the accelerating impact on the most vulnerable. Some countries will do that, other places will stick to the growth strategy that is now crashing the ambulance.

[CTyankee]

17. OK, good. Now I see where you are going. And thanks. Becasue I'd like to know more

about your philosophy of easing "the accelerating impact on the most vulnerable." Which country in your opinion is doing this successfully?

[GliderGuider]

18. I think the Scandinavian countries are doing best so far.

Canada was doing OK for a while, but we messed up and elected a growth-guy. Now Little Stevie Harper is screwing us imperiously to the wall.

The problem IMO is that when economies begin to shrink, social programs are the first to go as we start to burn the furniture. Ostensibly they are slashed so the stored financial potential energy of the programs can be released into the productive economy where it will have more socioeconomic leverage. Unfortunately, that's not what usually happens as the money trickles up to the top so fast in our intensely hierarchical, concentrative economic structure - and then stays there.

The poor in Scandinavia will do better for a longer time than those elsewhere. However, no modern economy can survive what I suspect is coming over the next two or three decades - as climate change, food, resource and energy shortages, and economic complexity team up on the human race.

[CTyankee]

19. and I guess the next question is which country/countries will be best equipped to deal with

the changes you see, those in Scandinavia who are realistic about it or those elsewhere who are not. I am certain that you are not the only one concerned about this issue. So for me our best chance would probably BE the Scandinavians, who have at least thought some of this out and have more than likely been thinking this through for a while now.

I really don't know. But I am pretty sure there are those that know...

Oh, and BTW, I don't think there ARE any "poor in Scandinavia."

[GliderGuider]

20. Poverty in Sweden

Poverty drops in Sweden: report

The number of poor households in Sweden has decreased after a dramatic rise over the last ten years, according to figures that the Parliamentary Investigative Service has calculated on the behest of the Left Party.

The figures for 2012 build on prognoses from the National Institute of Economic Research (Konjunkturinstitutet) and the National Social Insurance Agency (Försäkringskassan) and measures relative poverty, which is the EU benchmark, where poverty is measured against 60 percent of the median income.

In Sweden 384,000 households fell under the poverty benchmark in 2003, compared to 704,000 this year. Since 2006, poverty among women has increased quicker than among men. But between 2011 and 2012 the number of women below the poverty benchmark fell from 487,000 to 459,000.

In total, 1.1 million Swedes or 12.1 percent of Swedes are affected. The study also included the absolute poverty, measured against the social benefits norm

Poverty is always a relative perception.

[CTyankee]

22. but according to this report, they must have addressed the issue, which I guess makes

my point...I wonder what that "poverty' looks like anyway, compared to the U.S....

[Nye Bevan]

21. Wow. He's raising the top rate of tax to 75% and *still* needs to cut pension and welfare benefits.

France must be in a terrible financial situation.

[ucrdem]

24. Maybe.

But then so are we, and I don't think they're in worse shape than us.

[ucrdem]

23. "pressure from bond investors and France’s European partners"

Last edited Mon Apr 1, 2013, 10:54 AM - Edit history (1)

who seem to take a special dislike of socialist governments, having in the last two years run two, in Greece and Spain, out on a rail. It doesn't sound like the pressure is coming from Merkel which basically leaves Wall Street and London i.e. US and UK banks. If past is prologue this isn't going to end well for Hollande, which is a shame, but maybe this time it will be different.


ETA: correcting to add that the pressure could well be coming from Merkel. She's been cordial enough and has met with Hollande several times, but not as many as with Sarkozy. Those two got along like thieves and it turns out she openly supported Sarko in last spring's presidential elections which I'd forgotten. So maybe she's been twisting the knife but discretely.