France as a model?

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It was not long ago that France was regularly criticised by the more liberal economies of the world and its leaders. The intervention of the State in many facets of the French Economy was often seen as being backward and a hindrance to the free market flow of goods and services.

Recently however, these criticisms have been more subdued and you can nowadays hear comments and read more and more articles explaining that the heavily regulated French economy together with its massive public and social spending have actually helped cushion the negative effect of the worldwide economic crisis. “L’Etat-providence” in this situation proved to be the right choice and have made some governments think that more regulations and state intervention may actually help to avoid the type of crisis we experienced caused by economic liberalism and lack of real control of financial institutions.

Indeed, the French Economy has been more resilient than many other developed countries and President Nicolas Sarkozy has been quick to state that France has been one of the countries that best resisted the crisis.

The situation is in fact not that rosy and 2010 and beyond will hold many challenges for the French Economy. The pick up from the crisis is actually quite slow and quarterly GDP growth projections for 2010 are between 0.3 and 0.4%.

The immediate problem will be a further deterioration of the unemployment figures now at almost 10% with this percentage much worse for the young. Consumer consumption is badly damaged and is not expected to recover easily. The business climate is not healthy and recent surveys show that activity will actually slow down rather than pick up in the coming months. Many of the economic measures that the Government implemented in 2008 and 2009 will not be extended and that won’t help.

Additionally, one should also not forget that public finances have been heavily used recently and will continue to be through, among others, its recently announced “Grand Emprunt” (grand loan). As a result, the public deficit is forecasted to soon represent an unprecedented 8.5% of GDP, far above the EU’s target of 3%.

President Nicolas Sarkozy promised back in 2008 to implement many necessary reforms to the way things were organised in France and the majority of the population supported him at the time of his election. While quite a number have been implemented in the last 30 months, many have been actually watered down and quite a few have been postponed partly due of course to the crisis, but also partly due to the steady unpopularity of the President whose rating is nowadays below 40%.

His style is leaving many French people uncomfortable to say the least. Trying to do everything himself and taking all the decisions or at least giving that impression is actually putting him at the front line constantly. The recent debate regarding “L’Identité Nationale” (what it means to be French) is actually further polarising the electorate and is very much seen as an attack on the immigrant population and more of an extreme-right idea coming from someone like Le Pen.

But this is actually a sign of a much deeper problem. While the official country’s motto has been historically “Liberté, Egalité, Fraternité”, a good part of its population, not only immigrant, is not seeing much of these words practiced in reality. The social fabric is breaking down and a growing percentage of French citizens are “falling by the roadside”. The immigrant population especially from the former colonies is struggling to integrate into French society and the number of “new poor” is growing regularly and dangerously. Paradoxically, the number of “privileged” civil servants in France has grown in the last 20 years much more quickly than the private sector to reach 5.4 million or 1 in 5 employed people, but this has not benefited much the above mentioned groups of people. France will need to tackle this problem seriously to avoid more unrest in its cities’ suburbs.

There is no doubt that France needs more essential reforms partly to cut down on huge public expenses even in time of “normal” economic condition. France is living beyond its means and President Sarkozy has again recently insisted on getting them through. One of these reforms will be the delicate one on retirement age and pension benefits, but at a time of slow economic growth, implementing all the planned reforms will not be easy. Of course, almost everyone still continues to believe that these reforms are needed, as long as one is not touched by them.

We can of course here easily recognise one of the key characteristics of the French character, but this is basically what the French government is up to. Contrary to the Swedish population which had to accept many painful reforms a few years ago for the common good, a good percentage of the French population does not see it that way and will resist any attempt to modify earned privileges or any set arrangements. With 2010 just starting and to duplicate last spring’s demonstrations by 3 million people all over the country, one can easily envisage more unhappy people ready to fill up again the streets of France and/or going on strike to stop reforms or to demand improvement in their conditions. It remains to be seen how well the French Model copes!

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