Tuesday, 19 June 2018

Macronomics - Part 2, pension reform


Behind the focus on investment, training and work lies an even more serious purpose in Macron’s vision which turns on the much heralded reform of the French pension system, now expected to kick off in 2019 and scheduled to be phased in over a period of about 10 years.  A high Commissioner for pensions has been appointed and he has launched an extensive public consultation on the Internet, to be followed up by citizens’ meetings before the government drafts its legislation and submits it to parliament in the spring or summer of next year. 



The pension system of any country is highly complex, the product of past history and successive reforms, major or minor. France is no exception and only a few experts, whose job it is to manage the system, understand its full ramifications. The bare facts are that it is a mandatory, pay-as-you-go system for both the basic pension (Pillar 1) and the occupational part (Pillar 2). Contrary to many other advanced industrial economies in which the state provides only a minimum basic pension and the occupational part varies widely from company to company, the largest part of most pensioners’ income in France is the responsibility of the state, supervised and guaranteed by the state, to which employers simply contribute a large amount. It is a system to which the French are profoundly attached, emphasising, as does any PAYG system, the idea of inter-generational solidarity. The huge pension funds of the United Sates, the U.K or the Netherlands are not only unknown but also unwelcome in a country in which many people view the workings of financial markets through a haze of deep suspicion. The state guarantee is taken for granted. The idea that retired fire-fighters - as happened in Detroit for instance - could be deprived of their pension because the city had gone bankrupt, is totally beyond the realm of understanding of most people in France.


 There are several drawback to PAYG systems in general and to the French system in particular: with rising life expectancy, a large cohort of baby boomers at retirement age, younger people joining the work force later, and older workers leaving it earlier, the demographics are unfavourable, pushing up the dependency ratio and requiring regular adjustments to the level of pensions or the retirement age. Successive French governments have done both: in 1993 (the Balladur reform) subsequently in 2003 (the Fillon reform) and again in 2010. The main result of these reforms, approved by parliament after protracted opposition on the streets, is that the official retirement age for both private and public sector workers is now 62, still lower than in most comparable countries. In addition, private sector pensions are calculated over the 25 highest earning years of a career whereas civil servants still get 70% of final earnings, often boosted, somewhat artificially, in the last six months of their career.  It is clear however that even these reforms have not gone far enough because of two very specific issues to France that successive governments have tiptoed around but have been afraid to tackle head on: the cost of administering the 40 odd retirement schemes for specific industries and sectors, that some experts put at €6 billion, and, above all, the perceived inequality between the private and public sectors, and within the public sector, the very favourable schemes enjoyed by employees in the railway and electricity industries. Alain Juppé, as Prime Minister back in 1995, is the only other politician to have attempted serious reform. His efforts led only to the most damaging wave of strikes to affect the country since May 1968 and his government was forced to back down ignominiously.


From a macro-economic viewpoint, whatever pension system it adopts, a country can only devote a given amount of the wealth it produces to its pension provision. And in France, it has become clear over the years that groups with considerable negotiating clout, notably civil servants and equivalent, have captured a greater proportion of that wealth to the detriment of less powerful groups like small farmers, employees on the minimum wage or the self-employed. This is surely one of the reasons why Macron has promised a long overdue root and branch reform of the whole system, encapsulated in the simple idea that each Euro of contribution will give exactly the same pension entitlement to every contributor. But all other things being equal - and there is no doubt that the special schemes, will be fiercely defended by their beneficiaries - the reform can only work if the economy creates more wealth, with more people in employment and paying more into the system for longer rather than draining national wealth in the form of benefits. Which brings us back to the need for investment, continuous training and a flexible labour market that I referred to as essential components of Macronomics in my last post.



The current strike in the SNCF is only a foretaste of what is likely to happen once the government officially announces its plans and sends draft legislation to parliament. And one of the reason why the railway unions have opposed SNCF reform so doggedly is to put on a show of strength in preparation for the struggle to come, where they will inevitably find more common ground with other public sector workers than they have so far, even though many judge their retirement privileges out-dated and unjustified. And yet, on the face of it, what is there to object to in the idea that every worker should get the same pension entitlement for every Euro of contribution and that the whole system should be managed under one set of rules by one state-run administration? It would not of course mean that every pensioner would get the same income but it would ensure that the state remains the pension system’s manager and guarantor and would be seen to acting with even-handedness, and not, as happens at the moment, indulging in behind-the-scenes pressure and opaque accounting practices to subsidise schemes in deficit by those in surplus.





So what then can we conclude from all this about Macron’s overall economic strategy? Why is he on course to put France through another wave of strikes and disruption? He has gone on record as saying that his ambition is to profoundly change the country for the next 50 years and there is no doubt that a successful reform of the French pension system would do more than anything else to change the state of France’s economy and the mindset of its people. It would be a profoundly significant signal that France is changing its ways. This is perhaps the key, and, as I suggested in my last post, most French commentators have not yet fully picked up on it. It is all about the concept of self-reliance, a quality more reminiscent of Anglo-Saxon and Nordic cultures and somewhat foreign to France, where the nanny state is invariably seen as the Great Protector and the Great Provider. It is the same concept that underpins all of Macron’s economic policy initiatives so far, from the changes to labour legislation, the promised reduction in unemployment and other social benefits, to the radical changes in apprenticeships and vocational training. Tellingly, it is a concept that does not translate neatly into French, where the words “autonomie”, “autosuffisance” or “indépendance” do not fully capture the idea that people should rely more on themselves and less on the state. There have been occasional and half-hearted attempts to establish this idea in France’s recent past: by Edouard Balladur for instance, who as Prime Minister between 1986 and 1988, presided over a wave of privatisation and wrote a book about it in 1992 entitled: Je crois en l'homme plus qu'en l'État”  (“I believe in people more than the state”). But Balladur was only a closet liberal and so much a product of France’s elite culture that his timid steps were quickly and silently crushed under the weight of a left leaning establishment. About ten years later, in 1995, another politician, Alain Madelin, a controversial and maverick figure with genuine liberal credentials, was appointed Minister of Finance but he too quickly came up against establishment norms and resigned just three months later. Margaret Thatcher of course was the great promoter, for better or for worse, of individual responsibility and self–reliance, in the UK of the 1980s. But although some see Macron’s tussle with the railway unions as his “Thatcher moment”, the excellent “Economist” commentator on French affairs, Sophie Pedder, who has just written a book on Macron (“Revolution Française” - Bloomsbury, 2018) writes this: “ A Thatcherite vision this is not. Macron, like many of his generation, may speak English. But he does not seek to emulate les Anglo Saxons.” 



I’m not sure that I entirely agree. First of all, as I have suggested above, the conflict with the railway unions may turn out to be extremely tame in comparison with the forthcoming conflict over pension reform. And even though Macron is clearly determined to keep the basic structure of the French social model, if my reading of his economic policy is correct, he is nevertheless trying to wean the French off their overreliance on the state. Equally tellingly, a leading German newspaper titled a recent interview with Angela Merkel, in which she “responded” to Macron’s grand designs for Euro area reform, as follows:  “…. People in the EU must take their fate more into their own hands. The Chancellor tells us what this means in concrete terms”  (die Menschen in der EU müssen ihr Schicksal mehr in die eigene Hand nehmen. Im F.A.S.-Interview erklärt die Kanzlerin, was das konkret heißt…) The literal translation “take their fate more into their own hands” can also be read as “people in the EU must become more self-reliant”. And, as Chancellor Merkel made clear, she was not only delivering a message to Donald Trump and the Chinese about Europe’s external credibility but also to other European leaders about its inner workings.  No serious progress has ever been made in the EU if France and Germany have not seen eye to eye. Since his election in May 2017, much has been made of Macron’ desire to convince Germany that he is serious about reforming France in the hope of greater financial solidarity within the Euro area. Is this not the outline of the grand bargain to come: more self-reliance in France, more financial solidarity from Germany? Pension reform is probably, in his view, the key that will unlock that move. And, if successful, it will be the clearest signal yet that France can put its own house in order, generate stronger growth, put more people into work and take pressure off the public purse, thus gradually reducing debt. How convincing this, inevitably long-term, vision will appear to the outside world and particularly to Germany will start to become clearer at the summit on Euro reform at the end of June.




Sunday, 20 May 2018

Macronomics


About fifteen years ago, I was doing my best to introduce would-be interpreters to the basics of economics, of which students with a background in languages and the humanities generally have little idea but which is essential for any aspiring conference interpreter. I was talking about the French economy and repeating a point made by many economists that its level of public debt was unsustainable. One student ventured to ask why the French could not choose to have a shorter working week, longer holidays and earlier retirement than most other Europeans. My answer was that they were perfectly entitled to make that choice but if they did, they couldn’t expect to continue to enjoy world class health care, some of the best infrastructure anywhere and generous retirement provision, because the country would not be able to pay for it without levying punitive taxes and incurring ever greater levels of debt that future generations would be burdened with.



Fast forward fifteen years to Emmanuel Macron’s first Armistice day ceremony as President last November 11: “My daughter has just got a job and I wonder what kind of pension she will have when she retires” asked an onlooker whose outstretched hand he had just shaken. His spontaneous answer was: “I’m all in favour of the welfare provision that we are able to afford”.



As the contours of Macronomics start to take shape, one year into his presidential term, it seems worthwhile to look more closely at the implications of this answer for clues to his basic economic philosophy which, it seems to me, is very different from the consensus view that has prevailed in French decision making circles for as long as I have lived here.



During those fifteen years of course, we have witnessed how a national economy like that of Venezuela can descend into chaos or, closer to home, the sad and sorry state of the Greek economy over the past ten years to understand what can happen when governments make explicit or implicit promises to their people that they are subsequently unable to keep. Without going so far as to suggest that the French economy is close to falling into similar straits, it cannot be a matter of indifference that its annual budget has not been in balance since 1974, and that its national debt is now close to 100% of GDP, a portion of which is held by non-residents. With slow growth, high unemployment and interest rates starting to rise from record lows, the danger signals are there for all to see.



Emmanuel Macron is not the first leader of France to have seen them but he does seem to be the first to take them seriously enough to want to do something about it. Others before him have tried but failed. Going back no further than 2007, one remembers François Fillon, when he was Nicolas Sarkozy’s Prime Minister, declaring publicly that he was at the head of a “bankrupt state” (“un état en faillite”). All he got for this rare admission of reality was a widely reported dressing down from the President for saying it, after which the financial and banking crisis broke and the whole episode was forgotten. The “bankrupt state” continued to borrow wildly to contain the damage.



Macron seems intent on breaking the vicious circle of rising public spending funded by higher taxes and higher debt and is doing so with his now familiar single-mindedness, driven by an economic doctrine that breaks radically with the comfortable but lazy consensus on economic policy that has prevailed since well before he was born. 



The first part of this vision concerns his attitude to wealth. His highly articulate left-wing opponent, Jean-Luc Mélenchon has dubbed him “President of the rich”, a charge that has stuck in public opinion. It’s not difficult to see why. By emasculating the wealth tax, that now only covers real estate assets, introducing a flat tax of 30% on financial income but at the same time increasing the CSG tax by 1.7% for almost everyone, including a majority of pensioners, he has indeed laid himself open to the charge that he has favoured the rich, particularly the very rich, to the detriment of the less well off. The counter measure to this increase in the CSG, a reduction in social charges for those in work, has attracted a lot less attention. Human nature being what it is, people are quick to complain, as pensioners have done very vocally, about higher taxes but never turn out to manifest their joy at lower ones. Macron was at pains to explain this policy, a well-trailed part of his election programme, in another spontaneous comment to a lady in a crowd during a walkabout in a provincial town recently. The lady was complaining that she had contributed all her life to get a decent pension and that now she was seeing it more heavily taxed. “No”, Macron said, “what you contributed to was your parents’ pension. What I am asking you to do is to help your children contribute to your pension by making it easier for them to find a job and taxing their earnings a little less”.  



In another revealing comment during a TV interview some months ago, Macron dismissed the idea that he was reducing tax on the wealthy because he believed in trickle-down economics.  He expanded on this by saying that he does not believe that wealth trickles down from the rich to the poor but that the rich support the poor by their investments in the economy. He expressed it in the seemingly puzzling image of “the lead mountaineer on the rope” (“le premier de cordée”) pulling the rest behind him. Except that the image only makes sense if everyone behind the lead climber also makes an effort. An equivalent expression that suggests itself to me in English is: “everyone must pull their own weight”. The more well off must show the way ahead by investing their wealth in the economy, the justification for reducing their level of tax. But instead of simply benefiting from the trickle- down effect, the less well off must pull their weight too, by working more productively and being willing to undertake further training to change jobs more easily. This reading of Macronomics is also consistent with a remark in a recent interview by an up and coming MP in Macron’s party, Amélie de Montchalin, a member of the Finance Committee of the Assemblée Nationale. She too has a background in economics and banking and she too has a gift for plain language: “We are not”, she said, “pursuing a policy of redistribution”.



This comment has gone largely unreported in a country that has always had a particularly generous interpretation of the notion of equality. Generations of politicians, from every part of the political spectrum, have taken it for granted that Marx was right about the exploitative nature of capitalism and that therefore money must consistently be taken from the rich in the form of taxes and redistributed to the poor in the form of social benefits.  Thomas Piketty’s recent tome, “Capitalism in the 21st century”, for all its detailed documentation, seems basically to be a modern day restatement of this belief, except that poverty in France today, however visible in some parts of society, has little in common with the extent and level of povery in Marx's time. So entrenched has this broad and comfortable consensus become over the years that it has led to an inexorable increase in taxes, very visibly on those who have, or earn, a lot of money, more stealthily in the form of corporate taxes, high rates of VAT and other consumption based levies, and a concomitant increase in social benefits, not to speak of almost automatic annual salary increases for an army of civil servants, usually with no productivity strings attached but simply to keep them sweet and off the streets. Hardly surprising that the amount of wealth redistributed by the state, at over 45% of GDP, is one of the highest in the EU. And when tax increases no longer suffice, borrowing fills the widening gap, justified in the minds of many by another somewhat out-dated economic doctrine of deficit spending, designed to inject demand into the economy. The problem is that high taxes have gradually discouraged ambitious young people who, having benefitted from some of the world class training opportunities France has to offer, vote with their feet and take their ambitions, their talents and their skills to less highly taxed countries. It was reported the other day that their number rose sharply between 2009 and 2015, the last year for which data is available. As the French saying goes: “Too much taxation kills taxation” (Trop d’impôt tue l’impôt). When François Hollande seriously considered raising the top rate of income tax to 75% soon after the start of his presidency, his then chief economic advisor, Emmanuel Macron, exclaimed: “sounds like Cuba  - without the sun !”  Rising debt, given a powerful boost by the crisis of 2007 and 2008, now requires billions of Euros out of the annual budget to service it. Having become France’s leader, Macron seems to be doing his best to make it clear to the country that he is determined to break with an economic policy biased heavily towards wealth redistribution, funded by taxes and debt, and replace it with one of wealth creation first and foremost, driven by investment, work and training. In a word, supply side economics “à la française”!



All this also goes a long way to explaining his focus on work. The radical overhaul of apprenticeships and vocational training is a good illustration. For too long, such policies have been shaped in cosy negotiations between employers and unions and largely funded by the state. The system has gradually become ossified, spawning bureaucracy and sprinkling money over a large number of training courses with little relevance to job opportunities and from which the unemployed were often excluded.  (“Nice work if you can get it” – November 23, 2017). It is also suspected that large sums of money, supposedly earmarked for training, have ended up financing organisations on both sides of industry. No need to look further than the dramatic mismatch between skills required by industry and the crying lack of them among the three million or so unemployed to realise that the system has reached the limits of its usefulness. Ordered by Macron’s government to come up with something radically different, the industry/union partnership could only agree on more of the same. The government promptly rejected their conclusions and imposed its own, focused more on the needs of trainees and those of industry. Whether a system steered by the government will produce better results remains to be seen. But even if it takes time to do so, the new system can hardly do worse than the old.  A similar, although for the moment less radical, overhaul of unemployment and other social benefits is also quietly being introduced.



However much all this will contribute to growth and employment though, it is only part of Macron’s underlying purpose of reducing public spending. A far bigger drain on the public purse is the uniquely French pension system and its reform would therefore have a far bigger impact on spending than anything mentioned so far. Pension reform, I would suggest, is the main pillar of Macron’s much trumpeted “profound transformation” of the country and it is entirely consistent with his two revealing comments to onlookers reported above. I shall return it in more detail in the next post.

Wednesday, 9 May 2018

Give him hell !



It is axiomatic that political leaders find it easier to make an impact on foreign policy than to shepherd through difficult reforms in their own country. France is no exception. Going back to the Chirac presidency that lasted a total of 12 years (from 1995 to 2007), Jacques Chirac will probably be most remembered for his dogged, and applauded, opposition to France’s participation in the American led invasion of Iraq than for anything he achieved at home – apart perhaps from abolishing compulsory military service. On his five-year watch, Nicolas Sarkozy introduced some minor reforms on universities and pensions but made a much greater impact on the European scene by his vigorous action to contain the financial and banking  crisis of 2007 and 2008. Even the hapless François Hollande showed greater decisiveness in dispatching French troops to fight terrorists in Sub-Saharan Africa than he ever showed on the domestic front. As for Emmanuel Macron, who passed the first anniversary of his election to the French presidency on May 7, it could be argued that he has already achieved as much on the international stage as his three predecessors in the last 20 years. His frenetic year of international and business diplomacy that I referred to in a previous post (“Looking outwards from Versailles” – February 6, 2018) has since been completed by a state visit to the United States and a trip to Australia. All this has put France fairly and squarely on the map again as the leading European power, actively involved in the crises of Eastern Europe, the Middle East and Africa and talking to every world leader in the grand tradition of de Gaulle and Mitterrand. And the rest of the world has noticed. Despite the fact that domestic reforms are only just beginning, the single-minded determination to pursue them on the part of a youthful and energetic president has vastly improved France’s image as a country in which to live, invest and do business.  In an interview with America’s Fox News, in English, broadcast the day before his U.S. visit, Macron was asked whether there was any chance that he would back down on the contentious reform of the SNCF. His cryptic answer  - “No chance” -  was clearly meant for both international and domestic consumption (it was the only extract to be broadcast, with subtitles, on French prime time news). The sub-text was undoubtedly: “France has changed and I shall make sure that it continues to change”.



 All this being said, as the French saying goes, plus ça change, plus c’est la même chose!  (“The more things change, the more they stay the same”). On the domestic scene, many of the reforms that Macron’s government is implementing or in the process of introducing, have come up against predictable, and sometimes violent, resistance on the streets. Even if the strike at the SNCF seems to be petering out, it is far from over. Air France, which has also been strikebound for the past few weeks, has been dealt a nasty blow by the outcome of an ill-judged company-wide referendum on salary increases that attempted to go over the heads of particularly militant unions. The referendum was lost, the boss resigned and the very future of the airline is now in doubt. The financial daily “Les Echos” wrote the other day that both companies are slowly committing suicide by refusing to recognise that the world has changed.  The evacuation of Notre Dames des Landes  (“Cleared for take-off?” December 19,2017) has been more protracted than planned. A small number of universities are “occupied” and vandalised by a radical student fringe that seems intent on igniting another May 1968. And on top of these flash points, there is clearly a more diffuse feeling of discontent as reforms that were judged essential at election time are now starting to bite. Millions of pensioners are upset that their taxes have been raised to finance lower payroll taxes for those in work. Rural dwellers complain that in spite of Macron’s lofty declarations about reviving their communities, nothing has changed since May 2017. 

Jean-Luc Mélenchon’s vocal party, “La France Insoumise”, intent on styling itself as the main party of opposition, did its best to capitalise on these discontents by organising a “festive” demonstration called “La Fête à Macron” in Paris on May 6. According to a media count, about 40 000 people attended. The title of the demonstration was deliberately ambiguous. “La fête” evokes the idea of a party, festive and non-violent, in marked contrast to the violence that marred the traditional Mayday marches in Paris this year, but the underlying criticism becomes clear if one considers the other sense of “faire la fete à Macron”, a popular expression meaning: “give Macron hell!”



Such demonstrations are designed of course to catch the cameras and inspire headline writers. And so they do. The underlying aim was to portray Macron as a heartless leader with a background in the ultra-capitalist world of investment banking, a “President of the rich”, insensitive, in typical left-wing parlance, to the sufferings and anger of the poor, downtrodden and dispossessed. Opinion polls would suggest that the attempt has not been entirely unsuccessful. And as politicians are not in the business of offering a balanced view of their opponents’ policies, and the media rarely make it their business either, it is easy to forget that Macron’s government has also introduced measures to give children from disadvantaged backgrounds a better start in school, increased benefits for the handicapped, abolished some local taxes for the less well-off and engineered a radical overhaul of apprenticeships and vocational training. Not to speak of Macron’s own repeated willingness to talk plainly and directly to ordinary people: onlookers at remembrance day celebrations, farmers at the annual agriculture show, pensioners in provincial towns or the victims of a devastating hurricane in the French Caribbean islands last winter.



Political life will undoubtedly continue like this for some time yet, in the time-honoured French tradition, dotted with carefully choreographed presidential walkabouts and interviews, inflamed parliamentary debates and colourful street demonstrations, their impact measured in almost real time by the ever present pollsters.  The next opportunity to test public opinion for real will come with the municipal elections in two years time. Next year will see elections to the European parliament too, but voters, if they go to the polls at all, will be voting on questions that are somewhat removed from the bread and butter issues that affect their daily lives. By then, Macron’s policies will have produced some effects. Just what policies and what effects will be the subject of the next post.

Saturday, 14 April 2018

Train spotting


The good news about the rail strike is that it’s still possible to get around on strike days. Buses and metros are operating normally in Paris and its suburbs, some high-speed trains are running and although it’s difficult to get into work on time, it’s not impossible. Unlike the last big rail strike in 1995, which also affected the bus and metro network, mobile apps give up-to-the minute information about which trains are running on what lines.  The Internet also facilitates car-pooling and makes it possible for more and more people to do essential work from home.



A few days ago, I arrived five minutes before the time indicated on the app. at the station of a Western suburb of Paris to travel two stations down the line. The platform was crowded with building workers going home after work. They were mostly, I guess, of African origin although I also heard occasional snatches of East European languages.  The train was on time but already packed, so not everyone could squeeze in. The next day I joined a 100-meter long queue of bemused Chinese tourists outside the Château de Versailles. They were waiting for a bus to take the 25-minute ride to the nearest terminus of the Paris metro. The bus was packed too. At one stop an old man in a wheelchair watched forlornly as the bus arrived and left again, leaving him no chance whatsoever of getting on.



As usual, a public transport strike affects most acutely those who have little choice but to use it to get from A to B.



As the series of rolling strikes ends its second week, prime time news still focuses on colourful street demonstrations with banners, flares and megaphones or resigned passengers stuck at mainline stations and union leaders continue to repeat their much rehearsed sound bites about the destruction of public services and the extinction of their “statut” (“A fair hearing” - March 2017). But out of the media spotlight, there are signs that the number of strikers is slowly dwindling. On Thursday in a TV interview, Emmanuel Macron chose his words carefully so as not to antagonise railway workers, but gently chided that they should refrain from spreading “irrational fears” like the bogeyman of SNCF privatisation which, he promised, was not on the agenda, pledging that the company would remain 100% public. Media attention has also been diverted to the long promised evacuation of the area around Notre Dame des Landes (“Cleared for take-off?”- December 2017) with its action packed pictures of fearsome looking riot police facing masked and helmeted demonstrators and trails of tear gas from grenades. Macron commented soberly that, “as the French would expect… republican order is being restored”. Coming back to the causes of the rail strikes, two days after the Assemblée Nationale voted to change the legal structure of the SNCF, he conceded that the state would gradually take on a part of its massive debt. As to the rest of the reform, he would, he said, “see it through”.



My feeling is that he will.

Monday, 2 April 2018

The state of the state


The Treaty of Rome was signed in 1957, but it is only the past 30 years that France has become used to living within a larger European land mass and single trading area and sharing a currency with 18 other countries. Relinquishing some national sovereignty started in 1985 with the Schengen agreement. In 1986 the single European market legislation was introduced and in 1992 the Maastricht treaty was signed and ratified. Shortly after the turn of the century, people could travel across France’s borders with minimum immigration and customs checks and no longer had to change francs into D-marks, lira or pesetas because crisp Euro banknotes and freshly minted coins had supplanted them all. And, as Marine Le Pen found out to her cost at the presidential election in May 2017, a majority of the French have no desire to put the clock back.



At about the same time that power in these crucial areas of national sovereignty was being delegated upwards to supranational institutions, the government of France, under François Mitterrand, started a process of delegating power downwards to regional and local authorities.  A policy of decentralisation, initiated in 1982 was expanded in 2003 and again by François Hollande’s landmark regional reform in 2014.



So what then of the centralised state? Article 1 of the 1958 constitution of the Fifth Republic states that  “France is a republic that is one and indivisible” – a notion that originated with the French Revolution. An amendment stating that it has a “decentralised organisation” was approved in 2003. Paradoxically though, instead of reducing the influence of central government, as might be logically expected from a country that sets great store by logic, decentralisation, instead of flattening and rationalising layers of administration, has tended to pile them on top of each other. Many considered for instance that the regional reform of 2014 was a golden opportunity to dispense with the “département”, introduced by Napoleon Bonaparte, and delegate more power to variable geometry rural or urban local authorities answering increasingly to a larger regional authority. It was not to be. 22 regions were merged into 13 European-sized entities but “départements” survived, with their own governance and specific powers. A prefect and sub-prefects are still in attendance to represent the state. And although local authorities raise local taxes, they are still heavily dependant on dwindling subsidies from central government to balance their books.



The centralised state is thus increasingly caught between two conflicting constraints. The current reform proposals for the SNCF are a good illustration: within a few years, regional authorities, that have now been given the powers to organise their own transport needs, will be able to award tenders to competitors of the SNCF. Main line rail services on the other hand will be increasingly influenced by the four European Rail Packages to which France has finally, but reluctantly, agreed. 



Would not the logical conclusion be for France eventually to adopt a federal structure, with the state limiting itself to a smaller number of policy areas like defence and security, public finances, justice, possibly education, and health care? Some of which would be carried out in in cooperation with other federal countries within the EU?



Such an outcome seems highly unlikely. For any such move would go seriously against the grain of a country that has spent centuries building up and consolidating its national unity. Shortly before his death in 1985, the famous historian, Fernand Braudel, put it in the following terms in an interview with “Le Monde”: ……”(over the centuries) France has expended its most precious resources to build itself into a single entity..… in France’s identity, there is therefore this need for concentration and centralisation against which it is dangerous to act.”



In the eyes of the rest of the world, Emmanuel Macron passes for an energetic and reforming President, but the truth is that in adapting France’s highly centralised and costly state to the requirements of both European integration and regional decentralisation, he has barely scratched the surface. Amidst all the crowing over the reduction in 2017 of France’s annual budget deficit to less than the Maastricht yardstick of 3% of GDP, for the first time in nearly 20 years, it has hardly been noticed that growth-driven tax revenue can explain all of the improvement and that public sector spending has barely fallen. It was still a record 45.4 % of GDP last year. Spend some time, usually far longer than you would like, in any  government office and you will find that although computer screens have replaced ledgers and pen-pushers have become mouse-clickers, little else has changed in years. The government has announced that public sector workers will soon be able to volunteer, undoubtedly with a generous sweetener, to try their luck in the private sector. The youngest and most ambitious may take up the offer. The others, in the absence of any obligation, are more likely to stick to their job for life until retirement. Whether their advantageous pension scheme will have been merged with all the others by then, whether everyone in work in the public or private sector, or self-employed, will get the same basic pension for the same level of contribution remains to be seen. Macron had promised that reform for 2019 but its timetable is already slipping. For the time being, railway workers are about to go on strike to defend an employment contract that was initially drafted in 1920 and are protesting about the possible effects of greater competition on the railways. As to the long march towards greater integration of the Euro area and the EU it will only happen on terms that France finds acceptable - and that are not too far removed from its own proposals. As always, most other Europeans would say.



It seems fairly safe to assume therefore that, like a top-heavy super-tanker, the French ship of state will sail slowly on, changing course only if it risks running out of fuel or is rocked by an occasional violent storm. Jean Monnet was indeed wise not to attach any deadline to his determination to bring about “an ever closer union among the peoples of Europe.”

Wednesday, 21 March 2018

A fair hearing


Ten months after taking power, Emmanuel Macron, his Prime Minister and his government will be facing their first real taste of opposition in the next few weeks. As so often happens in France, it will come from the street and as so often in the past, it will be mounted by railway workers.  This time they are protesting about the government’s proposals for  reform of the SNCF. There is a general impression in the media and public opinion that the future of Macron’s reforming agenda will be determined by the outcome of this dispute

The objective reasons for reforming the wholly state-owned SNCF can be summarised in a few sentences and are hardly in dispute: the company has a quasi monopoly of rail services in France, a debt of over €50 billion, about 160,000 employees for just over 300,000 pensioners and its running costs are roughly 30% higher than those of its European competitors. The main reason for this is that train drivers, maintenance and sales staff and on-board ticket inspectors work shorter hours and are entitled to longer holidays and earlier retirement than most other public and private sector workers. Their highly specific labour contract, their “statut” as it is called, dates back to 1920 when a large part of their job consisted in shovelling coal into the boilers of steam-powered locomotives. The government is intent on abandoning the “statut” for new recruits and turning the SNCF, currently an integral part of the public sector and therefore immune to normal market pressures, into a still publicly owned but normal joint stock company to be run on a more commercial basis.  It should be noted in passing that the SNCF, through its majority owned subsidiary, Keolis, is successfully and profitably running railway, tramway and bus service all over the world, from Boston, Massachusetts, to India to Australia.  But in France, it has never been able to do so. In protest against the reform plans, the railway unions have announced a two-day strike every three days from the beginning of April to the end of June, a strike mode designed, as a union official quite openly admitted on television a few nights ago, “to combine maximum disruption to train services with minimum loss of earnings for railway workers”.

As previous French governments have accepted, after much procrastination, an EU-wide regulation introducing greater competition in rail services, while doing nothing to prepare the SNCF to meet it, it is clear enough to most people why these fairly minimal reforms are necessary.  But the unions see the reform as the thin end of the wedge towards more flexible working practices, longer hours and more commercial management. And yet, the government has been careful to stake out its ground: existing employees will keep their statut until they retire, and no proposal is being made at this stage to reform their generous pension scheme or close down unprofitable rail services, both of which will be dealt with in 2019 or later. The government has promised consultation with the unions, presumably one of the reasons why they haven’t called a strike until after the Easter weekend. There will undoubtedly be many such consultations, out of the media spotlight, between now and April 3.

This ritual process of consultation is probably the key to the outcome of the dispute. In France, no more than anywhere else, employees are understandably reluctant to give up employment privileges, however out-dated. But in France, much more than anywhere else, people in general insist on being consulted, expressing their views and being listened to. In the somewhat futile “what-if” approach to history, many are those who wonder whether the French Revolution, for instance, would have taken the course it did if Louis XVI had listened more carefully to the complaints of his downtrodden subjects. The fact is that every French person feels that everyone has a right to speak out and be listened to. Having lived in France for so many years, I have lost count of the number of meetings of committees, associations or other groups I have attended in which participants did not necessarily want to answer the chairperson’s questions, react to what someone else had just said or propose a practical way forward but simply to sound off about what was on their mind. In an Anglo-Saxon culture, a meeting of any kind usually has a chairperson, whose job it is to guide the meeting through an agenda, give the floor to people who ask for it, sum up the discussion and suggest a way forward. In France, and I suspect in most countries with a more Latin culture, the chairperson is seen as more of an honorific title than a function, the agenda is vague, contributions to the discussion are spontaneous and not necessarily about the point at issue, there is little attempt to sum up and once everybody has had a chance to express their views, the meeting goes on to talk about something else or breaks up. Subsequently, whatever needs to be done gets done - those with executive power have to find a way of reconciling conflicting views and constraints, often an impossible task. But the essential thing for most people is not necessarily that decisions are taken but that everyone has had a chance to air their views.  

French labour unions, far stronger in the public than the private sector, have become extraordinarily skilled at exploiting these foibles of the national psyche. On top of presenting labour conflicts in the usual guise of workers fighting for their rights against an uncaring and technocratic government, they frequently complain that governments “don’t listen”, have already “made up their mind” or refuse to engage in “real negotiations”, which is usually union speak for the refusal to meet their demands. Other bogeymen designed to resonate powerfully with the public are often conjured up too, like “an all-out attempt to destroy”, or - even more prominent in union demonology  - to “privatise” public services. For their part, ministers fall over themselves to declare that they are “negotiating in good faith” and that “their door is always open”.

It is of course the unions’ role to defend their members' interests as best they can. As for the government, it may have picked its fight carefully over SNCF reform but it has not made life easier for itself by announcing that it will legislate through the French equivalent of executive orders (ordonnances), which makes it sound as if it will not listen to the other side and is refusing a proper parliamentary debate. And for the first time since the start of the Macron presidency, the unions are apparently united in their chosen course of action.

The cause of the last major transport strike of 1995, that paralysed the whole country for six long weeks, was that Prime Minister Alain Juppé unexpectedly foisted radical reform proposals on unsuspecting public sector employees, including railway workers, and they were justifiably angry. The government eventually had to back down and abandon much of its proposed reform.  And it was not because the unions won the argument but because a majority of the general public, in spite of the chaos in the country and the extreme difficulty of getting to work or anywhere else, ultimately chose to back the public sector employees and not the government. I suspect that the key to averting or ending the promised rail strike this time will not be the merits of each side’s arguments but, once again, whether people generally feel that the railway workers have been given not necessarily a fair deal but a fair hearing in the court of public opinion. Today, railway workers’ “anger”, faced with a reform that Macron has abundantly trailed and that will not affect them much anyway, sounds more rhetorical than real. But the government does not have much ground to give. If it does come to a protracted strike, both sides will appeal to public opinion  - and public opinion will decide.

One thing is therefore abundantly clear.  If the government manages to attain the limited goals of this reform and is considered to have won its fight with the unions, it will have a freer hand to move on to the more ambitious reforms that Macron has promised in other areas. If it has to back down, it will have seriously weakened its capacity to take on more intractable issues like pension reform or the reorganisation of the tentacular civil service. It is worth recalling that many of those who voted for Macron in May of last year did not necessarily support his reforming ambitions but wanted, quite simply, to prevent Marine le Pen from coming to power. His reforms to date, of the labour code, vocational training and university access have not caused much protest, but on the other hand, for all except the very wealthy, taxes have risen. Sooner or later, men and women in the street will deliver their verdict on his efforts so far and decide whether they want him to continue.


Tuesday, 6 March 2018

The right stuff - Marion in Maryland




The French chattering classes registered surprise a couple of weeks ago at a very political speech that Marion Maréchal Le Pen delivered to the American Conservative Political Action Conference (CPAC) in Maryland. Marion is the youngest of the Le Pen political dynasty, the granddaughter of Jean-Marie Le Pen, the founder of the Front National party and the niece of Marine Le Pen, the party’s current leader. Surprise, because after having served one term as France’s youngest ever MP, Marion announced that she would not seek re-election to parliament following Emmanuel Macron’s victory in May of last year. Instead she said that she was leaving politics altogether. How – and why - she was on the bill at CPAC has not been revealed. But her presence there served as a reminder that when her aunt, Marine, was running for the presidency of France, she singularly failed to get a photo-op with Donald Trump despite making a trip to New York for that very purpose.



For somebody who has decided to leave politics and devote the next years of her career to setting up an academy for young leaders in France, Marion’s political instincts are clearly as sharp as ever. During a ten minute presentation in highly accented and sometimes incomprehensible English, she borrowed largely from the ideology and vocabulary of Brexit and Donald Trump with well-rehearsed lines like “make France great again”, “we want our country back”, “never underestimate the people” and “France used to be the eldest daughter of the Catholic church and is now the little niece of Islam”. Her audience applauded loudly when they recognised a familiar point and obviously warmed to a young woman who must fit every American male’s fantasy about French girls.  Interviewed on French TV, shortly afterwards, her aunt Marine looked distinctly dowdy and ill-at-ease, saying only that Marion was in America to pursue her business ventures.



However fresh and attractive Marion may have looked to the CPAC audience however, the ideas she expressed were neither fresh nor particularly attractive. They seem to come straight out of what Sudhir Hazareesingh refers to in his book “How the French think”  (Penguin Random House, 2015) as “the demonology of French conservative nationalism”: the decay of the nation, an elite that is out of touch and the malevolent influence of Islam. That did not prevent her admirers in France from loving it. “Macron is the not the only one who can speak English”, commented one clearly adoring supporter in the comments section of the YouTube video of her presentation. Others made it clear that they wanted her back in politics and running the Front National. Facing a party conference in a week or so, Marine Le Pen is still fighting the headwinds of her lacklustre presidential campaign. She conceded magnanimously a couple of days later however that if Marion wanted to take on responsibilities within the Front National again, she would be welcome to do so.



All this being said, Marion is certainly more popular in her party than is the abrasive Laurent Wauquiez, new leader of the right-wing Républicains in his. Braving no serious opposition, he was predictably elected to the leadership a few weeks ago. Despite his impeccable educational background and considerable political experience though, Wauquiez is not everyone’s cup of tea. Centrist leaning party worthies like Alain Juppé, Xavier Bertrand or Valerie Pécresse have publicly criticised him and some have left the party altogether. No sooner had he been elected than he was embroiled in controversy when a speech he gave to business school students in Lyon was recorded, against his will we are assured, and widely broadcast on social media and the radio. The speech was full of derogatory and largely unfounded remarks not only about his political opponents like Emmanuel Macron but also, and more significantly, about his supposed political allies like Nicolas Sarkozy. Wauquiez subsequently apologised to Sarkozy and sought to justify his comments by claiming that he was only indulging in plain speaking, something he said that politicians should do more of.  Most observers heard only gratuitous insults.



All in all therefore, very little has happened in the past few months to advance the cause of the right-wing opposition in France. Marion Maréchal le Pen has ruled out returning to politics any time soon and Laurent Wauquiez is struggling to define a political line that does sound fresh and attractive, within a party that appears to be losing an increasing number of activists and sympathisers.  In a fund-raising mail shot that I received the other day, he refers to the values his party wishes to uphold, like work, merit and authority but also calls for a “reaction” to the government’s “passivity” in the face of a “massive” increase in crime and immigration. As his former colleague, Xavier Bertrand, pointed out perfidiously, if people didn’t know that such language had been cooked up by the Républicains, they could be forgiven for thinking that it was describing the policies of the Front National.



The biggest issue before the party therefore is how porous the border will turn out to be between its traditional voters and those of the Front National.  Or as Jean-Marie Le Pen has put it on many occasions, whether they will they vote for the real thing or only for the copy. Elections to the European Parliament next year and municipal elections in 2020 will be the first opportunities to find out. But to make a mark once again, Républicains leaders will have to work out quickly how to mount a credible opposition to Emmanuel Macron’s reforms, which, in their heart of hearts, they approve of and would have liked to undertake during Sarkozy’s presidency  - but didn’t. From his safe new vantage point as senior advisor to a venture capital firm, the once presidential hopeful, François Fillon, must be looking on wistfully as, one by one, the planks of what most people would consider a right-wing political platform are being torn up and put to use elsewhere.