Whatever it takes !

The former President of the European Central Bank, Mario Draghi, will go down in history for three words that he uttered at the height of the Euro crisis in 2012. His famous sentence “The ECB is prepared to do whatever it takes to preserve the Euro” pronounced on July 26, 2012, is widely credited with having saved the Euro from imminent collapse. For his nationwide TV address on the coronavirus crisis last Thursday evening, President Emmanuel Macron found an excellent French equivalent. The French government would take every necessary measure to protect the population and the economy, “quoi qu’il en coûte”, he declared.

It is of course an enduring feature of French history that in times of crisis, when the people are not rising up to try and overthrow their government, they expect it to take the lead in organising and financing whatever measures appear necessary for the common good. During his short presidential term, that has not yet run three years, Emmanuel Macron has already experienced both types of crisis – the “gilets jaunes" movement with its attendant insurrectional violence in late 2018 and early 2019 and today, the coronavirus crises. In his nationwide address on Thursday evening, he did not disappoint, stating no less than three times that the state would do its duty “quoi qu’il en coûte”. His stated reliance on expert medical opinion, an implied sideswipe at conspiracy theories flourishing on social media, also sounded convincing, at a time when, as “The Spectator” put it the other day, “a social media lie often has greater power than the considered opinion of an expert”. I found myself thinking that for someone who had had so little political experience before being elected President, he has come a long way since May 2017. Can anyone seriously imagine the self-styled leader of the opposition and candidate against Macron for the presidency in 2017, Marine Le Pen, delivering such an address?

The “whatever it takes” will nevertheless have a high cost. Bruno Le Maire, the finance minister, spelt out the next day that “several dozen billion Euros”, would be needed to fully compensate businesses obliged to put their employees on short time work, pay out loss of earnings to employees and the self-employed, postpone tax and social security levies etc. etc.  And that was before Saturday’s announcement by the Prime Minister that cafés, restaurants and other non-essential services would be closed down for an indefinite period. The commitment is clearly open-ended as nobody knows at this stage for how long such measures will be necessary. And the fiscal impact will be substantial, meaning that, “the 3% deficit target demanded by Brussels will not be met this year”, as a radio journalist unhelpfully and inaccurately noted. Of course it won’t, but then it hasn’t been for most of the past 40 years. 

Taking a big step back from the fast-moving situation of the coronavirus epidemic, not only in France but throughout Europe, it is sad but true that so many countries have made no serious attempt during the boom years to tackle the underlying reasons for the expansion of public spending and implement the kind of structural reforms that the OECD for example has been urging for years, rather than take the easy way out by starving essential public services of cash that only the state can provide. Had they done so, they would be better placed to face a situation like that of today, in which public spending is both essential and inevitable. Taking just three examples from around Europe, Italy’s public health system has been struggling for years to cope with the austerity that has been imposed on it, UK governments of the past ten years have systematically made cuts to the National Health Service, France’s public hospitals have long been protesting about dwindling investment and staffing levels. Most commentators in France seem to agree that for all his reforming zeal, Emmanuel Macron has done little to curb the seemingly inexorable upward movement in overall public spending, let alone start to reduce it.  To do so, he would need, as many have advised, to initiate a radical reform of the tentacular civil service in order to dramatically increase its overall productivity, oblige the state to relinquish areas of the economy in which the private sector would be better equipped to impose the necessary financial and management disciplines and prepare the national budget for precisely the kind of crisis that France is facing today. None of this of course can be done overnight, and the next major national elections are looming in just over two years’ time. Pension reform, in which many have placed their hopes of stopping a permanent drain on the public purse, has been contested every step of the way and has not yet cleared all of its legislative hurdles. Even if it eventually does, it will not produce tangible results for many years. But in the very real here and now, Emmanuel Macron is facing his second major fiscal splurge in as many years.