Wednesday, 12 June 2013
The French President on a flight of fancy
Francois Hollande, the French President, has declared the Euro crisis over a couple of days ago. His announcement comes at a time of unprecedented unemployment in Spain, Italy and his own country, as well as at exactly the moment when Mario Draghi's promise to 'do what it takes to save the Euro' (i.e. buy unlimited bonds from Italy, France or Spain) is under scrutiny at the Constitutional Court in Germany.
Apart from the odd timing of Hollande's announcement, and it's peculiar echo of the sun king diktating the will of the markets, it is likely to be more in the category of wishful thinking. The Euro crisis is fundamentally a crisis of budget deficits and national debts, bloated by enormous bail outs for troubled banking industry in the wake of the financial crisis. For France, and for the socialist president, this crisis is however mainly one of austerity and its effects. Or so he thinks.
The recent strike of the French air traffic controllers, grounding in one fell swoop half of Europe's air traffic for three days, demonstrates what this is really about: a largely unreformed public service, a highly fragmented trade union movement in France which makes effective negotiations of labour disputes difficult to say the least, and the unwillingness or inability of the French President to take on the problems he was elected to tackle. So, Hollande is looking for an easy way out. Declaring the Euro crisis over, so he believes, will open up the coffers of the European Central Bank for the French government. If the Euro is sorted, France can continue to spend, ever onwards with its profligate ways.
Observers are agreed in disagreeing with Hollande. What France needs are reforms, not higher wages for less and less work. The Commission President Barroso recently put it simply: France is loosing its competitiveness rapidly compared to Spain and Portugal (of all countries!) where radical reforms have begun to turn the ship around. It's about time Hollande understands that Europe wont wait for France, Euro crisis solved or not.