Hollande’s France is spiraling downward

By Dale R. Herspring

Things keep going from bad to worse for French President, Francois Hollande. His popularity has dropped to 27 percent — the lowest of any president of the Fifth Republic. The primary reason is the disastrous condition of the country’s economy. As a man in an unemployment office in a Paris suburb put it, “Hollande hasn’t kept his campaign promises to relaunch growth, create jobs.”

France’s jobless have reason to be upset. The economic situation is grim. On April 16, the International Monetary Fund issued a report forecasting that France would soon join Spain, Italy, Greece and Portugal in recession in 2014. In addition, the IMF expects France’s GDP to fall by 0.1 percent. Public spending is up to 57 percent of gross domestic product. Unem-ployment is expected to rise from 10.6 percent now to 10.9 percent in 2014. More people are looking for work now than at any time since after World War II. Youth unemployment is at 24.4 percent. In addition, 80 percent of new jobs are based on temporary contracts (to enable employers to avoid hiring a person for life).

Members of the euro zone are supposed to keep their deficits under 3 percent of GDP.  France’s deficit this year is 3.9 percent, and Pierre Moscovi, France’s finance minister, admitted, “France has too much debt.” Hollande and his finance minister say the deficit will reach 3 percent of GDP by 2014. They say they are serious and will introduce reforms in the areas of family support, health care and pensions. Few outside observers believe Paris will get to that point. The IMF expects France’s deficit to rise to 4.2 percent of GDP in 2014 and predicts France will go into a recession this year.

One characteristic of Hol-lande’s tenure has been his refusal to implement a program of austerity. He is making some cuts, but like President Barack Obama, the focus is on the military. As Hollande put it, “Today, prolonging austerity risks failure to reduce deficits and the certainty of having unpopular governments, and so the populists would at some point break through.”

Meanwhile, Paris announced that it would scrap 34,000 military jobs by 2019.  France had to call on the United States, the United KIngdom and Russia for assistance in transporting French troops to Mali. It also had to rely on the United States for much of its intelligence. Now is not a time to cut the military, but the left almost always favors cuts in the armed forces before cuts in social programs. 

Hollande also shares with Obama the idea of taxing the rich to help the poor. Hollande pushed through a change in France’s tax law so that those earning more than one million euros would pay 75 percent of their income in taxes. However, France’s Constitutional Court ruled the tax unconstitutional, calling it “unfair.”

There are reports that Hollande intends to propose taxing employers that pay their employees more than a million euros. He wants to force employers to review executive pay, which he considers excessive.  The danger with these taxes is that they could lead to a tax exodus and undercut investments.

There also are complaints that Hollande’s government is flooding France with new regulations. A government report last month estimated that France is languishing under the weight of 400,000 regulations. 

Hollande’s refusal to get France’s deficit under control has hurt his relationship with German Chancellor Angela Merkel.  His predecessor, Nico-las Sarkozy, worked closely with Merkel on a variety of issues.  Now, as the Economist has observed, “The Partnership has crumbled.” This presents a major problem for the European Community. Germany is unwilling to take a leadership position, and France seems to be bowing out of the relationship. 

If that were not enough, Hollande has taken on the Roman Catholic Church and many of his countrymen over the issue of gay marriage.

Even more important have been the scandals with which Hollande has been forced to deal.  Two have been of particular importance.  The first, the so-called “Cahuzac Affair,” occurred when a left-wing newspaper revealed that Cahuzac, who was in charge of the crackdown on tax evasion, had a hidden foreign bank account containing $770,000. He resigned and now faces possible legal action.

Then on April 4, Le Monde revealed that Jacques Augier, Hollande’s campaign treasurer, had corporate investments in the Cayman Islands.

Not surprisingly, the Germans see chaos reigning in France. One newspaper headlined an article on the situation in France with the comment, “France needs nothing less than a revolution.” The Ger-mans may be right, although following French politics, one gets the impression that much of what occurs resembles a revolution at times.

Dale R. Herspring, a University Distinguished Professor and a member of the Council on Foreign Relations, is a retired U.S. diplomat and Navy captain.

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