France is not only suffering from the ills of its economic and social models which generate continuous unemployment, but also from the disappearance of civil peace.
Far from entering a period of recovery, the French economy is at a standstill. There was zero growth in the second quarter, which makes it improbable that the government’s 1.5% growth objective for 2016 will be reached. Industrial production has decreased to 14% below its 2008 level. Tourism, which counts for almost 8% of GDP, has seen an unprecedented slump: 7% fewer foreign visitors and a sharp fall of 12% in room occupancy of Paris hotels. The foreign trade deficit increased to 24 billion euros in the first quarter whilst the energy bill was reduced by 7.5 billion. The unemployment rate has improved, deceptively, returning to 9.9% of the working population thanks to training programs. There has been a leveling out of category A jobseekers (at 3.7 million) contrasting with a massive 10.7% rise in Category D jobseekers. Above all, the notable slowdown in job creation underlines the continual jamming of the job market and the artificial nature of decreasing unemployment.
The French economy diverges from that of the eurozone which is showing high resilience to the rising number of uncertainties – ranging from the increasing numbers of terrorist attacks to Brexit. This is because of the highly aggressive monetary policy of the ECB and the lengthening of the timescale for returning to balanced budgets, exemplified by the abandon of sanctions for which Spain and Portugal were liable. Germany is expecting 1.8% growth in 2016 and has a job shortage with a 4.2% unemployment rate. In Spain, activity has progressed by 2.9% and 900,000 jobs have been created over two years. Over the same period, France has lagged behind the eurozone by 2 points and has managed only to stablilize unemployment whilst on average this has been reduced from 12.2% to 10% of the working population. Furthermore, the deterioration of our external trade accounts contrasts with the 134.5 billion euro surplus shown in the first quarter by the eurozone, an improvement of 23 billion on 2015.
Four reasons can explain why France has dropped behind. Firstly, the after-effects of the 2012 fiscal shock continue to paralyze savings and investment, and, consequently, innovation. Next, the handicap in terms of price competitiveness with regard to Germany, Spain and Italy; this is because of fiscal and social charges paid by companies that are more than 90 billion euros higher than the lowest equivalent level in Germany. This goes hand in hand with a considerable deficiency in structural competitiveness resulting in obsolete production facilities and weakness in research. To this may be added the consequences of a lack of security, since France has become third highest in the list of countries affected by terrorism (with the exception of war regions) with over 230 dead and almost 800 injured in attacks since January 2015.
At the moment, France is in a state of emergency that remains merely notional in the absence of any coherent strategy concerning the fight against Islamist terrorism on home territory. But the economic state of emergency is a real one. It is only because of the ECB’s injection of liquid assets and unlimited re-insurance of national debts that our country has not been heavily punished for its explosive mixture of decreasing production, mass unemployment and excessive public expenditure. Unfortunately, this unexpected reprieve provided by the ECB is not being used profitably to modernize our country but rather to increase clientilist measures – an extra 10 billion or so in public funds going towards plans for new exemptions to income tax, which is now paid by only 46% of households.
No one can doubt that, after the loi du travail fiasco (a law concerning liberalization of the labor market), that any attempts at reform will be abandoned between now and the presidential elections. Bertelsmann is therefore perfectly justified in placing our country once again further down its rating – down two places to 18th position.
As this wreck of a presidency ends its five-year term, France is zombie-like: the economy is at a standstill, society is engaged in a civil cold war and the establishment is powerless. The country is not only suffering from the ills of its economic and social models, which generate continuous unemployment and make 15% of the population wholly dependent on social transfers, but also from the disappearance of civil peace.
Economic recovery is now indissociable from the restoration of security. This is not the time to patch up the French model that came out of the Trente Glorieuses (the thirty years from 1945-1975) and which is killing off production, breeding exclusion and undermining the nation. The emergency demands the invention of a new model. On the economic front, priority must be given to production, investment, employment and expertise. On the security front, a global strategy must be drawn up and put into effect to coordinate state measures with the engagement of civil society. On the political front, the presidential elections of 2017 must mark a time when awareness of a new French model must come into effect, a model that can stand up to the crises and risks of the 21st century.
(Column published in Le Figaro, 29th August 2016)