James Galbraith's Plan for Europe

Jamie Galbraith thinks that what Europe needs is not a stimulus plan but a "stabilization plan." Specifically, he thinks that the Eurozone needs an expansive social protection plan, like Social Security in the U.S., providing equal benefits to all member countries' citizens and financed jointly by contributions from each. The word "stimulus," he says, gives the wrong idea of what true Keynesian economics is about, which is smoothing across the business cycle.

Hollande's "Surprise Maneuver"

The German network ARD calls it a "surprise maneuver," but all Hollande did was revive the call of his predecessor--and of all previous French administrations  since Maastricht--for more centralized economic governance of the Eurozone. The surprise may be that this time around, Germany is less hostile to the idea, no doubt because Germany no longer sees it as a French plot to do an end run around the ECB. What the Germans want is tighter control of national budgets in other countries, and a Europresidency may now seem like a reasonable way of getting it.

Or so says the press. Frankly, I think Hollande felt that he needed to show some initiative on Europe, since he has been beaten up over his failure to renegotiate the Sarkozy-Merkel agreement after he was elected, as he promised he would do. This is one of the main sources of the allegation of "weakness" against him, so he had to react, and this was his ploy. But actually getting from here to there requires persuading many countries to give up a little more of their sovereign prerogatives, and all will be reluctant to do so--France more so than most. But Hollande's maneuver will allow everyone to look as though they're doing something while awaiting the German elections, in which far too much hope for change is invested. The elections won't change anything either.

Meanwhile, however, Hollande has at least temporarily changed the conversation. I don't think he had any more ambitious goal. He is, as he keeps reminding us, a realist, after all.

Inside the Paris-Brussels Accord

The EU recently granted France a two-year respite in its drive to reduce the budget deficit to 3% of GDP. How did this come about? Le Monde has a very interesting background piece today. It reports that the steady French push for more pro-growth measures since Hollande's election met with backing from, most notably, the IMF, Barack Obama, and even European Commission experts, all of whom argued that a further recession in France (now confirmed by the latest statistics) would be more harmful to European prospects than continued depression in smaller economies. The main opposition came from the staffs of Rehn and Barroso, who argued that such a double standard (lenience for big countries, harsh austerity for smaller ones and even for the large southern neighbors Italy and Spain) would spark political difficulties. It seems that the outbursts against Germany by several Socialist Party figures also helped persuade the EC that something had to give.

EU Turns Off French

According to a recent Pew poll, support for the EU has declined more in France than anywhere else:

Recession Redux, Le Monde Doubles Down

INSEE announced today that France is back in recession, with another quarter of negative growth. Meanwhile, Le Monde has adopted the tone of those whom Paul Krugman calls Very Serious People. In an editorial today, the paper gravely clears its throat and calls for ... structural reform, while warning readers that--surprise--these take time to produce results. France has been talking about structural reform for twenty years. The editors might have aimed to be a little more specific.

But sometimes one has the impression that nothing ever changes in France. Is it so long ago that Sarkozy supposedly took care of the so-called special retirement regimes? Yet last night they were all back in the news, on France2's JT de 20h. Every one of them, including the SNCF's, whose reform was the centerpiece of Sarkozy's effort.

But of course as I wrote at the time, Sarkozy headed off more serious trouble with the unions by buying some (the train drivers) off with side deals, while delaying the effect of reform for others by many years. Austerity means that these arrangements have proved too costly, so Hollande will be forced to undo them. Now we will hear the Right criticizing the Left for redoing what the Right previously did badly under volleys of catcalls from the Left. Is it any wonder that people distrust politicians?

Shades of Blum-Byrnes

France, according to Le Monde, is leading a European charge to limit the extent to which American "cultural products" can invade the European market. To put it this way is perhaps misleading, since the basis of the French position, understandably enough, is that "culture" is not a "product" in the sense that other tradeable goods are. It is not "merchandise." Rather, it is "culture," and if you don't know what culture is when you see it, well, then you're a philistine.

The problem with this is that the French are being disingenuous. When they use the word "culture," they would like you think of paintings in the Louvre, the Fauré Requiem, or the novels of Proust, but their trade negotiators are all about limiting the number of American films that can be shown in French movie theaters and the number of American TV dramas and sitcoms that can be shown on the small screen. These things are not the fruit of individual creators but, indeed, the "products" of "the cultural industries" (to borrow from the title of Frédéric Martel's popular Sunday radio show on France Culture). Large sums of money are involved, as are substantial capital investments and desirable jobs.

The French position on this goes back to the post-World War II years and the famous Blum-Byrnes agreement, negotiated by Léon Blum and James Byrnes. The two countries agreed at the time to limit imports of American films, and quotas have waxed and waned ever since. At the time of the original accord, there were some regrettable attacks on American philistinism by such prominent French intellectuals as Étienne Gilson. Since then, however, the French have amply demonstrated that they are as capable of producing cultural schlock as any American philistine, and when there is money to be made, they are just as avid to make it.

Anyone who watches French TV or goes to the movies is aware that whatever "cultural exception" has existed since World War II has not done much to ward off American influences on French popular culture. Whether one deplores or applauds those influences (and I personally think neither deprecation nor applause is warranted), a trade negotiation is not a good place to stop it. In such a venue, money is what counts, not culture.

Perhaps as a cultural mongrel myself, capable of appreciating both high and low, domestic and foreign, I simply don't evaluate the stakes as the self-appointed defenders of European culture do. I say, let people decide what they like. I may often not approve of other people's choices, but I don't think that taste can be improved by imposing quotas, any more that it can be legislated or enforced by curricular edict. I do know that part of my love of France came from watching some fairly low-brow French films. I would have lost something if my government had tried to "protect" me from them. But American governments have never been much interested in that kind of protection (as opposed to prophylactic censorship of supposed sexual immorality). The mask of antiphilistinism is more commonly worn in Europe, but those who wear it are less concerned with the culture of the masses than they are with the profits to be made from them.

The Right Way and the Wrong Way

In an article devoted mainly to Ségolène Royal's wave-making at the Public Investment Bank, we read this:

Mais, en dépit des dénégations, la polémique au sommet de la BPI illustre de vraies divergences sur le bon usage des deniers publics. Des divergences que l'on retrouve au sein de Bercy, entre le ministre des finances, Pierre Moscovici, et le ministre du redressement productif, Arnaud Montebourg. Tandis que le premier veut orienter la BPI vers le soutien aux filières d'avenir, en l'éloignant du rôle de "pompier", le second fait du sauvetage et de la restructuration de filières industrielles emblématiques une priorité.

Moscovici is so right about this, and Montebourg so wrong, that it's easy to imagine why the two are constantly at loggerheads. I've written often about France's need to shift capital from declining sectors with overcapacity into rising sectors where new businesses are starved for startup funds. The role of the BPI (with its strictly limited capital) should be to supply them.

As for Mme Royal's sudden return to the front pages (two days running in Le Monde), she seems to have timed her move carefully. After the contretemps with the president's new companion last year, Royal largely stayed out of the public eye and gave Hollande room to be Hollande. Now she is prodding him from the left, where he needs to be prodded. Her influence is probably negligible, but the press is still interested in what she has to say, so perhaps she can accomplish something. Now that her call for a "restructuring" of Bercy has been echoed by Fabius, perhaps not coincidentally, one sees how a well-placed remark by an outsider can be amplified by an insider. This may not be the best way to conduct an internal policy debate, but anything that furthers such debate within the majority is to be encouraged. Two cheers for Royal.

MEDEF Wants to Tighten Pension Requirements

The MEDEF, representing large French businesses, is calling for an increase in the minimum duration of pension contributions to 43 years for full benefits. The organization also wants to increase the legal age of retirement to 65. The increase would come incrementally over an extended period.

The retirement reform dossier seems to be perennial. Each successive reform simply anticipates the next.

Ségolène Speaks Out

Ségolène Royal is rather complimentary toward the President in some ways. She speaks of him as a man of "courage." On the other hand, she observers, almost blandly, that the "relation to power" has not changed since his election. This is not the most perspicuous of criticisms, but it seems to come down to the fact that nothing has been done about reforming the cumul des mandats. She also calls for a "restructuring" of the finance ministry, because nothing that Hollande has done so far has reversed the decline of the principal economic indicators or the increase in unemployment. She thinks that the Public Investment Bank, of which she is vice-president, ought to be given a larger role, and that the president ought to do more to "instill confidence." Good luck with that. She hints that she does not expect to enter the government, and her expectation is no doubt realistic.

To Shake Up or Not to Shake Up

"Sicklied o'er with the pale cast of thought," François Hollande announced a cabinet shakeup. Or did he? Actually, he announced that a cabinet shakeup would come in due course.Why? For what purpose? Who was not doing his or her job? He didn't say. He did praise Manuel Valls, who polls highest among his ministers for his law-and-order--some would Sarkozy-bis--approach to the interior ministry. And he renewed his confidence in Jean-Marc Ayrault, whom most outside observers regard, rightly or wrongly, as a sort of milksop. As unpopular as Hollande himself, Ayrault at least will not put him in the shade.

So once again, true to the governing style that I described the other day, President Hollande has made a headline by doing nothing, only promising that something might happen someday. If he took this step on the counsel of advisors, he should fire them. If he slipped the comment into the interview with Match on his own, he should slap himself for repeating the impulsive error of announcing the 75% marginal tax rate on high earners, which has plagued him since his election. This simulacrum of action, this pretense of a carefully worked-out strategy, every step of which has been planned in advance ("le remaniement viendra en son temps"), is wearing very thin indeed.

Hollande criticized Sarkozy, in his time, for being a president who governed by "coup d'éclat permanent." It was a clever play on words. Hollande, alas, seems to want to govern by coup de plat permanent. 

Le Monde suggests that ministers might be motivated by the fear of losing their jobs. Heavens, if they haven't always feared losing their jobs, then the president hasn't been doing his.