The French Cul de Sac

Sarkozy has adopted a statesmanlike pose, as befits the incumbent, warning voters of the hard grind to come, such as the need to work longer hours for lower hourly pay. But selling to the French public painful structural change as the price to be paid for Europe no longer works.

Hollande’s program, meanwhile, implies that pain can be avoided altogether by loosening European constraints. He has indicated that, if elected, he would re-negotiate the fiscal treaty and seek to alter the statutes of the European Central Bank – perhaps as an early sign of willingness to break with European orthodoxy. He is also promising to emulate his predecessors by bringing Germany around to the French point of view – that is, use German fiscal transfers. That way, France could hold onto its European project at a lower medium-term cost to domestic living standards.

This is the sort of trick that Hollande’s mentor, Mitterrand, was able to pull off. But that was possible not because of Mitterrand’s superior wiles, but rather because France had a stronger position vis à vis Germany than it does today.

France’s response to the tension between preserving the European project (equated with the single currency) and avoiding a chronically depressed economy will be to put off the day of reckoning for as long as possible. This dead-end strategy will feature vain attempts to game Germany and desperate economic expedients, such as the essentially coercive capture of domestic savings to finance government debt. But the day of reckoning will come, and France’s ruling establishment will be judged harshly when it does.

Brigitte Granville is Professor of International Economics and Economic Policy at Queen Mary, University of London, and the author of the forthcoming book Remembering Inflation, Princeton University Press.

Copyright: Project Syndicate, 2012.www.project-syndicate.org

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