By Emmanuel Navon
www.navon.com
The first round of France’s presidential elections felt to me like a
reunion: Nicolas Sarkozy used to be the mayor of my home town (Neuilly),
Gaullist candidate Nicolas Dupont-Aignan was my TA at Sciences-Po, and
Pierre Moscovici (François Hollande’s campaign manager) was my
instructor in public administration. Yet I miss none of those
contenders and feel lucky that I no longer live in France -not least
because of my acute boredom in Dupont-Aignan and Moscovici’s classes.
For if Sarkozy loses, as polls predict he will, France will face
bankruptcy and the Euro may not survive. Despite my disappointment with
Sarkozy and despite my annoyance at his antics, I endorse him.
I criticized Sarkozy sharply after he was caught red-handed smearing my
Prime Minister in November 2011 (“Sarkozy, c’est fini” November 8,
2011). I ridiculed his foreign policy record, expressed dismay at his
treatment of Israel, and claimed that his meager economic reforms were a
far cry from the sweeping changes he had promised. I concluded thus:
“Sarkozy has lost the Jewish vote and his likely defeat in the upcoming
French elections will be well deserved. Sarkozy, c’est fini.” I stand
by every word: Sarkozy does not deserve to be re-elected in light of his
record, and his cavalier attitude toward Israel in the past two years
makes it impossible for me to pity him. Yet, compared to the
alternative, he is the least of two evils. I call upon the French
people to hold their nose and to vote for him.
France’s economy is on the verge of sharing the fate of its southern
neighbors because of its low growth, of its unsustainable debt, and of
the justified nervousness of financial markets. The French state is the
OECD’s biggest spendthrift: French public spending accounts for 56% of
GDP, compared with an OECD average of 43%. Like its European neighbors,
France built a generous welfare state after WWII. But the sharp
economic slowdown of the 1970s took away the economic growth and tax
income that sustained the European welfare state. And European
demographics (longer lifespan and lower fertility rates) inevitably
reduce the number of taxpayers while increasing the number of entitled
retirees. Add to this economic globalization, which enables money and
factories to move freely to tax-friendly countries, and you understand
why the French government cannot make ends meet and keeps borrowing to
pay its bills.
As opposed to its northern neighbors, France never tuned its spending
with demographics and with globalization. The successful reforms of
Margaret Thatcher in Britain (in the 1980s) and of Gerhard Schröder in
Germany (in the 1990s) never happened in France and probably never will:
the French strongly believe (as polls consistently show) that
capitalism is evil and that the State cannot possibly run out of money.
While in Britain, Ireland, Portugal and Spain people have voted in the
past two years for parties and leaders that promised painful economic
reforms, the French have given their votes on April 22 to candidates who
blame globalization and financial markets for France’s economic woes
and who promised none of the reforms that the French economy direly
needs.
The result of France’s refusal to come to terms with economic reality is
that French public debt stands at 90% of GDP (a figure that keeps
rising and that will reach 100% in 2015 according to the Cour des
Comptes, France’s state auditor) and that the French state has not
balanced its books since 1974. France has the Euro zone’s largest
current-account deficit in nominal terms. France’s banks are
undercapitalized. France suffers from a structural unemployment rate
(10% compared to 5.8% in Germany) partly because labor in France is too
expansive (French employers pay twice as much in social charges than in
Germany).
Until the financial crisis that erupted in 2008, France could live on
credit because, after all, the French economy does have many assets.
But easy borrowing is over, and so France may well end-up sharing the
fate of Greece.
France must wake up to reality before it is too late, and its
presidential candidates must say the truth to voters. Yet they are
doing the very opposite, especially François Hollande, the socialist
contender.
Hollande’s platform includes the increasing of public spending, the
partial roll back of Sarkozy’s rise in the pension age from 60 to 62, a
75% income tax on the rich, and an increase of the annual wealth tax
(levied annually on assets worth over €1.3m). By his own calculations,
Hollande’s proposals would cost the French government an extra €20
billion over five years. While the French state needs a serious and
urgent diet, Hollande would make it grow even bigger. Worse, Hollande
vows to renegotiate the European fiscal act, a hard-won deal that
imposes budgetary discipline in the Euro-zone.
In short, a Hollande victory would generate a credit crunch, a
brain-drain, and it would further destabilize the Euro. Instead of
tackling France’s structural economic imbalances, Hollande will bring
France to bankruptcy and the Euro to an end.
Nicolas Sarkozy’s economic reforms have indeed been meager during his
five years in office, but a re-elected Sarkozy with no fear of the
electorate might actually take the necessary and unpopular measures that
are required to save France from bankruptcy. Sarkozy may not deserve
the benefit of the doubt and he may not even deserve to be reelected,
but his replacement by Hollande would bring economic catastrophe upon
France and upon Europe. For that reason alone, the French should put
aside their justified dislike of Sarkozy and reelect him.
Emmanuel Navon, 27 April 2012 And here is the rest of it.
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