France: Toward a Horizon of Cuts Forced by Reality

12/05/2014

Eduardo Inclán is Maître en Histoire by the University of Toulouse II-Le Mirail

 

On 29 April, the French National Assembly approved a first major package of measures presented by the new socialist cabinet, led by the newcomer Prime Minister Manuel Valls, as the only way to meet the economic goals set by the European Union. Under this plan, launched as a 'Stability Pact', the costs of government will be reduced by a total of fifty billion euros until 2017, of which the so-called 'welfare state' will be deducted 11 billion, in cuts from social protection programs, and 10 billion to be saved on health-care costs. One should add to this a further reduction of 18 billion from State and official agencies and 11 billion from the local and regional administration.

Against this background, President François Hollande still has a three-year term before him in a very unpleasant situation. In 2012, during the election campaign, he was introduced as the man who would lead a project against the austerity that Germany was imposing on the EU and, above all, he would break the complacency of other countries, which President Nicolas Sarkozy seemed to represent, always accused of not separating himself from Angela Merkel. With this road-map, the French Socialists appeared as the new Keynesian model for Europe, based on spending more, investing better and hiring more teachers, researchers and other key State personnel, while keeping social benefits. However, in just 24 months all this seems to have collapsed. Hollande has had to give up his policy of increasing spending, has had to watch how the European Commission warned that it would have to intervene in the 2015 Budget if significant measures to reduce costs and increase revenues were not taken, and has seen how in the last local elections in March, the Socialist Party (PS) has lost a third of the votes which, to a great extent, are now going to extremist and populist candidates as the National Front of Marine Le Pen.

Given these dismal data, the appointment of a new Prime Minister was necessary, the most popular among ministers being the former Domestic Minister, the nationalised Catalan, Manuel Valls, which resulted in the rejection and exit from cabinet of the former leftist allies of the green party Europe Ecologie. This new period began with an about-face turn from the previous policy. A Stability Programme has been adopted urgently with the previously mentioned cuts, a decline in the contributions paid by all companies has been announced for 2015, which will mean a loss of State revenues of over 24 billion euros; the salaries of top officials and pensions exceeding 1,200 euros per month have been frozen and a decrease in the current social assistance system has been announced, until now one of the most generous in Europe. Apparently, by 2017, France will have to adjust costs following countries like Spain which, having avoided the rescue plan of the EU and the IMF, has been implementing new policies increasing the tax burden, reducing expenditure of public administrations and intensifying efforts to internationalise the national economy to make it more competitive in a globalised world.

All this clashes upfront with the traditional political postulates of the French Socialists. And voters are also surprised: Hollande is currently rated the worst president in the history of the 5th Republic, with an approval of only 18% of the French. The poor predictions for the elections and the sudden shifts in the Hollande-Valls tandem have come to shake up the majority enjoyed by the PS in the National Assembly as, at the vote of the Stability Plan on 29 April, up to 41 Socialist MPs broke the party line when voting and abstained by the rigour of the cuts announced and the adoption of austerity as the route out of the current economic crisis gripping the French economy since 2009. This has made president Hollande himself give a television interview last May 3 to announce tax cuts in 2015 for families, while announcing a new mediation attempt for dialogue between employers and unions.

And yet, the worst thing for the Socialists may still be ahead. Surveys say that in the next European elections of 25 May, the Socialists could be the third most voted force, with only 18% of the vote, far from a victory that UMP conservatives now vie with the FN, elated as some polls declare it the winner with 24% of the votes, compared to 23% for the opponent.

For now, the most leftist sectors of the PS are quietly waiting for the European elections. But if the result supports the surveys, the picture can be very unpleasant for Hollande, who has played all his cards and has no choice but to wait, while Valls must choose between immolating himself as the mere executor of the plan of austerity, defending the cuts and pragmatism of his line of government, while yearning for the economic recovery to show on the economic data; or becoming a statesman appearing daily on the media and making a great effort to teach French society to accept some basics in this economic climate: you cannot continue having a huge deficit in the system by taking loans. Immobility before the crisis has failed, we will see if this new policy does not wipe out the power bases of the Republic's traditional parties. Next Via Crucis Station: May 25.