The dreadful French economy and European unity
In the course of reading Belmont Club on France and Algeria, we stumbled upon an informative piece by Sylvain Charat at TCS on the French economy and the EU. We were unaware of how out of date we were on France, and how out of date the French economy is:
“Economic liberalism would be as disastrous as communism,” stated French President Jacques Chirac in lashing out against the EU’s so-called Bolkestein directive (named for Frits Bolkestein, the Dutch commissioner who authored it), which would guarantee the free movement of services across the single market.
Strengthening individual rights and promoting free trade are not public policy priorities in France. State rights and intervention are high up on the political agenda whether it be from the Right or the Left. All political and economic measures have a common point: market control. That, of course, is contrary to what Europe intended to be. The 1957 Treaty of Rome proclaimed four fundamental freedoms: the free movement of persons, capital, goods and services. This has been strongly restated in the Lisbon Agenda, which aims to make Europe the most competitive economic zone in the world by 2010.
Convinced that liberalization of services would be an important source of wealth and jobs, the European Commission was asked by EU leaders to draft a directive ensuring it. This was done on January 13th, 2004. Important footnote: the two French commissioners at that time, Michel Barnier, now foreign minister, and Pascal Lamy, hoping to run the WTO, signed onto it. Additionally, the French government did not protest.
The directive has two main aims. First, it would allow free movement of services among member states by making easier the settlement of a service provider in another member country. Second, it would allow free competition for almost all services, including social, cultural, educational and health services. A market-based economy is the way to make a stronger European Union, and this directive helps achieve it by forcing member states to have competitive regulations. Under the country of origin principle, service providers would be able to operate in the most competitive environments.
In the post below, we wrote that a majority of the French don’t like the European Constitution — heck, they don’t like the EU, period. The EU itself, with its new low-wage, low cost members, is seen as a threat to the French way of life. The Wretchard sums up nicely how European Union expansion, once thought to serve the interests of France, has now created conflict:
Those free market aspirations have come into shuddering collision with the French ’social model’ where 25 percent of the workforce is employed by the government, 10 percent of the population is on welfare and French law calls for a 35-hour week. While European enlargement ordered British shopkeepers to sell wares in grams and kilos instead of pounds and ounces it was fine, but now that it lets “hairdressers, plumbers and accountants to work freely across Europe” as the Scotsman reports, it is no longer so fine – and a French ‘Non’ is more than likely. This is bound to be met by the rueful echo of what one Muslim moderate, who was originally in favor of Algerian integration into Metropolitan France said five decades ago: “the French Republic has cheated. She has made fools of us … why should we feel ourselves bound by the principles of French moral values… when France herself refuses to be subject to them?”, except that it will be uttered in Polish, or worse, English.
Europe if not now then soon must accept that enlargement by itself can never fully compensate for the fundamental weakness of its demographics and economy. Even a ship as large as the Titanic eventually fills with water. French EU Foreign Minister Michel Barnier could not have spoken more eloquently of the dead-end French policy had become when he said the EU had no contingency plan in the event of a rejection. “We have no plan B. You cannot have a plan B. It is ‘Yes’ and that’s the only way to discuss this item, so we go 100 percent for that outcome”. If wishes were horses then beggars would ride.
Jacques Chirac can talk all day about the threats from the “anglo-saxon” liberals in the US and their free trade policies, but his problem is in his own backyard. It is shocking that 25% of the French workforce is employed by the government, and that fully 57% of France’s GDP is government spending (CIA Factbook) — by copmparison, federal government spending in the US is a little over 20% of our GDP.
The idea that France gets to call the shots for the European big dog is economically absurd. France accounts for 60 million of the 455 million EU members, and odds are that the 74 million people from Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia and Slovenia aren’t looking for a 35 hour work week.
We have long been on the record saying that the idea of a united Europe under the policies of France and Germany has fundamental and structural economic problems. They perhaps are now becoming evident.