Economy

Eurozone crisis: The sick man of Europe is France

12 November 2012
Les Echos Paris

“The German model" — Angela Merkel as Marianne, symbol of France, as seen in its town halls.

“The German model" — Angela Merkel as Marianne, symbol of France, as seen in its town halls.

The German government is increasingly concerned as well as outspoken about France's economic situation and its inability to act. Authorities in Paris are aware of the slump in industry but nonetheless irritated by the German pressure.

We do not know if the German government discreetly tasked its five expert advisors to examine the situation of France, as the press on the other side of the Rhine has reported. The high-profile economists in the experts’ group have officially denied that any such initiative took place, while the insistence that there will be “No comment” from the Chancellor’s office nonetheless suggests that there is something to the story.

Be that as it may, the simple fact that such a request was not unlikely is a testament to Berlin’s concern about its neighbour. And sadly, it is a concern that is completely justified.

The initial French reflex in response to this state of affairs is one of irritation. That the Germans should assume that they can teach us lessons on how to reform France is both vexing and insolent. Ten years ago, the Federal Republic was the sick man of Europe, it has been consistently late in its management of the eurozone crisis, and no doubt it would be none too happy if it had to take advice from Paris on how to deal – to cite a random example – with its catastrophic demographic situation.

The second French reflex is to remark on the domestic political dimension of such an initiative. In answer to recent criticism of some of her decisions by the five experts, Angela Merkel remarked that you only had to compare the situations of Germany and France to see that German policy was better.

A major historical shift

Although understandable, these impulsive reactions should not be allowed to dissimulate the obvious point which is that Germany is concerned about the state of our economy, about its stagnation over the last three quarters, its deficits, and most importantly, the difficulty inherent in taking action to reverse a downward trend. Germany is right.

One single comparison is enough to highlight what is a terrible situation: according to Eurostat, the latest figure for unemployment in Germany is 5.4% whereas it stands at 10.8% in France. But the real difference is perhaps elsewhere: France, and it seems François Hollande, still consider that the current difficulties are temporary and that everything will improve when the traditional economic cycle is reversed in the latter half of 2013 and 2014.

In contrast, the Germans have long considered that what the French refer to as a “crisis” is in fact a major historical shift, which is why they have allocated themselves the resources they need to deal with it.

The reality is that we do not need the Germans to tell us that the Gallois report [on the competitiveness of French industry]  and the government plan which followed it are first steps in the right direction, but only first steps. They are not enough to mark a turning point, and we will have to continue to work to acelerate change.

Translated from the French by Mark McGovern