PARIS — Three months ago, the French center-right scored two stunning electoral victories. As a result of miscalculations and voter apathy, the Socialists who had formed the government since 1997 crashed to defeat, and President Jacques Chirac was re-elected with 82 percent of the vote in a runoff ballot against the extreme right wing candidate, Jean-Marie Le Pen of the National Front. A month later, Chirac’s supporters won a huge majority in parliamentary elections.
That seemed to set the scene for a tectonic change in one of Europe’s major nations, with the new government promising radical change to dismantle the huge state apparatus and set the land of Napoleon and Charles de Gaulle on a new course. But, as the country returns from its summer holiday, the atmosphere is much more hesitant. This could affect the chances of Europe staging a revival as the major continental economy, Germany, wallows in a prolonged downturn.
The government appointed by Chirac under Prime Minister Jean-Pierre Raffarin faces a string of economic tests that are making it the target of criticism from both the left and the right. It must reconcile tax-cutting pledges by the president with his insistence on raising spending on law and order and defense, at a time of slowing growth.
Raffarin says he expects growth to pick up from under 2 percent this year to between 2.4 and 2.8 percent in 2003. But with the government deficit above target, welfare budgets deep in the red and Chirac’s spending plans, the prime minister and his finance minister, Francis Mer, risk finding that the sums do not work out. The chairman of the parliamentary finance commission has allied with analysts who doubt the official growth forecasts, saying tax cuts could wait for a couple of years.
Some relief may come with revenue from the planned privatization program. But market conditions are far from good for large-scale disposal of state assets. The main index has dropped by 25 percent this year.
Raffarin has a huge parliamentary majority elected on Chirac’s coattails and in a rejection of the previous Socialist-led administration. He needs to get to grips with the jungle of administrative regulations that impede French companies. He speaks of the need for fundamental reforms, which would include reducing labor market rigidities. But at the same time, Chirac has talked of the government’s intervening passively to help work out corporate restructuring plans when companies want to shed workers.
The prime minister also talks of modernizing the big public sector. A report published at the end of August showed that the number of state and local government employees has risen by 10 percent since 1990 to 3.1 million. But trade unions have made plain their opposition to the job cuts that would result, with talk of strikes in the public sector. This could confront Chirac with a repetition of protests that erupted when his government tried to introduce such reforms in 1997, leading to the election of a Socialist-led government.
Opposition will be sharpened by high unemployment, which rose by 0.7 per cent rise in July, with a 5 percent jump from the same month the previous year, and an increase of double that among young people. But, with growth falling from 3.8 percent in 2000 to an expected 1.4 percent this year, companies are under growing pressure to rebuild declining operating margins. That will lead to cost-cutting before any significant rise in investment occurs, putting further pressure on jobs.
At the same time, consumer confidence is falling, which could hit the high level of demand that has helped to save France from a downturn on the level of the decline in Germany.
The problem for France is, in part, psychological. Like Japan, the country had long needed new political blood, but its president has been around since the 1960s. Raffarin was presented as a new face, but he belongs to the old establishment, having been a junior minister and member of the Senate. His initial moves have hardly taken account of the desire for change. He has taken a careful approach to reform, and sought to avoid conflict with the entrenched power of the public trade unions.
His boss, Chirac, has good historic reason for caution. Though Le Pen’s presence won Chirac his enormous second-round majority, Chirac got less than 20 percent in the first round of this year’s presidential election. He also cannot forget how his first prime minister, Alain Jupp, was booted out of office by the electorate in 1997 when he tried to start reforming the public sector.
So, over-ruling the finance minister, the government will intervene passively when companies want to lay off workers with a special task force established for the purpose. It is playing to the most vocal lobbies, notably the farmer, fending off trouble without laying down a long-term strategy.
This may win Raffarin and Chirac immediate popularity. But it is not how leaders with such a huge majority should act. Now is a time for radical change for the better in France. The trouble is that, as so often in the past, the leaders are neither up to the task nor willing to take the risks that their country needs.
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