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French reforms

April 20, 2012

There is a sense of crisis in France. Unemployment is at a record high and growth is well behind Germany's. Economic expert Isabelle Bourgeois spoke with DW's Andreas Noll about the need for reforms.

Isabelle Bourgeois
Isabelle BourgeoisImage: privat

On balance, French President Nicolas Sarkozy's economic performance is a bitter disappointment: In his five years in office, the country's unemployment rate has gone up, the national debt has risen and the promised economic upturn has not materialized. French industry is still hemorrhaging jobs at the rate of 1,000 a month. In search of an economic role model, Sarkozy turned to Germany. France, he said, needed reforms similar to the so-called "Agenda 2010" introduced in 2003 under former Social Democrat Chancellor Gerhard Schröder. The controversial concept was aimed at cutting Germany's social services costs and liberalizing the labor market to make the country more competitive.

DW: For weeks, the so-called "German model" was a hot topic in the French media. As the French election approaches, where does the debate stand now?

Isabelle Bourgeois: As soon as the discussion turns to Europe - for example, the debt crisis - then the issue is present, or when the debate turns to how deep the social welfare cuts were in Germany. Then the one side or the other warns that if so-and-so is elected, the same would happen in France. Otherwise, the discussion about the German model has died down.

What deficits does France have compared to the German economy, if we are talking about modernity?

France has a whole bunch of deficits, which have developed over the years. The first, and perhaps biggest deficit, is that France has still not realized that the world economy is globalized. I often compare the situation to the famous Asterix-and-Obelix comics, where the Gallic villagers could always beat up the dumb Romans. But that does not solve the problem of globalization because you have to live with it. That realization has yet to arrive in France. The second problem is: France has not understood, even after decades, what European integration actually means, and therefore has difficulty finding where it belongs.

What exactly do you mean by difficulties with globalization? Do you think France is headed toward a new phase of protectionism?

Perhaps, but, to me, that is not the most important thing at the moment. I get the impression that that is more a symptom of populism because no one knows how to tackle the problem of the modern world, in which we live after all, and of Europe and globalization. Perhaps the most revealing thing is that in the current French presidential campaign not one of the major candidates has ventured into what really matters; namely, how do we reduce the debt, how can industry be made more competitive, how can we get youth unemployment out of the cellar and how can we even modernize structures so that we can cope with the competition.

What consequences for France will this burying one's head in the sand have, as you are calling it, in the coming months and years? Several politicians have been thinking out loud about protectionism.

Protectionism is not possible in the European Union, so the question does not even arise. That is campaign sloganeering with no basis in fact and it will disappear again quickly. At the very latest, after the parliamentary elections in June, there will be a nasty awakening. The ratings agencies will be standing at the doorstep to evaluate France's Triple-A rating. And then, we will very quickly be talking about those things that no one at the moment is talking about; namely, how to modernize France and how to get the economy back on its feet.

France has a long tradition of state-regulated industrial policy. Is that part of the modernization process you are talking about?

Why should the state be doing that? It can't do it. Industrial policy is a core problem in the EU between France and Germany. Each side understands something completely different in the term 'industrial policy'. For Germany, it means the creation of a framework favorable to industry so it can develop freely. For France, it means a continuation of the old Gallic industrial policy, whereby the state decides what sectors should develop and how they should develop – and it ends in subsidies for those industries. Fortunately, today, it is not so pronounced as it used to be.

What sort of practical policies could be implemented?

If they wanted to, our political leaders could do a lot. First of all, they could stop using Germany as a model and instead think about benchmarking - which using Germany as a model essentially is anyway - and start looking at our own strengths and weaknesses. There is a great deal that needs to be done in France. We need a new educational policy, a new vocational training policy, a career training policy and a qualification strategy. We need to re-think personnel management, starting with the public administrations. We need to stop measuring things by age and status in determining career paths. The employer associations need to become more autonomous and take responsibility. The trade unions need to rediscover that they are not mini-communist parties, but rather, defenders of workers' interests.

Transferring German economic recipes to France then would not be a good idea?

That would be a disaster because the subsidiary principle does not exist here. In Germany, everything is based on the principle of personal responsibility. At each level, a person makes his or her own decisions and only calls on the next higher level, if the problem cannot be solved at their level. Because we are a centralized state in France, because the state is supposed to provide for the general welfare, the individual has no responsibility in this sense.

Would it help the French if the Germans followed the suggestion of your former finance minister, Christine Lagarde, and pushed through steep wage hikes?

This is a favorite pastime in France: whoever is at the head of the class takes the flak. This wish needs no further comment.

From an economic point of view, in other words, France would gain no advantage?

Just remember, this view means you have not understood how closely entwined the economies in Europe are. If Germany was no longer quite as competitive due to higher wages, then France would also suffer and the rest of the EU with it. Germany must remain competitive – whether the others want that or not. If Europe's economic engine were to suddenly sputter it would have consequences for all its partners.

Isabelle Bourgeouis is a researcher at the French Center for Information and Research on Contemporary Germany (CIRAC) in Cergy-Pontoise. Her special area of focus is economic issues.

Author: Bourgeois, Noll / gb
Editor: Neil King