Home > Uncategorized > How the Eurozone damaged French politics — and this year’s presidential election

How the Eurozone damaged French politics — and this year’s presidential election

from Mark Weisbrot

As France heads into the second and final round of its presidential election on Sunday, a number of observers have compared the choice between the far-right candidate Marine Le Pen and centrist neoliberal Emmanuel Macron with the Trump-Clinton contest of 2016. There are similarities: Le Pen, who is politely called xenophobic, like Trump represents an anti-immigrant, right-wing nationalism combined with some populist appeals. Macron is a former investment banker and economy minister under the current Socialist government who, like Hillary, is widely seen as too close to powerful financial interests.

But one significant difference is that if Hillary had won the US presidency in 2016, she would most likely have tried to win some net improvements in the living standards and economic security of the majority of the electorate — including working class and poor people — who voted for her. The same cannot be said for Macron in France. His public platform has been vague, but insofar as it has a discernible trend, it is in the same direction that the country has moved over most of the past decade. That has included large public pension cuts, labor law reform that has weakened the bargaining power of unions and made it easier for employers to dismiss workers (including the Macron Law, as it is called, of 2015), and spending cuts.

How does France, a country with an advanced welfare state that provides nearly free university tuition, universal health care, and free childcare, end up with less of a choice than what Americans faced last year? (And don’t get me wrong: I think it’s still an important choice to make, given the special dangers that Le Pen, like Trump, represents.)

The short answer is that there is a structural problem in the eurozone, and in the EU. The European Central Bank (ECB), the European Commission, and the IMF (which is not an independent entity but generally answers to its European directors for decisions affecting Europe), are the European authorities that have increasingly constrained the economic decision-making of European governments. We can also include the eurogroup of finance ministers, which has tormented poor Greece and helped prolong that country’s interminable economic crisis.

These people have shown that they are committed to creating a different kind of Europe. This can be seen in a paper trail of thousands of pages of documents, called Article IV consultations, where the IMF and EU government finance ministries hammer out their views on economic policies. These documents represent an elite consensus which can differ greatly from public opinion within the countries. A review of 67 of these agreements for the four years 2008 through 2011, for 27 EU countries, showed a clear pattern of policy choices: cutting government spending, including on health care and pensions; increasing labor supply; reducing public sector employment; and changes in labor law that would reduce the scope of collective bargaining.

This is the economic program that any politician or political party who does not want to be labeled as “anti-Europe” must adhere to, and it can be seen in the most recent (July 2016) IMF Article IV consultation for France, as well as the Stability Program that France has agreed to with the European Union. These documents see France as freezing real spending, and committing to reducing its budget deficit to zero by 2021. These commitments imply that the French government can do nothing to reduce mass unemployment, which has averaged about 10 percent over the past year.

Although the major Western media portrays the EU authorities’ policies as the only sensible course, in economic terms, it is anything but. With France’s real borrowing costs near zero and inflation well below target, it makes sense for France to implement an economic stimulus, for example by increasing public investment. Fears of increasing the French public debt are unfounded; annual interest payments on that debt are currently at about 1.7 percent of GDP, a modest burden by any historical or international comparison.

In the presidential debate Wednesday night, Macron rightly accused Le Pen of a “campaign of fear” for her manipulation of the threat of terrorism and her anti-immigrant positions. But he also several times played on fears and public misunderstanding to support neoliberal, regressive reforms. For example, he said that reversing the two-year increase in the retirement age would cost 30 billion euros. He didn’t say over what time period, but 30 billion euros is about 1.3 percent of current annual GDP, and it would be presumably be spread over a very long period. In 2009, just before the Sarkozy government raised the retirement age by two years, the European Commission projected a 1 percent increase in pension costs over 60 years. With GDP expected to more than double over this period, it’s hard to see this as a problem.

Since the 2008–09 world financial crisis and recession, the project of the eurozone, and to some extent of the EU, has created a destructive feedback loop that leads directly to the kind of dysfunctional politics now unfolding in France. It is one thing to give up some national sovereignty for a common project that can raise common living standards; it is quite another to surrender a country’s most important macroeconomic decision-making (monetary, exchange rate, and increasingly fiscal policy) to unaccountable authorities who have demonstrated their commitment to a regressive agenda. The Center Left’s collaboration with this program, e.g., President Hollande’s in France, has given the Far Right opportunities not seen since the 1930s.

Le Pen’s complaints about this loss of sovereignty and even of democracy, mixed as they are with racist nationalism, are about as politically useful the as the Batman archvillain Bane garbling the populist slogans of the Occupy movement. The same is true for the National Front’s clever switch from a traditional right-wing economic program to a Keynesian, pro-welfare state posture. Whether she means it or not, she is the wrong messenger.

Europe’s hope resides with a left that can become strong enough to change the economic course that the European authorities have charted. If the voters who chose the leftist Jean-Luc Mélenchon and the Socialist Party candidate Benoît Hamon in the first round had cast their ballots for a single candidate, that person could have been in the election on Sunday, offering a progressive alternative. Such an alternative won’t be there this Sunday, but that day is getting nearer.

See article on original site

  1. Craig
    May 5, 2017 at 11:29 pm

    The common denominator of all politicians and political parties is their ignorance or half conscious awareness of the concept upon which the necessary new monetary and economic paradigm is based, namely direct and reciprocal monetary Gifting. The present financial and monetary paradigm of Debt and Loan ONLY has been problematic for 5000 years. Break up that exclusionary onlyness by integrating the current paradigms of Debt and Loan with Direct
    and Reciprocal Monetary Gifting with intelligent policies that align with the new paradigm and utilize the digital nature of the money and pricing systems and are wisely implemented in the correct places and times of the entire process of the economic/productive system and you’ll have a greatly stabilized, prosperous and flowing economy


  2. May 6, 2017 at 4:32 pm


    Thank you very much for this article and your insights. I’m a day late, and was reading Paul Krugman’s article https://www.nytimes.com/2017/05/05/opinion/european-union-france-election.html “What’s the Matter with Europe,” where he of course, endorses the centrist candidate in the French election.

    Especially in light of what you wrote, it made me wonder – has Krugman ever written about, or even referenced Yanis Varoufakis – his name or his work? I don’t believe he has in his column …although his blog has mentioned him in passing when he absolutely had to in the midst of the crisis of 2015…and from a distance, Krugman sounds like he agreed with YV’s analysis…

    But Krugman has never given a serious statement or analysis of what Varouvakis is about professionally, and range of levels of play in the political and policy arena, which are directly relevant for his column and what is going on in Europe, the failure of the left to mount a serious challenge to the Center and the Right under these circumstances.

    Any thoughts on this and Yanis as well, Mark?

    I don’t expect those further to the left (Varouvakis has been vigorously criticized by the left at Jacobin Magazine) to have much sympathy, but is there any more serious or competent voice on the social democratic left to match Varoufakis?

    If there is I’m unaware of that person, and Varoufakis deserves better, agree or not with what he is up to with Diem25.

  3. May 8, 2017 at 11:52 am

    I read through the IMF consultations with the nations of the EU. My conclusions are simple. To accept that the recommendations from the consultations are necessary and useful for the welfare of the EU and its citizens one also has to accept these two premises:
    1. The economic models (theories) upon which the recommendations are based are both accurate and reasonable.
    2. When these models are applied the results predicted by the models occur more often than random events.

    I see little evidence that either of these premises applies with regard to these consultations. I have little faith that the recommendations from the consultations will do more good than harm in the EU.

  4. Hepion
    May 8, 2017 at 3:18 pm

    European Union is a free movement area with over half a billion people. Any country trying to restore full employment within its borders would be swamped with tens of million of immigrants. Is it any wonder some would like to put limits on free movement of people?

    Who came up with this crazy system anyways?

  5. Hepion
    May 9, 2017 at 8:37 am

    European union was sold with utopian visions of well functioning economies and full employment. It did not pan out to be that way, not by a long shot.

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