Our Opinion: 2014

Paralysis in Paris

Paul Ames reported in Globalpost this week that “France is in a mess.” I agree.

The latest data suggests that the economy is sliding back into recession after stagnating in the first half of the year. In those circumstances, France “can ill afford fresh political uncertainty” according to the Economist’s Charlemagne blog. Unfortunately, that is what it’s got.

The reformist Prime Minister, Manuel Valls, survived a no-confidence vote in parliament last month. But rebels in his Socialist party, who oppose reforms such as cuts in business tax, continue to thwart change.

In any case, the measures seen so far hardly add up to the wide-ranging structural reforms that France is widely deemed to need to improve its long-term growth rate. The Socialists have lost its majority in The Senate – France’s upper house, The Senate can now delay, or water down, legislation proposed by the lower house, raising uncertainty.

The outlook is unlikely to improve for some time. Near-term, the political wrangling will undermine confidence and investment further, as Capital Economics points out. Ongoing austerity will also dampen growth. As for a reform push in the next few years, a possible return to the presidency by Nicolas Sarkozy, 2012’s defeated centre-right candidate, doesn’t bode especially well. He came to power in 2007 promising a ‘rupture’ with France’s social model, only to retreat at the first sign of resistance from vested interests.

Louise Cooper summarized things well in the Times. “France desperately needs economic leadership. Instead, it has paralysis.”