Blog Post

France and Europe: the phantom issues and the real issues

Usually in France the subject of Europe is absent from presidential debates. True, the topic is both important and controversial, as the 1992 and 2005 referenda demonstrated, but the divide is not the neat left-versus-right one which always ends up shaping the electoral battle. Both sides in fact include a significant Eurosceptic component, so rather […]

By: Date: April 3, 2012 Topic: Macroeconomic policy

Usually in France the subject of Europe is absent from presidential debates. True, the topic is both important and controversial, as the 1992 and 2005 referenda demonstrated, but the divide is not the neat left-versus-right one which always ends up shaping the electoral battle. Both sides in fact include a significant Eurosceptic component, so rather than risk splitting their own camp, candidates usually opt to skirt the issue – only to see it raising its head later in the national debate, often in unplanned ways.

However, this time around the Europe question is economically and politically centre stage. Even though the last three months have been calmer, the crisis which was raging at the end of 2011 has not been resolved. The reduction in Greek debt has temporarily removed one source of tension, the European Central Bank has managed to let fever abate by administering a massive dose of tranquillisers, and governments have finally agreed on the size of their firewall, but the underlying problems subsist. The interdependence of banks and sovereigns remains a permanent source of fragility, central banks continue to substitute drying-up private capital flows within the Eurozone, and the South has barely started regaining competitiveness relative to the North. Moreover, the European economic policy framework has become considerably tougher in the last few months, even before the new fiscal treaty enters into force: European law sets stricter fiscal targets, imposes tighter surveillance and now extends to current account deficits which had been neglected hitherto.    

It would have been a very serious thing for democracy if an issue of this magnitude had been omitted, all the more so because France itself is in a delicate situation within a Europe where the divide is no longer between East and West but between a prosperous North and a struggling South. Fortunately the two main candidates have each found their own angle to tackle Europe. François Hollande has made an unorthodox stand in calling for the renegotiation of the recently signed fiscal treaty, he is riding to the banner of growth, and he is attempting a subtle balancing act of budgetary responsibility and the fight against austerity.  Nicolas Sarkozy, for his part, endorses the constraints of the new fiscal treaty, he is clear-cut about the need to restore the competitiveness of the French economy, and in order to distinguish himself – just as the others – from the Brussels consensus, he has opted to thumb his nose at the EU on migration policy and to oppose opening European procurement markets unless third countries reciprocate.          

In rhetorical terms, both have succeeded. Neither can be accused of conformism or of ducking the fight. They are giving reassurances to the Eurosceptic wing of their coalitions and for the other half of their constituencies, they are hinting at ambitious European plans. One of them (Hollande) can be given credit for having raised the key issue of growth on which if elected he will find allies in Europe, though he is unlikely to find many to renegotiate the treaty itself. The other (Sarkozy) can be credited with not putting his head in the sand on the competitiveness issue, even though he is partially at odds with himself in flirting with protectionism. And both say that they have understood that the era of fiscal largesse is over.   

The problem is that, however nimble this positioning may be, they do not contribute to solving the basic dilemma the country has to face. France, which nurtured the idea of the euro from the outset and, twenty years ago, won over German scepticism, is now having second thoughts. It does not know anymore where its own project should lead to. A large segment of public opinion sees Europe as a source of constraints and the Trojan horse of liberalisation and globalisation. Germany’s undisputed economic dominance and it policy assertiveness are a source of anguish.

In this context French political leaders on both sides are uncertain about their aims and strategy. As the crisis reveals the inadequacies and fragilities of the euro as a currency, a first option is to aim at a more integrated “euro union” around common supervision of, and crisis resolution for the banking sector, a fiscal union involving a partial mutualisation of government debt, and whatever political integration is needed to give democratic legitimacy to fiscal and banking supervision. The second option is, for essentially political reasons, to oppose any additional transfer of sovereignty and keep monetary union as it is – despite the risk that a fragile Eurozone might stumble further under market assault. 

Both options are possible, but willy-nilly a strategic decision will need to be made the morning after the 6 May. Starting with Germany, France’s partners in Europe will not give the next president time to procrastinate. They expect from him a clear stance as a precondition to key discussions on the future of Europe. It is to be feared that the next occupant of the Elysée will have to make a choice without the election having given citizens the chance to express their own views.                  


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint. Anyone is free to republish and/or quote this post without prior consent. Please provide a full reference, clearly stating Bruegel and the relevant author as the source, and include a prominent hyperlink to the original post.

Read about event More on this topic
 

Upcoming Event

May
25
14:30

How can we support and restructure firms hit by the COVID-19 crisis?

What are the vulnerabilities and risks in the enterprise sector and how prepared are countries to handle a large-scale restructuring of businesses?

Speakers: Ceyla Pazarbasioglu and Guntram B. Wolff Topic: Macroeconomic policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read about event More on this topic
 

Upcoming Event

May - Jun
31-1
10:30

MICROPROD Final Event

Final conference of the MICROPROD project

Speakers: Carlo Altomonte, Eric Bartelsman, Marta Bisztray, Italo Colantone, Maria Demertzis, Wolfhard Kaus, Javier Miranda, Steffen Müller, Verena Plümpe, Niclas Poitiers, Andrea Roventini, Gianluca Santoni, Valerie Smeets, Nicola Viegi and Markus Zimmermann Topic: Macroeconomic policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read about event
 

Past Event

Past Event

[Cancelled] Shifting taxes in order to achieve green goals

[This event is cancelled until further notice] How could shifting the tax burden from labour to pollution and resources help the EU reach its climate goals?

Speakers: Niclas Poitiers and Femke Groothuis Topic: Green economy, Macroeconomic policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: May 12, 2022
Read about event More on this topic
 

Past Event

Past Event

How are crises changing central bank doctrines?

How is monetary policy evolving in the face of recent crises? With central banks taking on new roles, how accountable are they to democratic institutions?

Speakers: Maria Demertzis, Benoît Coeuré, Pervenche Berès, Hans-Helmut Kotz and Athanasios Orphanides Topic: Macroeconomic policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: May 11, 2022
Read article Download PDF More by this author
 

Book/Special report

European governanceInclusive growth

Bruegel annual report 2021

The Bruegel annual report provides a broad overview of the organisation's work in the previous year.

By: Bruegel Topic: Banking and capital markets, Digital economy and innovation, European governance, Global economy and trade, Green economy, Inclusive growth, Macroeconomic policy Date: May 6, 2022
Read article Download PDF
 

Policy Contribution

European governance

Fiscal support and monetary vigilance: economic policy implications of the Russia-Ukraine war for the European Union

Policymakers must think coherently about the joint implications of their actions, from sanctions on Russia to subsidies and transfers to their own citizens, and avoid taking measures that contradict each other. This is what we try to do in this Policy Contribution, focusing on the macroeconomic aspects of relevance for Europe.

By: Olivier Blanchard and Jean Pisani-Ferry Topic: European governance, Macroeconomic policy Date: April 29, 2022
Read article Download PDF More on this topic
 

Working Paper

The low productivity of European firms: how can policies enhance the allocation of resources?

A summary of the most important policy lessons from research undertaken in the MICROPROD project work package 4, related to the allocation of the factors of production, with a special focus on the weak dynamism of European small and medium-sized enterprises (SMEs).

By: Grégory Claeys, Marie Le Mouel and Giovanni Sgaravatti Topic: Macroeconomic policy Date: April 25, 2022
Read article More on this topic
 

External Publication

What drives implementation of the European Union’s policy recommendations to its member countries?

Article published in the Journal of Economic Policy Reform.

By: Konstantinos Efstathiou and Guntram B. Wolff Topic: Macroeconomic policy Date: April 13, 2022
Read article Download PDF More on this topic More by this author
 

Working Paper

Measuring the intangible economy to address policy challenges

The purpose of the first work package of the MICROPROD project was to improve the firm-level data infrastructure, expand the measurement of intangible assets and enable cross-country analyses of these productivity trends.

By: Marie Le Mouel Topic: Macroeconomic policy Date: April 11, 2022
Read about event More on this topic
 

Past Event

Past Event

Macroeconomic and financial stability in changing times: conversation with Andrew Bailey

Guntram Wolff will be joined in conversation by Andrew Bailey, Governor of the Bank of England.

Speakers: Andrew Bailey and Guntram B. Wolff Topic: Macroeconomic policy Date: March 28, 2022
Read article
 

Opinion

European governance

How to reconcile increased green public investment needs with fiscal consolidation

The EU’s ambitious emissions reduction targets will require a major increase in green investments. This column considers options for increasing public green investment when major consolidations are needed after the fiscal support provided during the pandemic. The authors make the case for a green golden rule allowing green investment to be funded by deficits that would not count in the fiscal rules. Concerns about ‘greenwashing’ could be addressed through a narrow definition of green investments and strong institutional scrutiny, while countries with debt sustainability concerns could initially rely only on NGEU for their green investment.

By: Zsolt Darvas and Guntram B. Wolff Topic: European governance, Green economy, Macroeconomic policy Date: March 8, 2022
Read article More on this topic More by this author
 

Opinion

The week inflation became entrenched

The events that have unfolded since 24 February have solved one dispute: inflation is no longer temporary.

By: Maria Demertzis Topic: Macroeconomic policy Date: March 8, 2022
Load more posts