Didier Le Menestrel

Dear France

French public debt has virtually doubled over 10 years, crossing the record €2000bn mark in June and placing France among the group of bad pupils in Europe (Greece, Cyprus, Spain, Italy…), which already have a public debt rate of more than 100% of their GDP.  

These spectacular figures should have caused outrage and served as an electric-shock for the media, investors and decision-makers. However, this has not been the case and so far, reactions have been few and far between as if the slope were unavoidable, deficits were unmanageable (4.4 of GDP is a further €90bn in deficit in 2014) and the future bearable…

Bearable, indeed, since the financial industry does not hold grudges and creditors throughout the world continue to trust that French households will pay back these colossal sums one day. Thanks to this trust, the cost of debt has stabilised at below €50bn for some years, with the constant decline in interest rates requested by lenders (currently at 1.3% for 10-year loans) sweetening the ongoing increase in this outsized commitment.

Governments have preferred to use debt as a means of making up for their shortfalls over the past 40 years. As the Pébereau report(1) stated so well in 2005: “Our political and collective practices make the announcement of additional public spending the systematic and often unique answer to our problems, whatever they are, including problems concerning our society “.

This clairvoyant statement is particularly relevant today, nine years after it was penned. Conservatism reigns in France. There is no need to look further to understand why consumer confidence remains lastingly in the doldrums, why economic growth is still flirting with negative figures in 2014 and why unemployment is topping new records in absolute value and relative terms: with a lack of sanctions, nothing really changes in France and “French specifics” are still spreading their restrictive power over the healthy functioning of our economy….

Paradoxically, the recent strike by Air France pilots, which is a timely illustration of our view, offers a way of improvement for fighting the fatality of the “French-style social system”. For the first time (at least audibly so), voices from all areas have risen to denounce the excessive impact of this strike on the company (estimated losses of around €300) and the lives of French citizens. The bad mood of a small corporation even ended up annoying its colleagues who are now quick to publicly brand the pilots as spoilt children bent on defending their rights… Could this spell the beginnings of a common lucidity on the need to question individual and collective advantages?

It is obviously too early to rejoice, but here at last is a “popular” example of the adjustment measures necessary for survival and the healthy future development of the French economy. This could be a first step in leading the majority to agree to discuss “taboo” subjects such as working hours, minimum wage levels, flexibility in employment contracts and even the status of France’s civil servants (no small task!).

The most surprising fact is that examples of the success of these strategies are now increasing in number: Germany, Canada and even New Zealand… Not to mention northern countries, which have all questioned their social models founded on the all-powerful Provident State. A little bit of common sense and social cohesion is needed to implement reforms that have already proved their worth.

It is often during periods of discouragement that the first signs of awareness emerge. The nomination of a young Minister of the Economy with good calculation skills, the publication of relevant books(2), full of good sense and optimism, the increasingly audible messages from politicians concerning all these subjects about our society should surely be valued in order to maintain some hope. And what if, as a bonus, the euro could continue to fall to help us restore some competitiveness over the short-term?

 Didier Le Menestrel

(1) Report mandated by the Ministry of the Economy at the time, Thierry Breton.(2) “Pourquoi pas nous?”, by Xavier Fontanet ; “Les saboteurs”, by Eric Le Boucher ; ” France est prête“, by Robin Rivaton.