The more the sovereign debt crisis rolls on, the more you realize that politically, there will only be real casualties and real beneficiaries. Both Mr. Berlusconi and Mr. Papandreou are obviously in the former category, but it remains to be seen whether the unconventional Franco-German pairing of Nicolas Sarkozy and Angela Merkel will be consigned to the dustbin of history.
That said, however strong this unerring duo’s resolve may be to prevent the countries of the Eurozone from exploding in a fanfare of schadenfreude, their political survival still hinges on their ability to convince their own electorates that they can reverse the current rebalancing of the world economy towards the emerging nations.
Nicolas Sarkozy set his economic stall out this week with the recent launch of a stringent austerity budget that looks to drastically reduce France’s bulging deficit. It was therefore disappointing that this package maintained the manipulative fiscal management that has rendered France so economically uneven, and one of the most financially indebted countries over the last 20 years.
This plan, launched by a characteristically muscular speech from Francois Fillon, is a carbon copy of the Greek, Portugese and Spanish plans that have failed so spectacularly. It stipulates that the legal minimum retirement age will rise further in 2017 and that the budget will be balanced by 2016, a date which not only ignores reality but also points to overzealous and stinging cuts that will hurt the poorest fractions of society most. Put bluntly, France’s economic fruits have been fiscally undernourished for too long, but in response the state is going to leave those who are responsible blameless and those who will suffer penniless.
Sarkozy has recently made assertive presentations on French television, portraying the message that France must pay in blood, sweat and tears for the profligate spending of previous generations. However, it seems as if the blood is going to touch a few more dirtied bootlaces than ironed cravats. Under the current plan, the government will collect 8bn euros from VAT rises on certain vital goods and services. Furthermore, the government will make stringent cuts on state spending, most notably on health (500mn Euros). This is simply bubble-wrapped indirect taxation that will hit the poorest hardest.
In truth, France’s public debt comes down to the repeated tax cuts that and the costly failures of their state-backed banking system. The Elysée and French banks act in very close harmony, and in recent years banks have had to absorb substantial financial losses, but the state has become very adept at socializing these losses while quietly privatizing the profits.
Sarkozy’s loaded argument that his people must embrace this austerity, in order for their children’s children to put food on the table, reeks of political gamesmanship and deserves the obloquy that it may reap.
With the 2012 election approaching, Sarkozy is trying to sway the political pendulum in the only way possible at this point. By instilling fear into the electorate’s subconscious, thus inducing them to vote for the status quo.
But these austerity measures aren’t wrapped up in enough political rhetoric to pass the French electorate’s own ‘stress test’. Campaigning on a fear of the consequences of change is often effective, but cannot trump a message based on hope.
Slowly, you can feel the French electorate shifting onto its left foot, as Francois Hollande’s validity as a presidential candidate gathers momentum. This new jerk towards the left is bound to attract the attention of the disaffected, disadvantaged and ultimately disappointed populations that, if left un-catered for, will revolt.
Whatever the economics of the Eurozone crisis will teach us in years to come, the true lesson must be one of the innate unfairness of it all. Governments overspend and tax too lightly, and hard-working people pay the price. It is this idea of fairness, or indeed a lack of it, which will prove to be the most electorally lucrative idea for major Western economies in years to come.
The clamoring Western revolt defined by the Occupy movement does not just emanate from the fear of an impoverished future. Its true root stems from a feeling that some people, usually but crucially not always the unabashedly rich, squeeze more out of society than society squeezes out of them. Be you a reckless banker or a shifty welfare fraudster, you should no longer be able to exploit our something-for-nothing culture, so the notion goes.
This is as true for France as it is for Britain, and it is where Sarkozy’s fatal last malentendu may lie. The man who eventually walks up the steps of the Elysée Palace next year will be the man who allows society to take back its long abandoned power and significance.
France’s new austerity package is really the latest in a long line of rigorous yet moribund belt-tightening rigmaroles across Europe. The French people must not let the sugar-coating of fear with which it was served set the tone of their presidential election. The stakes are far too high and resources far too scarce, for another eloquent French President to use the mauvais bilan card to buffer the rich and dampen the poor.