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France is not Kiev!

Vladimir NESTEROV | 13.12.2013 | 00:00

Social protests are on the rise in France. At the beginning of November a wave of Bonnets Rouges (red caps) meetings hit the region of Brittany in the north-western part of France. Thirty thousand people held a demonstration in Rennes, the capital of the region, to protest unemployment and «ecology tax». There were clashes with police, which used water cannons and tear gas, one of the protesters lost his hand when a gas grenade was tossed. French Prime Minister Jean-Marc Ayrault said the violations of law and order were inadmissible. It’s not Kiev, the capital of Ukraine, where everything is allowed! Some say France will have to get out of the crisis with other politicians at the helm. If it will ever get out of it…

The constant rise of taxes gives rise to farmers’ discontent in Brittany. The «ecotax» imposed on commercial transport was the limit. The farmers wear red caps (bonnets rouges) that were worn by Britannics who rose in revolt to in 1675 to protest the tax imposed by his Majesty’s Finance Minister Colbert. Even the cabinet members started to complain about high taxes. One more tax imposed in October was the last straw for French farmers making them hit the streets en masse. Brittany was the French region to rise first in protest. Its economy fully depends on agriculture (almost 90% of population sell fruits and vegetables grown on plots); the new «ecotax» hits the suppliers of agricultural goods who use the trucks with capacity exceeding 3, 5 tons. The government believes that this and other measures will make the economy more healthy leading the country out of the financial blind alley that it has been facing since 2008. 

The farmers cannot reconcile with the measure. The burden they shoulder at present brings them on the verge of ruin. Other regions have joined the protests. Truck drivers have started to block highways leading to large cities including Paris. 

A month has passed since Bonnets Rouges started protests in Brittany. On December 9 Le Figaro came out with an article that starts with the words «that's a bit too thick!» warning a new wave of protests against the government’s tax policy is imminent. This time the protesters are the people of independent professions: doctors, lawyers, notaries, accountants, insurance agents, teachers of music and dances, sports coaches, in short all those who work on their own and have no hired staff. They account for 25 % of all working places in France and 27% of job market. The France's independent workers' union UNAPL initiated the protests, it used social networks for propaganda purposes, the petition it has posted on Facebook and Twitter is already signed by half a million. In case the new tax policy is adopted by the government, the burden for independent workers will rise four-fold. UNAPL leaders say it’s not excluded that the independent workers will join efforts with peasants in Brittany. 

* * *

France is not kind of a backward country like Romania; it’s the second economy of the European Union. Still the government fails to cope with social and economic crisis. France's Minister of Finance and Economic Pierre Moscovici said the country had left the recession behind. INSEE, France's National Institute of Statistics and Economic Studies, says the GDP is to remain unchanged in the third quarter of the year (others say the economy is down by 0, 1%) to go up 0, 4% in the fourth quarter. The annual growth is expected to be 0, 2%. Actually it means the growth of French economy has stopped. Unemployment was 10, 9% in the third quarter of the year compared to 10, 8% in the second. France has not seen such level of unemployment since 1998. It is especially severe for the young. In September the youth unemployment was around 25%. French President Francois Hollande has promised to stabilize unemployment till the end of year. Economists say the mission is impossible under the conditions of zero economic growth. 

Le Figaro cites government sources saying recently the French debt will be record high in 2014 nearing €2 trillion or exceeding 95% of gross domestic product (one of the highest indexes in Europe). Two trillion translates into €30 thousand per capita! The last two years were the period of the most rapid debt growth adding € 120 billion to it. The index may justify banks’ refusal to grant loans to France or make them raise interest rates. At present France has to spend 50 billion euros in interest rate payments annually. According to Le Figaro, the loans France gets now are not spent on investments and spurring economy, but rather on social welfare… and interest payments! 

The real state debt pushed the economy down and the hopes for serious economic growth are getting murky. 

Standard & Poor's rating agency brings down the France’s rating for the second time in two years. Looks like France is to join the list of European Union members that face solvency problems like Italy or Spain. The financial situation really makes France a problematic country. Many a time Paris breached the Maastricht financial stability criterion that envisions that the national debt is kept at or below the 3 % of GDP level. In 2013 the index for France is over 4%. 

The lack of income was compensated by raising taxes and increasing the debt. It has limits. In 2015 the government is to start reducing state expenditure to cut the deficit to the required level of 3%. That is exactly what Standard & Poor’s has doubts about. 

Heavy tax and welfare burden is one of reasons (but by far not the only one) for French manufacturing industry losing the ability to compete. Looking at the ill-starred neighbor, Germans say that the unsophisticated Renault Twingo cannot measure up to the fashionable Mercedez. The France manufactured goods are too «commonplace» keeping the country behind the European leaders. Prices should be greatly lowered to sell the products on the world market where the competition is tough with the countries that have much lower labor costs. Lowering prices leads to reduced profits and make enterprises operate in the red. There is a vicious circle: an enterprise making a low profit cannot increase investments for research and development, it continues to produce low-profit commodities that do not meet the new challenges posed by competitors. 

As a result, at the beginning of 2013 Renault moved to the edge of bankruptcy and decided to close its factories in France. After a long strike the Renault-hired workers made the government step in. So the factories function as yet, but the future is blur. The talks go around from time to time that the Chinese may buy the production facilities. PSA Peugeot Citroen faces the same situation. 

One more problem is welfare payments. The sums are huge enough to hurt business. Welfare payments cannot be increased anymore. But high unemployment and aging of population make the deficit grow reaching the level of 25 billion euros. The state faces debts too great to go on with social welfare on the same scale as before, and it cannot increase taxes to prevent such social unrest such as the protests in Brittany. 

* * *

The financial, economic and social deadend makes the rating of President Hollande precipitously fall. According to the French Institute of Public Opinion IFOP (Institut français d'opinion publique), only 20 percent of the Fifth Republic’s citizens support the policies of the head of state. The majority of French are sure the President and the government ignore the priority tasks like fighting unemployment and stimulating economy. In March 2013 Francois Hollande’s popularity slipped to make him the most unpopular French Leader Since 1981. 

According to polls, the two French leading political parties led by Francois Hollande and Nicolas Sarkozy have actually lost popular support. Their place is being confidently taken by the National Front led by Marine le Pen, which is becoming frequently compared with Jeanne d'Arc (Joan of Arc). Just like «the Maid of Orleans», le Pen fights for the «traditional France». The National Front is leading the Holland-led Socialists by 24 percent leaving far behind the Sarkozy-led political movement founded by de Gaulle. The main political slogans of the new French leading political force include: the withdrawal from NATO and the European Union, the return to the former currency – the franc, building a continental alliance of states from the Atlantic to the Pacific along with Russia but without immigrants, going back to traditional family values (to exclude the perversions like the same sex marriages). Now Marin le Pen wants a referendum to be held on the issue of urgent pull out from the European Union. 

Tags: European Union France Hollande

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Russia, Austria to Expand Gas Cooperation

Despite the European Commission’s stern warnings, Russia’s share of European energy market will grow in the coming years. According to Bloomberg’s experts, gas exports to Turkey and the EU have reached 162.6 billion cubic meters (5.7 trillion cubic feet) this year, up from about 159 billion in 2015 and 161.5 billion (then record high) in 2013...

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