Letter from Europe: France faces a new Waterloo.

For most of my time as foreign minister, Jaques Chirac was the president of France. My dealings with him were largely unremarkable but I do recall saying farewell to him outside the Élysée Palace on one occasion and, after exchanging some words about Aboriginal art, he turned to me and said, “do give my best wishes to Helen Clarke”. Whoops!

She was then the Prime Minister of New Zealand. Or put it another way, I don’t think John Howard had made a big impression on Monsieur Chirac. A few months earlier I had my first and only meeting with Nicolas Sarkozy. At that time he was the president of the UMP, Chirac’s party and the heir to the Gaullist tradition. Three things stick in my mind from that meeting. First, Sarkozy was an amiable bloke. He gave me a box of Partegas cigars, a true sign of friendship. Secondly, he told me he admired the Anglo Saxon economic model and wanted to implement many of its features should he become President of France. It was not popular in France, he conceded, but went on to boast he was the most popular politician in the country. Everyone knew of his affection for market economics but it wasn’t holding him back. I was impressed. And thirdly, he spent copious amounts of time telling me why Turkey should never be a member of the European Union. We argued about that; Turkey should be in the EU and it’s in Europe’s interests to have it there. All this came flooding back to me in mid-January when I was at a meeting in Copenhagen with 15 or so former foreign ministers. Amongst them was Hubert Vedrine, a former French foreign minister. On the same day, Standard and Poors, the American ratings agency, announced France was to lose its AAA rating. I thought of Sarkozy because he faces a presidential election in April. For the time being, he is lagging in the polls behind his Socialist Party challenger, Francois Hollande. But not by all that much. Vedrine thought he would lose the election. I’m not so sure. Hollande is a colourless character with odd policies, insofar as he has any. We’ll see. But there is no doubt Sarkozy’s five years as president have been problematic. To be fair, Sarkozy was decisive in his support for the Arab Spring and in particular military action to help the rebels in Libya. His liberal economic plans however came to nothing. Sarkozy ignored the EU rules on government debt and budget deficits increasing France’s public debt by around 40 per cent during his term in office. Far from being a saviour of the euro, Sarkozy pursued economic policies, which contributed to the crisis in the first place. Now he has fallen out with Britain’s Prime Minister, David Cameron, over Sarkozy’s plans to re-regulate financial markets. He has gone from being a champion of liberal market economics to being a spendthrift to being a champion of regulated markets. And France’s economy is in the doldrums. With a record like that you’d think Hubert Vedrine’s prediction that Sarkozy is heading for the political guillotine was an easy one. But it’s too early for the drum roll. The alternative doesn’t sound too flash. Francois Hollande wants to reduce France’s retirement age to 60 from 62 and run a public sector job creation program at taxpayers’ expense. And that’s about it. He has no plan to cut back France’s chronic budget deficit and alarming public debt. On the contrary, his two initiatives will only make it worse. Hollande is playing the timeworn opposition game of having very few policies, depending on sweet sounding slogans and hoping the public despises the other side so much they will elect you. It often works, as we know. What all this tells you is something deeply worrying. Europe is suffering from poor leadership. By default, leadership is drifting to Germany, Europe’s largest economy. France is engrossed in a populist election campaign now focussed on the loss of its AAA rating. For Francois Hollande, this is a gift from heaven. It proves, he argues, that Sarkozy’s economic strategy is in ruins. And he’s pretty much right. But he would sound all the more credible if he had his own plan to get France back to growth. So saving the euro depends now on Angela Merkel. So far she’s saying Germany won’t spend any more money bailing out the stragglers. She says that because German bailouts are unpopular with German voters – understandably. But since France isn’t going to be much help, Merkel will face a tough choice soon: stump up more money to save the euro or let it collapse and wreck the European economy. With that choice, Merkel will save the euro. And by then, France’s election will be over. Maybe, just maybe, France will then adopt responsible economic policies.  

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