Home » Why we're ungovernable » Why We’re Ungovernable, Part 4: Hollande’s Short Honeymoon

Why We’re Ungovernable, Part 4: Hollande’s Short Honeymoon

by John Rubino on November 14, 2012 · 14 comments

The premise of this series is that once a country’s debt rises to a certain level, the country becomes impossible to govern. Voters accustomed to a relatively easy life based on other people’s money won’t accept the truth that they’re not actually rich, so each new leader sees his or her popularity plunge almost immediately and their “reform” program, whatever it happens to be, quickly discredited and abandoned. Now it’s France’s turn. From today’s Washington Post:

France’s President Hollande struggles to regain popularity

PARIS — President Francois Hollande has suffered a dramatic decline in popularity during his first six months as leader of France, failing to convince much of the country that his Socialist government is capable of firm leadership to overcome a persistent economic slump.

Recent opinion polls have shown Hollande sinking nearly 20 points in approval ratings, to about 40 percent, with respondents from across the political spectrum expressing disappointment as unemployment, which is above 10 percent, continues to rise, factories close and growth remains elusive.

Hollande’s friends and supporters have publicly urged the president to explain more clearly how his decisions fit into a coherent plan for restoring France’s economic health.

In many ways, Hollande’s fall from post-election grace reflects the simple fact that he is in charge as Europe’s debt crisis forces France and other countries to raise taxes and cut back on cherished welfare expenditures. But French analysts say it also stems from Hollande’s tendency to keep his options open as long as possible before making decisions, creating an impression that his path is unclear, and from missteps.

“I understand the worries of the people and the doubts they may express about the ability of politicians to meet the challenge,” Hollande said in a news conference Tuesday at the Elysee Palace.

In response, he rolled out a series of measures decided since he took office, portraying them as a cohesive array designed to get the economy moving again and bring the national debt under control. The effects of these efforts, he added, should be judged at the end of his five-year mandate, not in the first stretch.

“These choices are consistent with my commitments, with my goals and, most important, with the interests of France,” he said.

Some of the public’s unease comes from the contrast between Hollande and his predecessor, Nicolas Sarkozy, who was known for making swift and bold decisions. Sarkozy, who was widely disliked by the end of his term, has enjoyed a comeback in public opinion since his defeat in May, particularly among his natural constituency of conservatives.

The latest Hollande measure to raise questions was an attempt to improve the competitive position of France’s small and medium-size industrial sectors by lightening the heavy load of payroll taxes, which help pay for the generous welfare system. Prime Minister Jean-Marc Ayrault announced last week that firms making new hires would get tax rebates worth $26 billion beginning in 2014 and that value-added taxes would be raised to pay for it.

Only months before, while running for president, Hollande had denounced as grossly unfair a similar proposal by Sarkozy. Last week’s announcement was portrayed as a turnaround. The Socialist faithful grumbled that liberal principles were being compromised by a gift to businesspeople that would be paid for at the supermarket checkout counter.

“We have a left-wing president who, several months after taking power, engineers a real cultural revolution, adopts a policy that is completely new for the French left,” Raymond Cayrol, a generally sympathetic political researcher, told Le Figaro newspaper.

Jean-Luc Melenchon of the Leftist Front, whose followers mostly voted for Hollande, called the program “a shame.” Jean-Vincent Place, a senator from the Socialist-allied Greens, wondered aloud whether his party’s two ministers should remain in the government.

From the right, critics predictably denounced the decision as too little, too late. A report commissioned by Hollande, they noted, had recommended $39 billion — and in payroll tax cuts, not rebates. Moreover, they said, if the economic situation is serious enough to require such a step, why should businesses have to wait until 2014?

Francois Bayrou, a centrist leader, called the Hollande system “a gas machine.” He and others said the real hindrance to competitiveness is a bloated government that accounts for more than half the economy, despite cutbacks.

“One day, instead of cold-cocking the country with taxes and fees, a French statesman will have to slice, dice and cut amid the fat, the gelatin and the girdles that strangle our economy,” wrote Franz-Olivier Giesbert, editor of the newsweekly Le Point.

Underlying much of the criticism is the impression that Hollande and his lieutenants have underestimated the depth of Europe’s economic crisis and its effects in France. Hollande recently suggested, for instance, that the slowdown is a question of economic cycles and that growth will soon return. Unemployment will start to drop by the end of next year, he predicted.

At the same time, he and his finance minister, Pierre Moscovici, have insisted that France will respect a commitment to the European Union to reduce the government’s budget deficit to 3 percent of gross domestic product by next year. Some of Hollande’s supporters have suggested that the goal is not realistic unless growth returns, a prospect that, according to the International Monetary Fund, the European Union and the Bank of France, is unlikely anytime soon.

Some thoughts
The above article doesn’t explain what Hollande did in his first few months, so very briefly: after inheriting a heavily indebted economy with the second highest labor costs in the Eurozone (4 euros an hour higher than Germany’s), he chose from the standard socialist menu, raising taxes on the rich, promising to increase the government’s overall tax take from 45% of the economy to 47%, and lowering the retirement age for many workers from 62 years to 60.  This of course failed to produce a burst of new hiring, and now, six months in, he’s already changing course and cutting taxes.

None of this will make a difference, though, which is the point: There is no mix of mainstream policies capable of returning France to the pre-crisis days of steady growth and political quietude. Turmoil is the order of the day until debt falls by half or more.

“Sarkozy, who was widely disliked by the end of his term, has enjoyed a comeback in public opinion since his defeat in May…” This kind of instant buyer’s remorse is to be expected. The other guy always looks better than the incumbent who is actually grappling with the country’s problems.

The US election, which returned pretty much the same people to power, would seem to discredit the “ungovernable” thesis, but in reality it just illustrates the near-total cluelessness of the republicans. Space doesn’t permit a full accounting of their dumb (in some cases crazy) choices, but suffice it to say that they managed to enrage Ron Paul supporters, women, and Hispanics for no apparent reason, and still would have won had the same number of republicans shown up to vote as in 2008. So watch the administration’s approval ratings going forward and note the similarities to Hollande’s. But again – to avoid an avalanche of right versus left name calling – this isn’t about ideology. Nothing that a majority of Americans would vote for will work, so we’ll remain ungovernable until the market puts an end to the age of fiat currency.

  • philaphil

    We live within “Parker Bros.” games and the public does not know that this game exists. No education pertaining to the Federal Reserve or how the game is played by the Elites.

  • Klearcut

    Always the same. A child has to be run over before they decide to put up a stop sign. Kipling had it right.
    “As it will be in the future, it was at the birth of Man
    There are only four things certain since Social Progress began.
    That the Dog returns to his Vomit and the Sow returns to her Mire,
    And the burnt Fool’s bandaged finger goes wabbling back to the Fire;”

  • Tony D

    Actually the US election continued to prove the ungovernable thesis.The candidate with the proven track record of giving away the most free sh!t won the election. The electorate is simply ungovernable because it will never have discipline imposed on it by it’s political masters, only the markets can do it. That way the politician can blame “evil speculators” when the market acts.

    • picomanning

      Tony yours is the best and most accurate answer, and is easy enough to grasp. If men were men and women women, then America would act on what is so easily grasped. So until we return to discipline imposed, we should remember that it’ll be misery which returns us.

    • jesterx

      I think you have a point, but are lacking one simly thing, that was disussed on this blog and over at http://www.forecastfortomorrow.com which I read all the time.

      The market is manipulated, its not made for winning, its made to suck you in for quick money and suckers rallys and then the sell offs come and take you for everything you are worth.

      I know that I have money on the stockmarket and always worried due to the overshadowing elite who know what is happening and where it will go next while all of us lemming just have to guess. Not good.

  • http://www.facebook.com/people/Dan-Buckles/100000913763806 Dan Buckles

    Actually if the people in the streets pushed on the Congress and President to get rid of Edward Demarco, and Erich Holder, and put new people in charge that would help the home owners by resetting their loans, and put some people in jail after they break up too big to fail, we’d be on the road to prosperity, not austerity. But Geithner and Dimon have mesmerized Obama and so I don’t have much hope for the change thing to happen.

  • Selaretus

    Good post! The apparent wealth phenomenon is the pervasive with this generation. Look, it is not difficult to understand: there is only a finite amount of actual, real wealth in the world, just as there is only so much cheap energy and resources (no matter WHAT the cornucopian inlimited growth politicians say!) Because everybody wants to be rich or at least appear so, Nixon detached the American fianancial system from reality when he uncoupled the dollar from the gold standard in 1971. This opened the door for all the financial alchemy that we see today; CDS’s, monetized debt, etc., etc. The Fed began printing money like there was no tomorrow so that everyone who wanted to feel rish could do so. The sad part is that all this ‘wealth’ is not worth the toilet paper it is printed on. Jim Kunstler said it best: In the end there will be people with a lot of money that isn’t worth anything and those with no money.

    • floppyears

      … and those who have physical gold and silver in their possession.

  • http://profile.yahoo.com/3PB67QZ7PJMB5OV7ONF7XVQBSY Capt Sandy

    What we have is two political ideologies arguing over which side of the sinking boat do we need to drill holes in, in order to let the water out. The left side or the right side. There are not enough bodies or buckets to bail out the incoming water fast enough. She is going to sink and the smart people are quietly putting on their life jackets.

  • dixiebrick

    very interesting article but it only criticizes the higher tax rates,social programs and entitlements. What about corporate welfare,bailouts, white-collar crime perpetrated by the banksters. Oh that’s right they are able to plunder at will and when they get caught they pay a fine and are able to plead to no guilt. DON’T FORGET THE MONEY BOYS GOT THE BIGGEST WELFARE CHECKS IN THE HISTORY OF MAN.

  • Bruce C.

    JR writes, “Nothing that a majority of Americans would vote for will work, … “ That is absolutely right, and I think that means that nothing will be done. There is no political advantage to acting preemptively if it causes pain. As I’m sure every one reading this is aware, the analyses of what is going on runs the gamut from ‘this is just a blip in the inevitable upward march of the human condition’ to ‘the world is fast approaching a global meltdown of unprecedented magnitude that will lay waste human societies for decades.’ Given that environment, why should policy makers risk being wrong and doing unpopular and unnecessary things?

    I predict “the fiscal cliff” will be no different than “Y2k” and other highly anticipated, feared and over-hyped non-events. The entire situation is man-made so not until a crisis occurs will policy makers react, and given all the sanguine and optimistic hype – not to mention the bullish financial markets – they can always claim that they were blindsided.

  • Tom J

    I believe Mr. Rubino, in his usual elegant style, has nailed France’s current problems. I am just back from two weeks in Paris. A disaster in the making. Armed Paras in the street – cops arresting Gypsies – RE collapsing, stores being shuttered – and the cost of basics heading to the moon – a ton of explosives found in the War Zone, that is North Paris. This will be a real lynchpin for the shaky Eurozone. Sarkozy is probably happy he is not in power – so he doesn’t have to wear the mess that is about to overtake this once glorious Republic. One personal note: if you have not been to paris – go – before it blows up. It was even more magic than I could have imagined.

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