Category Archives: France

If you don’t want to read about the content, this is the post for you

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So, a bit of Euro-summit processology and diplo-speak. Why not? This was a failure of diplomacy, after all – all the states involved are allies and have largely convergent interests, the problem is managing conflict politely, but here we are.

The first question I’d really like answered is why David Cameron didn’t take the same course as the other states that disagreed, and simply say that he needed to consult parliament. It is theoretically possible for a British prime minister to both sign and ratify treaties executively, but it’s been assumed since the first world war that they must be at least seen by the House of Commons, and anyway this one required some very serious legislation at the national level.

I can’t imagine that the Tory hard right would be anything other than delighted by the chance to kick it out, even if the fact of being consulted and given power over a real goddamnit treaty didn’t fix them in itself. Had the Commons killed it, there’s no reason why it wouldn’t just have been another ratification foul-up, like the ones we regularly have with Irish referendums and decisions from the courts in Karlsruhe. Of course, it might never have happened – the treaty will need ratifying, quite probably this will mean one or more referendums, super-majority votes, recourses to the supreme court, and the like.

This raises a further question. Why did we need all 27? They’re not all in the Euro. The Eurogroup is a thing, and the French especially are in favour of it. It is, I suppose, still considered important to pretend that everyone will one day join, but this seems a bit remote as an argument.

And why was daft pork like the location of the European Banking Authority even up for discussion? It’s the sort of thing you expect from someone like Berlusconi, whining that there’s no food in Finland in the hope of some marginal-constituency shiny. The best explanation I can think of was that somebody was hoping that this would derail the whole project, without spoiling Franco-German relations, but it got a bigger response than they expected.

Another way of looking at it is that the European Commission has come out weaker – the new new thing is a pure side-deal, even if the Commission (or at least its EMU Directorate-General) has been very austerity-minded. Either a full 27-state amendment, or a Eurogroup one, would have protected its status and special role.

But then, I seem to recall Daniel Davies arguing that the Commission could be seen as Germany’s soft currency lobby. There ought to be such a thing – it’s Germany! the great exporter! – but it often seems to be nonexistent. On the principle that a revived mark would rise relative to the euro, the logic goes, the European institutions are the lobby for a lower German currency.

If this is so, it makes a lot of sense that the German hard-currency lobby would want to cut out the Commission and even the ECB, which implies going for an intergovernmental solution. Form requires, however, that it stays officially all blue and yellow, so all 27 must be involved in a treaty revision. The French didn’t like the idea much, but liked the idea of openly disagreeing with the Germans less, and hoped the Brits would kill it. The Brits thought it was the final triumph of euro-socialism, or something, and over-reacted. As a result, it went through anyway, with any waverers whipped-in by being told that it was just the Brits being bad Europeans. I think this story fits the facts.

Revisiting the Eurodebate

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This post of P O’Neill’s made me think of something. That is, the British debate on joining the Euro, and on Europe more generally. I was strongly pro-Euro, something which now looks as bad a decision as joining the Liberal Democrats was. It’s hard to avoid the conclusion that had the UK had Eurozone interest rates in the 2000s, we would have had an even huger housing bubble and even more gigantic bank balance sheets, and we would have had to resolve them without being able to use the central bank as lender of last resort, and we would have been unable to devalue the currency as a stimulus mechanism.

Any counter-argument requires that the influence of the Bank of England in ECB policy would have been both powerful and right. The first is debatable, but we have to accept that the Bank didn’t restrain the housing bubble and also failed to respond to the crisis in the real economy in 2008, sitting on its hands and mumbling about inflation while the labour market cliff-dived and the bank regulators across the corridor frantically juggled with Halifax-Bank of Scotland, Lloyds, and Northern Rock. Also, the early 2000s situation of a bubbly periphery and a stagnant core would have been even worse with the London housing market in the Euro, and it’s hard to say how that would have panned out.

But what were we really debating in the 90s?

The arguments in favour, at least the economic ones, were that we might benefit from being fully integrated in a bigger trading bloc, that we would benefit from currency stability, that lower interest rates would be nice to have, and that the Eurozone restrictions would be a force that would require industry to be more competitive (or did they just mean lower wages?). The arguments against, at least the economic ones, were that the Stability & Growth Pact would be an anti-Keynesian force for deflation and that the option of devaluation would be removed.

Then there was a whole lot of other stuff. A lot of the “for” side thought it would make us more European and meant by this that it would make us more social-democratic (or Christian-Democratic, or even Free Democratic), although I don’t think any of them could have articulated a mechanism by which this would happen. I suspect that for a lot of us it was a bit like the Estonian MP who told Tim Garton Ash that “Europa ist…nicht Rußland!”, or in our case, Europe was not-America.

A lot of the “against” side seemed to agree with the idea that joining the Euro meant the triumph of social democracy, because they at least claimed to think that the European Union was an inherently socialist institution. Some of them still think this now, when it has imposed structural adjustment on three European countries in order to avoid the nightmare of fiscal expansion in Germany. Others took the Friedmanite line that currency adjustment was a form of free market competition and therefore desirable. This was at least defensible. And others thought that it was a scheme to redraw the UK’s internal borders or replace the flag or something.

The interesting contradiction here was that the same people who worried that we would be unable to devalue the currency were also fervent austerians who didn’t believe in demand management of any kind. It was as if they believed in hardcore new classicism up to the point where it affected their re-election. How could it happen?

Obviously, whether you felt the SAGP would be useful discipline or an anti-Keynesian straitjacket simply depended on whether you expected the economic problem of the 2000s to be inflation or deflation. But the economic argument that was very rarely discussed was the one that is now fascinating everybody – exactly how the Eurosystem, rather than the Euro, would function in a financial crisis. Apparently this was discussed in specialist circles, but it didn’t make even the best of the national press.

To sum up, I agree that the yes side was wrong about fixing the currency. To be honest, when asked, I always said I was in favour of joining if we could join at a significantly lower exchange rate. The benefits of which Jaguar-Land Rover just demonstrated. But this is a cop-out on my part. On the other hand, I think the Eurosceptics and some of the conservative Europhiles should accept that they were wrong about the SAGP – yes, Virginia, inflation was a phantom menace, and the ghosts of 1929 were not finished with us. And we can all agree that we were all wrong about the banking and financial aspects of the Eurosystem, in that we didn’t even bother to argue about them.

I promised to blame somebody in the last post. Here it comes: the key European politicians, especially the French and the Germans and the European Commission officials, who designed the Euro and the Eurosystem. They created a system that had a structural deflationary bias in an era of deflation, one that delivered rock-bottom interest rates to countries in the grip of land fever, and one that couldn’t cope with a banking crisis although it included the biggest banking system in the world. And then they kept putting up interest rates. What’s worse is that they now have the gall to give lectures about virtuous savers – even when they are the same individuals, like Wolfgang Schäuble, who were in power in the 1990s.

Why you shouldn’t trust the WSJ piece on BNP Paribas

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The Wall Street Journal Europe has published this morning a market-moving opinion piece claiming to reveal serious funding troubles at French bank BNP Paribas. The article opens with an alleged quote from a BNP executive:

We can no longer borrow dollars. U.S. money-market funds are not lending to us anymore. Since we don’t have access to dollars anymore, we’re creating a market in euros. This is a first. . . . we hope it will work, otherwise the downward spiral will be hell. We will no longer be trusted at all and no one will lend to us anymore.

On the face of it, the quote didn’t seem that outlandish: the major French banks have a significant amount of the bad kind of European sovereign debt in their books, have not written off the potential losses quite as extensively as others have done and thus stand to suffer dearly in case of a Greek default. You could also argue that French banks haven’t always been 100% straightforward in their defense. And it’s not like hints of a dollar funding problem at a European bank haven’t surfaced in the past weeks.

Still, there are many reasons to be extremely skeptical of the article. Continue reading →

Collapsing Case Against Strauss-Kahn?

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The New York Times talks to its sources in the NY Police Department and prosecutor’s office and reports:

The sexual assault case against Dominique Strauss-Kahn is on the verge of collapse as investigators have uncovered major holes in the credibility of the housekeeper who charged that he attacked her in his Manhattan hotel suite in May, according to two well-placed law enforcement officials.

Although forensic tests found unambiguous evidence of a sexual encounter between Mr. Strauss-Kahn, a French politician, and the woman, prosecutors now do not believe much of what the accuser has told them about the circumstances or about herself.

More key phrases include “repeatedly lied” to investigators, “issues involving the asylum application,” and “possible links to people involved in criminal activities, including drug dealing and money laundering.”
Continue reading →

Flight of Fancy

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If there are, famously and waggishly, only two places in France — Paris and the provinces — what of other European countries? In the common imagination, the literary tradition, in culture as a whole, and of course for a fanciful exercise like this, in gross stereotype. For the UK, which I do not know very well, maybe there’s London, England, Wales, Scotland and Northern Ireland? Germany seems much trickier to me, perhaps because I do know it well. Berlin of course, and Bavaria, and then? German Suburbia? In the case of Germany, The Past, and specifically that part of the past from 1933 to 1945, looms largest in the world’s imagination. But I am not sure whether that fits with this scheme. Russia, fittingly, has more: Moscow, St Petersburg, the Caucasus, Siberia, the Gulag, the Provincial City, the Rural Provinces and maybe the Far East. Smaller countries, I will rashly opine, waver between one and two: the Capital City and Everywhere Else or just the Capital. What do you think?

French political update: surveillance, sex, and surveys

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A quick look over the fall-out in French politics from DSK. Le Monde has a fascinating article on government surveillance of public figures’ sex lives. The most trivial point is that Strauss-Kahn had been allegedly caught frequenting prostitutes, but far more interestingly, this information had been swept up the police food-chain and delivered privately to the president’s desk and also to Nicolas Sarkozy’s presidential campaign, which leaked it to the press.

However, nobody thought it particularly newsworthy. Also, the surveillance continued, and various officials in the president’s office were in the habit of boasting about their access to intelligence on DSK’s sex life to journalists. But again, nobody seems to have found that newsworthy – and you do wonder what, exactly, they were sitting on. In a sense, this is another version of the conspiracy of silence. The people involved, a circle of police, spooks, and political operatives from the old days of the Balladur campaign, are exactly the same names who came up in the Woerth-Bettencourt affair. The point is made both that Nicolas Sarkozy made very sure to get the right people into key posts in the police-intelligence network and also that this is not new – the last three presidents have all been interior ministers.

(It may also be worth knowing that the poly/swinger scene is extensively monitored by the police, and various people are in the habit of passing lists of guests to the internal secret service.)

There’s more here, but you’d be a fool to assume that the damage will be confined to any one political party. For example, enter Georges Tron. Although he’s surely no DSK he is on the right, and his case also involves a complex score-settling with the FN over a real-estate scandal. (It’s not a proper scandal without property developers.) He’s gone, the fifth government minister to quit in 12 months.

So, what’s the upshot of all this at the macro level? Nouvel Observateur has a complex survey, laid out to illustrate the full set of cross-breaks. The upshot is that Sarkozy’s polls are still in the toilet – depending on who runs against him, he’s polling between 22 and 24.5%. The vote for the extreme Left has evaporated, while Marine Le Pen is running steadily a few points behind Sarkozy.

On the PS side, the volcanic eruption has had surprisingly little effect. The race is developing into a head-to-head between Hollande and Aubry, with Hollande holding the lead and also holding the best numbers in the head-to-heads with the other candidates. Either would beat Sarkozy, but Hollande would take the first round by 9 points and the second by twice that.

If all this doesn’t shift the polls, what will? Sarkozy might not stand for re-election. He’s suggested it before, but how willing to give up power is he really? Like a lot of politicians who enjoy being around entrepreneurs, he’s actually devoted his entire career to politics. That would have serious consequences – there is no obvious candidate and hardly even a plausible candidate, especially if Christine Lagarde moves to the IMF. And that now looks like the original racing certainty.

Who’s Next at the IMF?

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Now that Strauss-Kahn has resigned, the IMF needs a new director. Traditionally, the job has gone to a European, but since quota weights were realigned last year, it’s possible that the new boss may come from outside Europe.

I will go ahead and take a flyer no Kemal Dervis, on account of being both European and non-European, and well regarded for his work in Turkey and the international arena. Other ideas?

UPDATE: Well, heck. He say’s he’s not in the running.

A political group obituary

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As nobody who hasn’t been living in a Faraday cage on Ellesmere Island for the past four days no longer knows, Dominique Strauss-Kahn, IMF managing director and probable next president of the French Republic, has been charged with attempted rape and has been remanded in custody of the New York police. I’m sure the AFOE Whole Control Inter-Macro Economic Soul Patrol will have some thoughts about the future leadership of the IMF in due course. For mine, I’m tempted to think that rudderless confusion is probably the least harmful condition for this organisation, but I know not every reader will agree.

Anyway. What about French politics? That’s bound to be more fun.

The most important fact here is that DSK was predicted by national polls to beat all the other candidates in the next presidential election. The Socialist leadership has been something between a soap opera and a French movie about self-torturing neurotic dread of action for years, but basically everybody expected that once he decided he was going to run, not only would he win the primary, but he’d also take out the general election. The facts are pretty simple – President Sarkozy has the worst poll rating of any French president ever. The extreme-right leader, Marine Le Pen, is doing better than ever. But DSK was both the top pick out of the Socialists, and also the polls’ pick for the big gig.

In fact, there was widespread speculation that the horrible experience of May, 2002 might be reversed. Rather than the extreme Left splitting the vote and leaving a run-off between the extreme Right and the Gaullist Right, the extreme Right would split the vote and leave a run-off between the extreme Right and the Socialists. This scenario was a little like a nuclear attack on Manchester destroying Old Trafford and Maine Road. A lot of people would think it a terrible disaster. But quite a lot of the people most concerned would have to mourn through gritted teeth to keep from laughing with pure schadenfreude.

Who was DSK? An academic economist and long-time Socialist, from a well-off family, one of those men who always seem to come up lucky. He was an effective minister of Finance, Economics, and Industry in the Jospin government, and he presided over possibly the first time the IMF ever thought wages should go up. I remember him wanting to know why the British let General Electric buy the division of Amersham International plc that at the time made practically all the world’s DNA sequencers. I still haven’t heard anyone answer that.

In French politics, he was very much parallel to his contemporary Peter Mandelson in Britain. Both ran economic ministries with some success, and did likewise as international civil servants. Both were considered dangerously foreign to their own parties for a mixture of reasons to do with ideology and with style – both liked the company of the rich and enjoyed good tailoring and better travel. They were certainly both well to the right of their parties, but it was DSK who was responsible for the 35 hours law in France, and the British Labour Party is now rediscovering how little it likes Conservative government in general. They were also both disliked for appearing clever, visibly enjoying cleverness, and repeatedly winning in micro-political squabbles with the journalists who hated them. As is the way with people who are genuinely clever and effective and look like they enjoy it, they were both hated and indispensable to the leaders of their respective movements.

It is probably worth pointing out that they are both Jewish and – much as everyone involved would deny it – this does look like a role grounded in stereotype.

Mandelson collected a lot of fairly horrible abuse from the cheaper end of the British press because (and again, everyone involved will now whine about this) he’s gay. DSK was regularly written up as a stereotypical French ladies’ man, a Latin lover for whom it was all both indivisible from his personality and from the sheer style of politics.

It seems, in the absence of a coup de theatre to blow the theatre roof off, that only one of these statements was true. Women are already turning up who claim that he raped them years ago – most shamefully, one of them was apparently told by her mother to shut up. Her mother is a relatively important official in the PS’s regional organisation for Paris, DSK’s power base throughout his career, and someone who could perhaps have expected favour if and when he was back in power. This week’s Canard Enchainé is likely to be an explosively sordid document.

It would seem that the whole story is the classic one of an abuser protected by his friends, family, and colleagues. The network would say nothing, and indeed would influence others to say nothing, until the day when he pushed his luck outside its zone of influence. At this point, it is usual for a whole lot of people to have sudden and wholly unexpected fits of principle. I would not be surprised if skeletons tumbled from many other French politicians’ cupboards in the next few weeks. If I sound pissed off, well, how many other people were convinced that he was a decent man?

So far, the party and specifically the Ile de France regional federation seems to be…well, check out the list. It is to be expected that a lot of the people named will rapidly forget that the whole thing is a plot against them because Sofitel is a French company. (Surely, had he stayed at the Hilton, that would have been even more suspicious?) I hear that this tone of denial is quite widespread among people who certainly ought to know better.

Upshot? It seems unlikely anyone will be more satisfied with Sarkozy as a result. In fact, only a revolution of opinion would be enough to help much. And Sarkozy’s personal style – all yachts and executive jets and watches and models – is rather like DSK’s. It will probably give Marine Le Pen a little more.

Inside the PS, expect yet more neurosis. DSK’s supporters skew to the right of the party, and he has a particular beef with Laurent Fabius (who in any case isn’t going to win). In the absence of other factors, they’d probably be spread roughly equally between Ségoléne Royal, François Hollande, and Martine Aubry. But there are other factors. Royal and Aubry have defined geographical power bases, Royal from being president of Poitou-Charentes, Aubry from being mayor of Lille. If you had to pick, you’d probably take the second for an intra-party fight. DSK’s support is localised in Paris – it was the only PS federation not to vote for Royal as candidate last time out. Hollande’s base is in the party organisation, from his years as first secretary and therefore chief organiser. It’s fair to say that a lot of his people are also based in the capital, so he might claim more of a bonus than anyone else. He has recently been enjoying an upward trend in the polls.

It is possible that this is an end of an era, or at least a significant moment in moral history. As I said above, I wouldn’t be at all surprised if there were more disgraces in short order, and that the general tolerance-level will have been reduced to a more defensible value.

Also, the style of French politics is changing. Mitterand is dead, Jacques Chirac is gone. Sarkozy is the least popular president on record. DSK, Laurent Fabius, Charles Pasqua, Simone Veil, Edith Cresson, Rachida Dati, a whole series of enormous and often enormously flawed personalities have left the scene in one way or another. Dominique de Villepin and Alain Juppé hang around, but will either make any impact?

The new style is understated and in fact quite dull. On the Right, there are people like François Fillon and Christine Lagarde – a gang of grey managers. On the Left, people like Hollande and Aubry – solid town hall politicians. Marine Le Pen’s unique selling point is that she makes fascism boring. Her party’s thuggish stewards have been ordered by party headquarters to dispense with their shiny boots and paramilitary trappings, and are said to be exploring British football-casual style for the future. So much the better for the Italian textile sector, so much the worse for Leicester. But perhaps dull is good. It’s worth remembering that dull is great news in the long term of European history. They said Clement Attlee was dull.

And now, for the IMF…

Oh My

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Removed from a Paris-bound plane.

Dominique Strauss-Kahn, the head of the International Monetary Fund, was removed from a Paris-bound flight on Saturday afternoon minutes before takeoff after a New York City hotel housekeeper accused him of sexual assault, the police said. …

Strauss-Kahn was being questioned after a 32-year-old chambermaid complained that a naked Strauss-Kahn sexually attacked her in his Manhattan hotel room, the police said. The maid, who said she broke free, suffered minor injuries, police said.

The NYPD expects to bring formal charges Sunday morning, New York time.