Eurocrash: How Long Before France Has To Face The Music?

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EUROCRASH: HOW LONG BEFORE FRANCE HAS TO FACE THE MUSIC?

There’s only a week to go now before Mr & Mrs Slog pack up the car with bags, dogs and wine boxes before heading out of the fiscal frying pan that is France, and back to the raging fire that is Coalition Britannia.
We’ve been here for most of the Summer, and during that time discussed with many friends of several nationalities the extraordinary upweight in road works and municipal repair projects going on here. Everyone has noticed it. And most people know precisely what it’s all about.
“The good days are leaving,” said a French friend to me three weeks ago, “and so we must use the last of the sun while it still shines”.
“We noticed it the minute we got back,” English chums we met for lunch told us, “they’re obviously spending every last centime while the going’s good”.
France knows – or least, fonctionnaire France knows – that the game’s up. Germany has run out of patience, and the eurozone has run out of money. Local government – with its mysteriously direct route to EU funds – is putting in sewers, laying drains, resurfacing roads and replacing old signage on such a scale, the whole of our department looks like one gigantic episode of Challenge Anneka. It is the year of the cash cow, and the French are milking it furiously.
Many UK politicians insist that the French doing well out of the EU is a myth. But the statistics tell an entirely different story. When people ask me these days how come France’s infrastructure is superb, I answer simply “The EU”.
President Nicolas Sarkozy talks proudly of there being ‘no need for austerity’, telling the Trade Unions and farmers that they have nothing to fear. So far he’s been as good as his word: the notorious CAP abolition has been put off yet again until 2016, and not one bureaucrat has been fired in the public sector – bear in mind, however, that quite a lot of them can’t be fired: A staggering 26.5% of the working population, mainly in the public sector, has guaranteed employment for life;.
The country’s standard of living has risen 300% since the original 1955 agreement with Germany, and at five times the pace it rose from 1789 until that date. France employs 500,000 more civil servants than Germany on roughly 60% of the population. Its cost of public administration outgoings is 53.8% of the gdp.

Not everyone has done well, but those doing worst have done better than they would’ve done in any other EU member State. 4.5 million people -a sixth of the working population - are not in paid employment and are living on benefit.
But for most Frenchmen, it’s been milk and honey for 55 years….and they’re not about to give it up without a fight. There’ve been two national all-out strikes in September alone, and everywhere there are Parti Communiste posters announcing ‘Non!’ to the plan to raise retirement from 60 to 62. Even at that level, France would still have the equal lowest retirement age in Europe.
And it’s not as if the bourgeoisie hates the strikes: a poll in the left-leaning Liberation newspaper showed the other day that 63% of the country supports the strikers, and just 29% the government. Almost 60% oppose the plan to raise the retirement age, with only a third in favour.
Yet for once, this is a Sarko policy that not only makes sense, it is only scratching the surface of France’s deficit problem. The annual loss continues to grow at eight billion euro a month – the highest and fastest in the EU – while the French deficit has never – not once – been within the eurozone guidelines since the currency was born in 2000.
The debt has gone from 72% to 78% of the gdp since 2008. A recent OECD report states that
‘…in recent years, most jobs have been created in the service and public sector, where more women work: finance, education, health, welfare and administration are the sectors where the number of jobs is rising fastest….’
The fact is that France has carried on being what is always was: a half-command economy State with huge subsidies for its farmers, and incredible pay and pension conditions for its bureaucrats. And just like our Sir Humphreys, they’ve been amazingly adept at hiding their numbers. The OECD report laments:
‘….it is difficult to define the size of the public sector in France, due to the sheer number of types of public employers and personnel grades....'
And how. This is why The Slog has always laughed at Christine Lagarde’s ‘private’ sector recovery figures. When it suits the French for a pen-pusher to be helping the farming sector and thus privately employed, that’s what they’ll be. But everywhere in le gouvernment departmentale, the labynthine system of funding everything ensures that even a labourer working 85% of the time on a commune project can be recorded as working for the private sector because part of the project is down to private sponsorship. It’s a wonderful scam, and it has enabled the French to fill in a million fantasy forms for Brussels while keeping a straight face.
In the end, I emailed a senior source and old friend in Paris to ask if there might be anywhere a number for total public sector employment. This was his reply almost exactly translated:
‘It would be a highly politicized number and therefore it doesn’t exist. But if you take education, administration, health, local government and public sector employees, the general view among les Sarkoists is that the number can’t be less than 55% - and may even be over 60%. The President himself has asked numerous times for the figure, or at least something approximate. So far they have avoided telling him – although they may not even know themselves.’
On the surface, France is not in the firing line as far as a credit downgrade or suspected default is concerned: the overwhelming percentage of its securities are longish-term and at reasonable rates, because the country remains (inexplicably) AAA rated. But there remain widespread doubts about the country’s banking system, and its exposure to ClubMed sovereign debt.
“It’s all going to come out,” an English analyst based here told me earlier this week. “I understand that Credit Agricole is very dodgy, which is rather alarming because I’ve got several investment products of theirs”. Only yesterday, Societe Generale raised a few eyebrows by announcing that it would ‘fight the proposed extra capital requirement [of Basel III] tooth and nail’. During the laughable stress tests hailed by Trichet and Lagarde as ‘definitive’, the large French banks were extremely economical with the verite. As the Wall Street Journal noted earlier this month:
‘BIS data from March 31 indicates that French banks were holding about €20 billion of Greek sovereign debt and €35 billion of Spanish sovereign debt. In the stress tests, four French banks, which represent nearly 80% of the assets in France’s banking system, reported holding a total of €11.6 billion of Greek government debt and €6.6 billion of Spanish debt.’ Regular Sloggers will recall the level of lying involved in Barclays’ reportage of their Italian sovereign debt holdings.
As with the German banks, through all of this murk it is easy to see the extent to which the eurozone’s problems are as much to do with lending practices as debt management. But fiscally, it remains true that France is in poor health. It will be very interesting indeed to see how the French President deals with the mayhem that will break out once the serious cutting has to start.

 

Interesting, thanks. No wonder France came out as the best place to live (retirement age, disposable income quality of life etc) in a recent survey. They are obviously masters at milking the system. I think they are a more conservative and cohesive culture, too (all milking together, so to speak) which makes a difference.

 

eur/usd should hit 1.40 on this news.

 

A Brit complaining about France. Wow amazing bait and switch tactic. The Brits are in worse shape by a long shot. While many complain about the French milking the system please remember that the French also pay quite a bit in taxes and other things.

I am not condoning France. What I am sick and tired of are the Brits who think they are so high and mighty with their system. I just wish that they would look at their crumbling and non existent infrastructure.

 

The day I left Paris (in 2004 and Eur was $1.20) I went to buy a large Coke and the french girl wanted 5 euros. Taxi driver charged me 40 euros to go to the airport(he was spanish and gave me a discount because I could speak his language) I was at the airport too early and it was still closed so I checked into getting a hotel and they wanted 350 euros for 1 night. France overcharges for everything so no wonder their standard of living is high.

 

Don't wear white sneakers.