It is hard sometimes to concern oneself with the big picture when the little picture here in Ariege is so beautiful. As the last golden leaves of autumn flutter down from the trees and warm, dappled sunlight warms the bones on a mid November day, life seems incredibly good. The wood is cut for winter, the woodburner glows welcomingly after a bracing morning walk, a pot of pumpkin soup simmers on the stove and all appears well in the best of all possible worlds. The price of petrol and diesel, heating oil, gas and electricity, and food, especially flour and bread, is a cause for concern but otherwise life rolls on much as it has done for hundreds of years.
The one big difference in our lives, though, is the constant stream of information channeled into our little, almost perfect worlds, minute by minute. And, at the moment, it is all bad. There is no getting away from it, unless one is brave enough to remove oneself completely by surrendering broadband, mobile phones, television and radio. Whilst I fantasise about living the life of mystic, deep in meditation and inner harmony, I am in reality too much of a news junkie to ever allow myself to miss out on what is going on. Politics has been in my blood since my sixth form in the sixties and it's too late to change my spots.
No one can have failed to notice the current 'crise economique', not even the most apolitical Ariegois. It seeps into our everyday consciousness, impacting on the most potentially joyful of days. A collective depression palls over us all. We are all closing our shutters to the outside world and praying that we will all wake up tomorrow to find that it has been a horrible dream. Nothing much in our world appeared to have changed. We, the little people, all got up each day, went to work and paid our taxes [well, most of us here in Ariege anyway!]. For reasons beyond our control and our comprehension, we are are now, however, being told that we must pay a high price for government profligacy. Young people have little hope of gainful employment, small businesses are struggling and unemployment is rising. Everyone is complaining and 'Sarko's' name is mud. Even more worrying, there are whispers of the increasing popularity of Le Pen. Has it really come to this?
France accounts for one fifth of the Eurozone's GDP. It is a big player as the strutting Sarkozy is determined to show. Up until recently, because it wasn't as reliant upon exports as Germany, France seemed to be weathering the storm rather better than most member states. If one overlooks youth employment, the big role of the French state in injecting a fiscal stimulus of 2.25% in 2009/10 allowed French GDP to modestly rise whilst other economies struggled. Now, however, as public debt spirals upwards, the dangers of a consumer-led economic model financed by government transfers are becoming more apparent and the markets are twitchy. In the space of a decade, France has moved from a current account surplus of 3.1% of GDP to a deficit of 2.2%. With unemployment rising, the French government has cut its economic forecast from 2.5% to 2.0%, although most forecasters think that a figure of 1.5% or less is nearer the mark.
Sarkozy's determination to prove that France is Germany's equal in the economic stakes is beginning to look like wishful thinking. Certainly, it is true that France has thirty- nine companies in 'Fortune's' list of the top five hundred global companies, two more than Germany's tally of thirty seven. On closer inspection, however, it is apparent that most of France's top companies rely either directly or indirectly on state support and are close to Paris, unlike in Germany where the top companies are much more diverse and engaged in the production of high quality capital goods. With France's budget deficit likely to hit a staggering 8% this year, the highest of any triple A rated economy, such a huge dependance on the state has serious implications for its productivity, a fact not lost on the markets.
Furthermore, because France has high quality state institutions, which gobble up all the top graduates each year, there is a marked lack of innovation at ground level, unlike in Germany where graduates head for expanding commercial enterprises from choice. France's rigid job market and the exorbitant social costs of employment mitigate against the growth and expansion of small and medium sized enterprises, vital for an export led economy comparable with that of Germany. Added to this, the high cost of firing workers cements inefficiency and complacency, as most of us experience every day in France. The high minimum wage deters companies from hiring inexperienced younger workers, many of whom are well educated and up to speed with new technology. They either become another youth unemployment statistic, or flee to London or Frankfurt, where they can get their feet on the first rung of the employment ladder.
On top of all this woe at home, the crisis in Greece has massive implications for France. Data from regulators in Basle shows that French banks have far more exposure to Greek creditors than other European banks. The 'haircut' by banks of 50%, agreed last week by European leaders, will hit France's banks hard, requiring them to raise new capital to calm markets. This, on top of everything else, leaves Sarkozy looking like the emperor without his clothes. He won't be able to get away with slagging off Angela Merkel's eating habits a second time! He will need to show that he is able, and willing, to tackle the budget deficit just one year short of a general election. If not, the bond markets will have him by the short and curlies as quickly as Angela Merkel can say, ' Du fromage, s'il vous plait!'
France remains committed to the euro, despite its fundamental flaws. There is little talk here of a return to the franc, largely because France, along with Germany, still believes that the euro will survive the ravages of the global debt market. The costs of borrowing for Ireland, Portugal, Greece and now Italy have been pushed beyond affordable levels. And because the debts are on the verge of being unserviceable, unelected bond traders are defining the destiny of elected leaders. In Greece, Papandreou has been ousted, replaced by a government of national unity. In Italy, Berlusconi has gone too, to be replaced by a bureaucrat. These are worrying times for democrats, as well as economists. It will take very strong leadership from both Merkel and Sarkozy to reassure both the markets and the disillusioned voters of member states.
We are all caught between a rock and a very hard place. The very people who caused the crisis are now calling the shots. The streets of Athens have fired up a fierce, and sometimes violent, resistance to imposed austerity measures. None of us is immune, as the tented, becalmed protesters of St Paul's demonstrate. France's ability to organise its people on a grand scale should never, as history shows us, be underestimated. We await the next weeks and months with some trepidation. Sarkozy's saving grace is the prospect of the imminent general election. With the Socialists in disarray, I am tempted to say, 'Be very careful what you wish for.'
The great European project, born of hope and prosperity, begins to look, to many, like a fool's paradise. However, it is important to emphasise that it is not just an economic unit. It is an ideal, born of the horrors of the last war. For many of us, its roots are deep, the product of political will as much as economic necessity. The introduction of the single currency provided the glue that was intended to bond it together forever. Since the euro came into being on 1st January 2002, it has become the currency of 15 countries and 320 million people. The possibility of its breakup cannot be an option. It was ill thought out, not least because the European Central Bank has no mandate to be a lender of last resort, but the answer lies in structural reform, not abandonment.
As the Greek crisis has metastasised, we have to be bold. We can only go forwards and that means more, not less, integration. We are Europeans and we are all in this mess together. David Cameron can complain as much as he likes but Sarkozy is right to tell him to stop poking his eurosceptic nose into the affairs of the eurozone. You cannot be on the outside of the tent pissing in! Whatever happens, France's rocky road to recovery remains a fundamental component; for if France falls prey to the same predatory attacks by bond traders that have felled the smaller nations of Europe, then we might as well all roll over and turn off the lights. Now, is that soup ready yet? I am going to go back to my own little world of reading, writing and keeping warm.
