France

   
 

Executive Summary

Solid institutions struggling to adapt
France currently enjoys solid institutions of governance – the most stable, consensual and efficient period over a past 200 years occasionally marked by dubious constitutional experiments. Yet, the country struggles to effectively address the challenges associated with Europeanization and globalization. The political system is presently tested by the political weakness of President Hollande, by persistent political and ideological polarization, and by the arresting rise of the extreme-right party (National Front) – expressing a deep distrust between segments of the population and the political class. This raises serious doubts about the country’s capacity for systemic reforms.
Small steps undermined by political divisions
President Hollande, in power since May 2012, initially attempted to reverse his predecessor Nicolas Sarkozy’s reforms, but further economic collapse soon demanded a U-turn, with supply-side reforms and more budgetary discipline. Deep division within the Socialist Party and the government, together with confusing communication and a lack of clear commitment by the president to the new policies, combined to discredit the government. As a result, the potential political benefits of these important reforms (i.e., labor market reforms, business tax cuts, liberalization measures, budgetary consolidation) have been marred. Overall, the policy changes, including social security and pension reforms, revised family allowances, and local government modernization reforms, involving spending cuts and the removal of redundancies in administrative structures, are steps in the right direction, but neither sufficient to meet present nor future challenges.
Lack of reform commitment has sapped support
As his predecessors, President Hollande has not fully and openly embraced the necessary reforms, but rather adopted them reluctantly and furtively while maintaining the illusion of a state capable of controlling the markets and steering the economy. Thus, the characteristic gap between real (if limited) change and immobile concepts, between liberal reforms and traditional statist interventionist discourse, has been maintained. In this tradition, European integration and globalization are often used as scapegoats to explain changes in French society. As a result, it has been difficult for the Hollande administration to gather political support for its measures. The government has been accused of destroying the French model and has faced strong opposition, in particular from unions, part of its own political camp, and other vested interests. This opposition has considerably hindered and often blocked government action.
Market hostility exacerbating polarization
France’s recurrent challenges also derive from its economic and political culture. There is a fundamental distrust of markets and a widely held belief that state action is an efficient means to guide the economy and solve problems. Furthermore, the economy itself is not seen as a driving force but as an ancillary tool, a variable that has to submit itself to the will of political power. The sense that political will (endowed with democratic legitimacy) eclipses all other considerations is difficult to accommodate with the constraints of an open economy and the rules of the European stability and growth pact. Furthermore, the French worldview is characterized by a particularly high distrust, if not open opposition, to globalization. In politics, the high degree of political polarization leaves no room for moderation, coalitions or compromise, but provokes sterile debates and fictional black-and-white alternatives far removed from reality.
Government feeding anti-market illusions
These attitudes are fostered by the government itself, as it often concedes to protest groups what it had previously refused in parliament. It also implies that citizens expect, more or less, everything from the state; ruling elites from both the right and the left of the political spectrum have continuously fed these expectations by putting in place policies beyond the budget’s capacity to fund them (1974 was the last year France had a balanced budget). The illusion that a “different economic policy” can escape the constraints of markets and competitiveness is still very much alive and is fed both by parts of the left and by the extreme right (National Front). The rise of the latter, capturing a third of votes in the last regional elections, adds to the extremely unstable and tense present situation: public opinion is strained and the government has neither much political support nor room to maneuver. Economically and politically, the country faces a fragile and risky state of affairs, with the added challenge that no major reforms can be expected until after the presidential and parliamentary elections in spring of 2017.
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