Tuesday, September 01, 2015

France and German austerity

I'm not inclined to give French President François Hollande much the benefit of the doubt on economic policy. He was elected President in 2012 on a platform of opposing Merkel's austerity policies and immediately capitulated to Merkel, agreeing to the Fiscal (Suicide) Pact that he had promised to demand be renegotiated. (See my Angela Merkel's policy for the euro crisis: put the pedal to the metal, head straight for the cliff 06/27/2012 and EU summit result: Angie pwns Hollande, rolling train wreck continues 06/29/2012)

But one thing that has emerged this year from Greece's desperate attempt to escape the Merkel-imposed austerity that has been destroying the Greek economy for years is that France sees itself in a position of definite subordination to Germany. Even an object of coercion. And Merkel's government sees France the same way.

As this report from France 24 shows, Joseph Stiglitz also perceives their relations in that France, France 'intimidated' by Germany on economic policy: Stiglitz 08/31/2015

"There is a kind of intimidation," Stiglitz, an outspoken opponent of austerity policy, said of the influence of Germany over the economic policy pursued by President Francois Hollande.

Stiglitz also said he agreed with former Greek finance minister Yanis Varoufakis that Germany's intransigence against Athens was aimed at striking fear in Paris and convincing the French government to continue austerity policies.

"The centre-left government in France has not been able to stand up against Germany" on its budget policy, eurozone policy, or on the response to the Greek crisis, said the former World Bank chief economist and advisor to US president Bill Clinton.
But what is France waiting for in fighting the austerity policies, if that's what they intend to do.

That's why it's hard for me to get optimistic over these reports. If France intended to take a stand against austerity, this year's negotiations with Greece were an ideal opportunity. But France backed Germany's punitive anti-Greek policies, even if they did grumble about them behind the scenes.

The advent of the new government in 2012 with a majority in Parliament would have also been an excellent time to openly resist. But they didn't then, either.

In another France 24 report states the issue this way (As Germany squeezes Greece, where does France stand? 02/20/2015):

It was not so long ago that France – not Greece – was the champion of Europe’s anti-austerity camp. In the run-up to his successful presidential bid in 2012, François Hollande was full of fiery rhetoric about ditching belt-tightening and promoting growth. The German chancellor, he said, would simply have to back down. As it turned out, Angela Merkel has barely budged.

In his first weeks in office, Hollande huffed and puffed but precious little happened. Paris did secure a vague pledge to promote growth in the EU, but Germany’s hallowed “stability pact” – which places a strict 3% cap on budget deficits across the EU – remained intact while Hollande’s cherished Eurobonds were junked.
I say that the French/German difference "emerged" during this year's negotiations with Greece. But there were press reports last year about such dissent, e.g., France's economy minister slams German austerity measures AFP/Yahoo! Finance 08/23/2014.

But why did that supposed resistance on France's part not get beyond closed doors during the critical negotiations this year with Greece.

So what will it take to get the Hollande government to resist Germany's Herbert Hoover/Heinrich Brüning economic policies?

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