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Market Oracle FREE Newsletter


France Stumbles Towards Political Meltdown

Politics / France Apr 03, 2013 - 06:48 PM GMT

By: Andrew_McKillop


France woke up Wednesday 3 April to the image of the country’s former budget minister and tax czar Jerome Cahuzac looking haggard and shaken on the front pages of all the leading dailies, and all TV news stations following his final and forced admission that he had repeatedly lied about secret accounts in Switzerland and Singapore, and his medical sector business dealings also using tax havens, as well as potential grave charges such as imported beyond-date medical products that may have been re-labelled and sold in France.

In a delayed address to the nation, scheduled for late morning but for "unexplained reasons" delayed a half hour, president Francois Hollande claimed that he had known nothing about his Budget minister lying, despite it being open knowledge for over 6 months, and that he had continuing confidence in the government of his PM Jean-Marc Ayrault. Leading press outlets like left-of-centre 'Liberation' gave full front page exposure and no excuses to Cahuzac in it' said was a giant stain on the nation, an affair where: “After months of lies, Jérôme Cahuzac admitted yesterday to keeping a foreign bank account and is being formally investigated".

This is the making of a political crisis that could bring down the Ayrault government - and even the 5th Republic and its current president - according to Marine Le Pen, on the extreme right, and Jean-Luc Melanchon on the extreme left of the French political spectrum.  The gloves are now off for Hollande's struggling and desperately unpopular presidency, its government, and its "steady as you go" IMF-style austerity policies only able to deliver long-term decline.

President Hollande is now the most unpopular president that France has ever had since the present 5th Republic was founded by Charles de Gaulle in October 1958. Recent opinion polls give Hollande about a 28% approval rating - with at least 65% of all persons polled saying they have no confidence in him. If a presidential election was held tomorrow, he would be turfed out of power with no regrets. Support for Sarkozy, despite voters turning against him, 10 months ago and voting Hollande "because they could not take any more Sarkozy-type policies" has reached almost religious intensity. The presiding judge in the current investigation of Sarkozy's possible exploitation of the mental frailty of billionaire heiress Liliane Bettancourt, of the L'Oreal empire, to allegedly grub campaign funding has received several death threats, and heavy caliber bullets have been delivered to him in postal packets.

When he ran against Nicholas Sarkozy in 2012, Hollande promised a “Republique Exemplaire” (a no-fault squeaky-clean republic), and a game change style of government light years away from the “bling-bling” Rolex-flashing consumerism of Sarkozy-ilk politicians of his UMP party, whose linkage with France’s fat cats grated on the nerves. Recurring corruption scandals, including the "shock resignation" of Sarkozy's own Budget minister Eric Woerth after a long-drawn-out trial by media, helped mine out public support for Sarkozy - but never to the extent of Hollande's fall.

Already treated as the political equivalent of Lance Armstrong, Hollande faces massive headwinds - in fact gale force headwinds.

The right-wing press, formerly supporting Sarkozy's UMP but with its all-but-total collapse, or "deliquescence" for the French, now simply opposes Hollande on moral, ethical, liberal and even family value grounds - based on large scale public unhappiness with Hollande's law authorising single sex marriage and potentially enabling single sex couples adopting children or using "meres porteuses". Its reaction, April 3rd, was summarized by the leader in 'Le Figaro': "A minister of the republic lied. He is a Socialist. And he lied about money. Can you imagine anything worse?”. Other right wing press outlets hammered the message that France is sinking each day into further and deeper crisis, and foreign confidence in France can only be harmed by "the atmosphere of suspicion" that the Cahuzac affair will inevitably cause.

France’s economic situation is frankly alarming, but few or no persons would think that, if they only operated on the storm of heavily-spun but incompetently packaged data coming out of the Parti Socialiste government and its president. Unemployment is for cexample claimed to be "about 10 percent" but the window-dressing of "chomage" figures is now extreme: the real rate is well above 12.5 percent - even using data from the French INSEE governmental economic data agency! The French government spending deficit for 2013 will be at least 4.8 percent of GDP - again using official figures. Credit rating downgrades, a moribund manufacturing sector, ever-increasing taxation, extreme high energy prices, especially in the private-sector controlled gas sector operate by Hollande’s "corporate friendlies", and no possible change for years ahead is what Hollande "promises".

More than the economic and political fallout from the latest scandal, the Cahuzac affair has almost instantly become the most dangerous-possible threat to Hollande's shaky presidency, and his totally unpopular government. The Cahuzac affair is viewed as a moral affront right across the ideological and party divide. Several media outlets, not only right wing have said that Hollande and his government are operating in "the realm of big lies", only comparable with the unlamented lie-monger Lance Armstrong and because that is the case, parliament mut be dissolved, and fresh elections must be held - for the presdiency, and for the parliament. This fast forwards the present crisis to another domain.

Cahuzac was a key ally of Hollande when it came to implementing unpopular austerity policies. He was an important piece of the government jigsaw, applying so-called "liberal and modernist policies". Some analysts and commentators say this was maybe why Hollande kept him so long, but that turned out to be a lose-lose scenario that could cost Hollande his presidency.

The Cahuzac debacle comes the exact same week as Prime minister Jean-Marc Ayrault starts applying a train of austerity measures aimed at slashing government spending by 5 billion euro in 2013-2014, and more by 2016, while accepting that almost-zero economic growth is New Normal, causing a continuing spiral in unemployment and mass layoffs in France's crippled manufacturing sector. These austerity measures were set by Cahuzac as Budget minister.

Wherever government still has the master word on prices, in the so-called "regulated sector" huge price hikes are now programmed. France’s Energy price regulatory commission has for example revealed, February 2013, that consumers should expect at least a 30 percent increase in the cost of electricity by the start of 2017. Reasons for this include extreme high cost "comfort spending' related to renewable energy development including huge spending on city-centre cabling, across France, to enable electric cars to be charged in the street. No presently produced all-electric sedan-sized car in France is available at less than 20 000 euros, excluding battery purchase, which is extra or "not available"!

The Parti Socialiste government, and "system" is known for what it is - at least as corrupt as any right wing party or president, but usually more arrogant about it. With the Cahuzac crisis, things have now tilted into a stark challenge to the authority of government and the existing political process, in France.  Under any hypothesis, this crisis will have long-term sequels.

By Andrew McKillop


Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights

Co-author 'The Doomsday Machine', Palgrave Macmillan USA, 2012

Andrew McKillop has more than 30 years experience in the energy, economic and finance domains. Trained at London UK’s University College, he has had specially long experience of energy policy, project administration and the development and financing of alternate energy. This included his role of in-house Expert on Policy and Programming at the DG XVII-Energy of the European Commission, Director of Information of the OAPEC technology transfer subsidiary, AREC and researcher for UN agencies including the ILO.

© 2013 Copyright Andrew McKillop - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisor.

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