Macron retreats, France loses

Thursday 13th December 2018

Away, if we may, from our Brexit fixations and to the troubled territory twenty seven miles across the Channel.

France was feted as being in the naissance of a golden age, with a new President who would bring about fundamental financial reforms. After a decade of being in breach of EU rules on spending and debt, France would rise and partner Germany as a leader and an  equal in the continuation of the great European project.

Now Germany looks on in dismay as Emmanuel Macron has given in to the rioters. His revolution has turned into a capitulation of tax giveaways, which, with the cancellation of the fuel duty increases will cost the economy about €14bn.

That will bring France’s budget deficit to more than Italy’s  – just as Brussels prepares sanctions against the rebel Five Star/La Lira coalition in Rome. 

Supporters of Macron say that the concessions to the gilets jaunts are just a one-off to smooth what was always expected to be a rocky road to the sunny uplands of a revitalised France. But the fundamental problems still remain –  not least of which a long standing  unemployment rate of over 9%, and a bloated state which eats over half of the country’s GDP. Another Macron nod to the rioters, the €100 rise in the minimum wage each month will, its critics say, distort the economy, not help the poor and make it even more difficult to avoid the unemployment trap of being better off on the dole.

It’s tempting to over-think the consequences of all this. If Brussels were to demand budget cuts and the  80% of the French population  who supposedly support the gilet jaunes  were to really change from spectators to participants then the EU and euro would be in real trouble. A further rise in populism, already smouldering in France’s neighbours could mean the end of the euro.

However, the Eurocrats behind the grand plan are experts at papering over the cracks in the edifice – what, for example ever happened to the Greek ‘tragedy’ ? The European Central Bank has been holding a well padded safety blanket under the EU since 2008, which to its supporters is the ultimate vindication of its raison d’etre.

And that points to the real next stage of Europe. Not France’s travails, but the ECB’s withdrawal of  printed money, a return to the difficult task of reach country running real economies amid the continuing progress towards a European superstate run by unelected technocrats. Now thats what I call trouble.

Michael

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