The Great Debate UK

from Anatole Kaletsky:

An ‘atomic bomb’ is hovering over France’s economy

France's President Hollande and German Chancellor Merkel talk during a conference on jobs in Milan

An “atomic bomb” is about to blow up in “the confrontation between Paris and Brussels.”

It was in these terms that Le Figaro, perhaps the most influential French newspaper, reported the European Commission’s near-certain rejection of President Francois Hollande’s 2015 budget on Oct. 29.  That is the date the commission must issue a judgment on the French budget, which proposes a two-year delay in reducing the  budget deficit to the EU-mandated maximum of 3 percent of gross domestic product.

German Chancellor Angela Merkel has insisted that she will not tolerate any such relaxation of the European Union’s new, toughened budget rules. Meanwhile, Hollande has stated repeatedly that France will refuse any demands from Brussels for more cuts.

A full-scale budget war between Paris and Berlin/Brussels looks inevitable, with catastrophic effects on the European economy and markets. But on closer inspection, this impending budget battle is no more lethal than the fiscal shadow-boxing in Washington last year.

from The Great Debate:

In France, where unions rule, a challenge from Hollande

In France, taking a person hostage or sequestering them against their will is a crime punishable by up to 20 years in jail. It also happens to be a very effective weapon in French labor disputes. Since 2009, there have been 15 incidents of “boss-napping” and only one resulted in sanctions: 11 postal workers who were fined $2,000 apiece for locking up their managers during a dispute over a change in how the mail is delivered.

Most of the time, it’s the unions who win. That’s certainly the case in the most recent incident, involving a bitter struggle over job losses at a Goodyear tire plant in Amiens. Earlier this month, union officials occupied the factory and sequestered the production manager and head of human resources for 30 hours. After the government intervened, the battle finally ended last week when the company agreed to triple the severance it had offered. Union leader Mickaël Wamen didn’t hide his triumph. “It was a grand and beautiful struggle,” he wrote in a blog post on Jan. 24, announcing details of the settlement.

from The Great Debate:

Foreign investment in France thrives despite gripes — for now

In France these days, every new industrial investment is welcomed with open arms, so when the Japanese machine-tools manufacturer Amada announced in mid-September that it was putting an additional $50 million into its existing production facilities, no fewer than two government ministers showed up for the signing ceremony. Much to their embarrassment, however, the chief executive officer of Amada, Mitsuo Okamoto, gave an interview that morning to a national French daily in which he castigated the national business climate, and said that if the company hadn’t already been in France for 40 years, “we would think twice about investing here for the first time.”

Chalk it up, one more time, to France’s investment paradox. Okamoto is just the latest example of a foreign CEO who moans and groans about the difficulties of doing business in France, even as he pours in money, in the form of fresh investment.

from The Great Debate:

The minister who dreams of a reindustrialized France

The body of Jean-Baptiste Colbert, Louis XIV’s wily finance minister, is encased in a marble tomb in the Church of Saint Eustache in central Paris. But if you believe Arnaud Montebourg, the enfant terrible of French politics, his spirit is still very much alive, 330 years after his death, and about to spark a new, digital-age industrial revolution in France.

Montebourg, 50, an ardent opponent of globalization, has for the past 15 months served as the nation’s “Minister of Productive Renewal,” in charge of industry, a post that -- in theory -- gives him leeway to implement some of his more radical ideas. He spells them out in a book published on Sept.18, “The Battle for Made in France.” Invoking Colbert’s grandiose interventionist approach, it is a strident call for industry to be protected and nurtured. Among other things, Montebourg insists that the outsourcing trend of the past decade needs to be reversed; he dreams of the day when televisions, textiles and toys will once again be made in France, as the nation recaptures its manufacturing glory.

Hollande the Brave

–Kathleen Brooks is research director at forex.com. The opinions expressed are her own.–

The French President has been in the press a lot recently. Firstly, there was the triumph in Mali. “Vive le France!” could be heard in the streets and the swift removal of the Taliban from Northern parts of the country is to be lauded. But after a rousing welcome in Timbuktu, Hollande might find he has a chillier welcome closer to home.

from The Great Debate:

Is France closing for business?

Arnaud Montebourg, a member of the French parliament, has a problem with the iPhone. He thinks consumers in France should pay more for it than they already do. Why? Because, he says, the iPhone is made by “exploited” laborers in China who are taking away the jobs of French workers and the best way to redress that is by putting in place trade barriers and taxes that will stop “excessive imports.”

Then there’s Renault in Morocco. When the French automaker opened a new factory in Tangiers in February, Montebourg decried the move as “a humiliation for French industry,” because Renault hadn’t built the plant in France even though the French state is an important shareholder.

from MacroScope:

Can Greek public opinion be turned?

So we’ve got the fresh Greek elections we expected and markets, despite the inevitability that we would get here, have reacted with some alarm. European stocks have shed  around 1 percent, and the harbour of German Bunds is pushing their futures price up in early trade. The Greeks will try to form a caretaker government today to see them through to elections expected on June 17.

The key question is whether the mainstream parties can mount a convincing campaign second time around, playing on the glaring contradiction in SYRIZA’s position (no to bailout, yes to the euro) and essentially turning the vote into a referendum on euro membership, which the overwhelming majority of Greeks still support. Don’t count on that. SYRIZA remains ahead in the polls.
To be able to pull it off, PASOK and New Democracy will need some help from Europe. There have already been hints from Brussels that if a pro-bailout government is formed, Athens could be given some leeway on its debt-cutting terms. But equally other voices are saying there is no more room for manoeuvre.

What would markets and Merkel make of Hollande?

It’s time I came out of the closet and ‘fessed up. My friends, colleagues and family all know anyway, so ……OK, here goes.

All my adult life I have been and remain a Francophile. It is a perversion I can neither defend nor explain.

  •