Please consider Europe à l’Hollandaise, François Hollande’s flawed vision for Europe.
LEADERS keep talking about the future of Europe, yet none seems able to offer a clear vision. Angela Merkel speaks vaguely of the need for greater “Europeanisation of national powers”. David Cameron, by contrast, wants a renationalisation of European powers—though without being too specific. This week it was François Hollande’s turn to speak about destiny. His concept, as set out in a speech to the European Parliament on February 5th, is to extend French dirigiste and socialist ideas to Europe, even where they cannot be applied to France itself.Apparently, "If it's bad enough for France, it's good enough for the rest of Europe".
Take the rising value of the euro. France cannot resort to devaluation to close its already large trade deficit. So Mr Hollande wants euro-zone governments to act together to bring down the exchange rate. Or take competitiveness. Mr Hollande has adopted some cautious labour-market reforms, but now he proposes a euro-zone minimum wage. Or take taxation. Having put up French taxes, he wants euro-zone countries to “harmonise” tax policies. Or take macroeconomic policy. If deficit countries must undergo austerity, then the EU as a whole should continue spending to support growth, and surplus countries should boost domestic demand to bring up the rest.
For Mr Hollande, as for many of his predecessors, competition is often “disloyal” and market forces dangerous—things to be tamed rather than encouraged. From both the left and the right, French politicians accuse European countries that allow lower wages and tax rates than France of practising “social dumping”.
The future of the euro zone, Mr Hollande suggests, will not be the Germanic notion of euro-zone members bearing individual responsibility for their economic policies, within rigid rules imposed by the centre. Instead integration must include common projects on, say, infrastructure and renewable energy, paid for by “new financial instruments”. And integration must be accompanied by greater “solidarity”, including guaranteed jobs and training for young people and, yes, Eurobonds.
Little of this fits with the British model of a looser, highly liberalised common market, in which members have the flexibility to tailor the terms of their membership. Europe, said Mr Hollande, was not just a market or a currency, but a political project where one could not ceaselessly “question everything at every stage”.
There could be no “à la carte” Europe. But there could be a “differentiated” EU in which some countries push towards integration, while preserving a “substantial foundation which must remain common competences”. In other words, Britain need never join the single currency, but cannot undo the deals that created today’s single market.
The 3% question
For now, Mr Hollande’s main worry is not to be cast as a “Club Med” country unable to keep up with Germany in a hard-currency, low-inflation zone. He may soon face a tricky problem. The European Commission’s official forecasts later this month will almost certainly indicate that France will miss its EU target to bring the budget deficit to below 3% of GDP this year.
Can someone, anyone, explain how all the differing opinions about what's good for Europe can possibly work (or even be approved).
Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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