Thu, Apr 28, 2005 page9

• Frightened French will make an unwise choice

  The EU treaty is uncovering economic and cultural insecurities, and this is closely connected to the frustrations of declining status and prestige

  • By Charles Wyplosz
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  If public opinion polls are to be believed, on May 29 the French will reject the EU's draft constitutional treaty. Because all EU member countries must ratify the constitution, a French "non" will, in effect, kill it.

  Amazing as this turn of events seems, it has been long in the making. It is amazing because France is not just a founding member of the European Community, but also has been the main driving force behind all major steps toward "ever closer union." But French opposition was also predictable because, for over a decade now, France has veered away from Europe and now finds itself increasingly isolated. Of course, Europe has also moved away from France through successive enlargements, but the main roots of the estrangement lie in France itself.

  The French regard with great sadness their declining status and prestige -- not only in world politics, but also in culture, science and, importantly, language. Europe, in their view, was always a way of reclaiming world influence.

  

  ILLUSTRATION: MOUNTAIN PEOPLE

  For three decades, this worked. France and Germany had forged an alliance that called the shots in Europe. Not interested in geopolitical power -- a legacy of its Nazi past -- Germany was content to back France's ambitions as long as the Common Market allowed it to be Europe's economic powerhouse.

  But that alliance is unraveling as Germany's own status declines, owing to its mediocre economic performance and the loss of its prestigious currency. Moreover, Germany is increasingly interested in exercising political influence on its own. As a result, it is no longer happy with what it gets from the alliance with France.

  At the same time, successive EU enlargements over the decades have brought in other powerful contenders, chiefly Spain and Britain, as well as smaller countries unwilling to bow before French-German leadership. In short, France has lost control of Europe. This is not new, but it has only recently started to sink in, and it hurts.

  France is also economically wounded. Here is a country that has long cherished its "exception" from the normal rules of market economics, a foggy view that rejects both central planning and free markets and claims to offer a well-balanced middle ground.

  The French do not care that they have never been able to articulate their vision of a "third way," for they remain deeply convinced that the state has a key role to play in steering markets in order to defend "higher" values from the single-minded pursuit of materialism.

  This view, propagated since World War II by a quasi-Marxist intelligentsia, is so ingrained that the French do not even bother to understand how markets operate. They look upon economics as an ideological battleground, where all views can be entertained without being confronted with logic, much less with facts.

  Yet facts have been hitting hard. Growth has been lackluster for a quarter of a century and unemployment remains stubbornly high. Urban crime, once described as the wages of unfettered individualism, now resembles what is found in the US, the French model's b?e te noire.

  What has this to do with Europe? The EU, by design, increases economic competition, but France is ill-equipped. One after the other, most European countries have reformed their economies, shedding the cozy arrangements that used to protect every interest group from the pressure of competition. Even Germany, after even worse performance than France, has now taken decisive steps.

  Unable to reform their labor markets because of the fear of street protests, French governments of all political stripes seek to protect their ailing firms, only to face limits imposed by the rules of the Common Market. The bloated French public sector, which many see as the employer of last resort, cannot afford its expensive personnel.

  While many private French firms are thriving, they do so by economizing on manpower and, increasingly, by outsourcing production, often to new EU member countries where labor costs are considerably lower. Public education is in a shambles and France's higher education system now faces competition from other European countries.

  Humbled by economic malaise and loss of influence, the French are scared. They fear the future, because the future means either market-oriented reforms or further economic and political downgrading, both of which are seen as unacceptable, if only because they clash with French self-esteem.

  The European constitution has little to do with any of these challenges, but a majority of French people has started questioning the strategy that has long masked France's diminishing status. They are alarmed by what they see as the domination of Anglo-Saxon economic principles -- the last nail in the coffin of France's mythical "exception." So the EU is now seen as the Trojan horse that threatens the myriad of state-sanctioned benefits and handouts that every citizen enjoys.

  Of course, most French people would ultimately benefit from doing away with this inefficient web of big and small privileges, but most voters, depressed by poor economic prospects and unnerved by high unemployment, are simply unwilling to take the risk.

  They do not understand the roots of their economic troubles and are nostalgic for better times. They mistakenly see the European constitution as one more challenge at a time when they want to be nursed and protected. Scared people rarely make wise choices.

  Charles Wyplosz is Professor of International Economics and Director of the International Centre for Money and Banking Studies at the Graduate Institute of International Studies, Geneva.

  Copyright: Project Syndicate
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