François Hollande on Collision Course with ... France

Wolf Richter's picture

Wolf Richter

During the French presidential election, it became clear that François Hollande, if he were to win the presidency, would try to align other Eurozone countries, particularly Italy and Spain, into a southern front against German Chancellor Angela Merkel and her government—to fix the problems of the Eurozone à la française. Among his ideas: pushing the ECB to buy government bonds of troubled debt-sinner countries and instituting eurobonds—or euro-bills, as he now calls them—that would give any member access once again to cheap unlimited loans. Everyone would benefit, except the German taxpayer, who’d have to foot the bill. Both policies are despised in Germany where budgetary discipline is seen as the solution to the debt crisis—rather than even more debt and monetizing of that debt.

Now that he has won the election, he has set out on his pre-charted collision course with Germany. The war of words has already started. For the first time that I can remember, a French government is lobbing unvarnished and relentless verbal attacks across the Rhine. They had their differences before, but they always put makeup on them and dress them up nicely to come across as the harmonious if not always smiling Franco-German couple. But now, the center of Europe, the two architects of Europe and the Eurozone have chosen the path of confrontation—and if any single thing can break up the Eurozone, or cause Germany to bail out—that will be it.

But Hollande isn’t just on collision course with Germany.

“We have the feeling that we live a grave historical moment, a moment of truth,” said Laurence Parisot, President of the MEDEF, the largest employer union and lobbying group in France, representing 700,000 companies. During a press conference on Monday, “the boss of the bosses” delivered her solemn words without a trace of a smile.

The situation for French companies, she said, was already tough: collapsing margins, falling orders, extreme cash flow tensions, frozen hiring projects, and “uncertainties of such magnitude that all large investment projects are put on standby” (video). And she plowed into Hollande’s program item by item:

  • Imposing a dividend surtax of 3% that companies (over 250 employees or €50 million in revenues) have to pay. Shareholders already pay income taxes on dividends.
  • Raising company contributions for pensions, healthcare, work-injury and disability insurance, and other state programs.
  • Raising the minimum wage, already at €9.22 ($11.60) per hour. Arch-competitor Germany doesn’t even have a minimum wage.
  • Making layoffs even harder and more costly if they fall into the nebulous category of “abusive layoffs” whose sole purpose is to goose the stock price.
  • Lowering the retirement age to 60 for those who started working in their teens, and funding it by increasing corporate and individual contributions.

“These increases will not remain endurable for long,” she said, before “they hit small and medium-size enterprises very hard.” They were already in distress, and with these policies, France would “run the risk that private investors will invest less, or elsewhere.” And bringing taxation of capital in line with taxation of work would “dry up” the economy. The new programs are “disconnected from the reality companies have to face, from what a company can endure.” Based on these new costs, taxes, and limits, she said, “We fear a programmed strangling.”

Adding to the uncertainties about Europe is the feeling among foreign countries, she said, that the old continent is no longer a market of the future. She called for a unified European voice in foreign policy, defense, economic strategy, and finance that would allow it to “counterbalance the colossal powers in other parts of the world”—particularly China and the US. Thus, without saying it, she implored Hollande to make peace with Germany. And she warned him “not to transform our country into a hyper-rigid enclave that would be totally disconnected from the functions of a market economy.

And so the euro crisis moved on in its inexorable manner. The G-20 summit last November in Cannes, France, was all about bailing out Greece, and it turned into a fiasco. Now at the G-20 summit in Los Cabos, Mexico, tiny Greece is still front and center, but the summit has been escalated to bailing out the entire Eurozone. President Obama took it even further: he wanted everybody else to do “what’s necessary to stabilize the world financial system.” Read.... The G-20 Farce: Saving The Eurozone From Collapse.

And here is an excellent, hard-hitting article by Rex van Schalkwyk, former justice of the South African Supreme Court. In politics, he writes, it is the idea that counts. And between idea and reality, there lies that vast uncharted terrain of promises unfulfilled, of lies and deceit and of naked hypocrisy—a self-inflicted deception that accounts for the failure of society, particularly relevant, given the Eurozone fiasco. Read.... Compassion – Killer of Society?

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Bollixed's picture

President Obama took it even further: he wanted everybody else to do “what’s necessary to stabilize the world financial system.”

What else could he have done. It was written right there on the teleprompter.

WhiteNight123129's picture

He could start by resigning, that would be a first good step. All the G-20 resigns, they appoint 1 auditor and some accountants to run the countries. Imagine the equity rally in Europe!!


John Wilmot's picture

Teleprompter-in-Chief: the legend of Barack Burgundy

disabledvet's picture

some background music while all of you read on...
with a hard on of course.

LetThemEatRand's picture

It is odd that so many commentators base entire pieces on the (false) premise that Germany is not socialist, contrasting it to other European nations.  In fact, Germany is incredibly socialist.  They require union workers to be included on the boards of companies with more than 500 workers.  They have government sponsored health care.  They have a massive public school system.  They have a comprehensive social security system.  And so forth.  Germany has been successful in part because it makes it very difficult for its manufacturers to leave and set up shop in places like China.  So Germany actually has a middle class.  Other western nations were convinced by the oligarchs that they could ship off their good jobs and live happily ever after buying cheap goods from slave labor countries.  Ironically, Germany succeeded where other Western nations failed in part because it was more socialist where it really counted (protecting middle class jobs).  

karp4cy's picture

You are totally ignoring the impact of cultural differences between the German populace and those residing in the failed socialist states.  The proportion of German citizenry that view it as their right to exploit the social safety nets to their maximum personal benefit is considerably lower than their socialist brethren, including unfortunately, the U.S.

TNTARG's picture

Do some homework.

"The secret of happiness is freedom.  And the secret of freedom is courage." Thucydides

LawsofPhysics's picture

Courage to protect your middle class and make damn sure that fraud is fucking prosecuted and the rule of law applies to everyone.  Wake the fuck up idiot.

Freddie's picture

The Germans seem to have a lot of factories in places like South Carolina, Alabama, Tennessee - far away from the shit and blood stained hands of the UAW.

mjk0259's picture

They had factories everywhere in US but we confiscated them twice last century. Unionized workers in Germany make very high quality products that can be sold all over the world. Much higher income than US workers. They built car factories in US to avoid currency problems and also to have cheap US labor (union or not).

BandGap's picture

Disagree to a point. Germany has a very strong nationalistic culture that starts at the base level. Germans buy quality goods, they take pride in making quality goods. Say what you want about their education system, but if you don't go to college you learn a trade. You don't sling hambugers. It is so much more a cultural advantage than anything a government could put in place. Their "socialism" stops at the border, they could give a shit about Greek pensions.

Cast Iron Skillet's picture

making it hard for companies to leave is part of the Industriepolitik, which I think pragmatically speaking works really well. The big advantage Germany has that allows it to work well is a a high degree of political consensus on the big issues.

kikkoman's picture

L'unanimité est presque toujours un signe de servitude.

mjk0259's picture

Yes and socialism is working quite well for them. That's why TPTB want to bankrupt them with bailing out less efficient socialists. But Germans are so smart and industrious that they succeed no matter the system.


smb12321's picture

You could not be more wrong. First she is losing population faster than any other EU nation despite. Massive immigration. Her true debt is -as noted on ZH frequently - much more than the official number. Germany made changes in the 90's that bought her time but the demographics are inexorable. Finally she is a produce-based economy without many natural resources and her main buyers are on the decline.

Finally I imagine she will give in and throw hundreds of billions down the black hole of PIGS debt.

mjk0259's picture

A produce based system? You mean they are selling carrots and lettuce?

An industrious, intelligent people don't need their country to have much natural resources if they can organize themselves efficiently. Germany never had much natural resources except coal. Neither did Japan. They produce things people with the desired resources and trade for them.  US is not so much able to do that. Some of our biggest exports are scrap metal from dismantled factories and cardboard to be recycled. The only big manufactured export is airplanes and they have a very large foreign manufactured component.

Declining population is not necessarily bad. It's not impossible to restructure social programs that were based on increasing population to work a different way.

Their main buyer is China - not on the decline although they are stealing their tech as fast as possible.

Consider 1945. Germans lost half their territory and about 25% of the working age male population dead or injured, split into 4 pieces each occupied by a foreign army. Every city bombed to rubble.  Millions of Germans that had lived in other countries for centuries killed or forced to move to Germany. Hundreds of thousands in Soviet slave camps being worked to death. Almost every neighbor hostile. Best scientists killed or captured and sent to US or Russia. Russians took everything they could of what was left, even the toilets. Massive rape and pillage. Couple decades later they were in top 3 exporters in the world. 











Vendetta's picture

Keeping manufacturing in the country and preventing healthcare costs from going to the moon seems quite logical

potlatch's picture

Why are you opposed to our healthcare costs going to the moon?


It sounds like a fine solution to a problem: lunar nursing homes, the first moonbases of the human race, our compassionate but enticing gift to our Boomer overlords.

bigwavedave's picture

It's called National Socialism. Doh!

Wolf Richter's picture

I agree with you mostly. Germany had a very good run the last three years, but that appears to be over. And before that time, it spent fifteen years in econ purgatory. I’ve written about that extensively. I certainly agree that Germany is in essence a socialist system ... with, as they call it, “a social market economy.” However, it did reform some sectors, and inflation saw to it that real wages dropped since Reunification (same as in the US since 2000). Personal taxes are extraordinarily high in Germany (though corp tax rates have been brought down), but everybody who can, cheats.... their national sport, ahead of Fußball even.

bankruptcylawyer's picture

Corporate Bankruptcy Laws place criminal jail time for executives and CEO"s that overleverage their companies. IN GERMANY.


when you look at the U.S. and you see what happens with corporate credit. Our government encourages failing companies to borrow money, or to be bought with borrowed money for the purpose of looting the company and screwing the shareholders. 

It's called "private equity' and it is an entire industry in america that is responsible for accelerating and profitting off of many devastating economic feedback loops. 

Private Equity helped shut down and loot factories in the U.S. , Private Equity helped securitize LAND/RENT that many businesses used to own . In fact it is LEGAL to loot a company by buying it with loans that are going to be funded with securitized proceeds from a sale of the companies land with no plan to USE the land itself for new purposes. 

you understand GERMANY and any SANE country would jail people who routinely do this. Many countries like singapre and china are forced to actually KILL executives when they get openly caught having done this stuff ( but they of course try to cover it up and make a mafia state out of it ) ----the private equity syndicates operate like a Usurous Mafia syndicate and the lifeblood of all this looting is CHEAP MONEY and LOT OF LEVERAGE. 

look at germany. frankfurt is hardly london. 

It appears socialism is more about keeping your bankers in check SO they don't loot your country than it is about any other practice. 



OttoMBMP's picture

Germany LOOKS relatively better than France, because:

- it has a heritage industrial tissue and know how built back in the 19th century and relaunched in the 1950s and 60s during the years of "libertarian" Ludwig Erhard. Germany is consuming this heritage. The EUSSR also wants to consume it. In any case, it will not last very much longer. This is due to (among other things) socialism (you are right!) a destroyed educational system, demographics and imported ethnic conflicts.

- Germany is socialist. But it has never completely closed the eyes in front of its own reality. France, living in the dream world of glory, has problems to accept her reality and is, thus, hardly capable to react and adjust to changes which are obvious for everyone else.

bigkahuna's picture

Hmmmm, the US is also living in a dream world...

potlatch's picture

Dude, you know full well, if push comes to shove, Steven Tyler warms up his pipes for a sweeping power ballad having something to do with dreams and not lettin' go, Liv Tyler tears up amid the sparks, and Bruce mutherfucking Willis puts a nuke into downtown Tehran.


Well, except for that last part.

Tijuana Donkey Show's picture

I thought Germany and Japan are the only two countries where you cannot contest your tax bill. Is that still the case?

El Oregonian's picture

Yes, I also agree. Though the Germans are extremely efficient their views are very socialist in nature. Hell, any country that has Mercedes Benz as taxi's ain't doing bad...

miszczuk's picture

You are absolutely right reagarding socialism. This is brainwashed into the people beginning from school, later in newspapers and magazines like SUEDDEUTSCHE and SPIEGEL and TV. Most of the teachers in Germany are leftists, they even inflaming the young people against infrastructure projects and indoctrinate them with stuff like climate change. 

Mercedes Benz has a declining share in the taxi market. 20 years or so ago almost every taxi was a Mercedes. The reason for this was more the proverbial reliability. This has changed - so the market share.

Peter Pan's picture

I define socialism as governments generating deficits and increasing the national debt of any nation.

Joseph Jones's picture

In Europe MBenz market and manufacture very down-scale cars vs. their USA market. 

In the USA MB market only upscale cars.  In Europe they also market simple little 4-cyl "strippers" or low-end cars (such as the taxi market) that they'd never bring here because it would demolish their market strategy.

Toyota make everything from $100k Lexus to $11k glorified go-karts.  But the two cars are branded and marketed in a completely different fashion.  Lexus never share floor space with any other brand, while Toyota brand may share floor space with Yaris.  

I can only surmise that Europeans are far less snobish (too an extent) than Americans.  Apparently Europeans have no trouble driving a $150k AMG-MB passing an $18k MB taxi, whereas in the USA this is unnaceptable (one of the problems with Hyundai and Kia now marketing $60k cars).   

ebear's picture

you want to see really cheap Mercedes, go to Thailand...heh.

OttoMBMP's picture

There are no €18k MB taxis in Germany.

kikkoman's picture

MB gives a 14% rebate if you use it as a taxi for at least a year.

BigJim's picture

As usual, you're all a bit confused about what socialism is. It's not  the re-distribution of wealth (though socialism does partly comprise this as well). Socialism is the State ownership of the means of production. Don't believe me? Look it up.

So, no, the Nordic countries and Germany are not 'more socialist', but they do have high rates of income tax... ie, they are collectivists (their model of collectivism has far more in common with fascism than socialism, however, as they're not especially militaristic and still have elections, they're not exactly fascists either). As for their economic success, relative to some other collectivist States (the USA, UK, etc), what 'socialists' always seem to gloss over is their relatively homogenous populations and a well-ingrained protestant work ethic... though, like everywhere else that practices significant wealth distribution, this work ethic is eroding.

What LTER and other 'socialists' forget is that for every collectivist success story there are probably 10 collectivist disaster stories. You don't see LTER extolling Spain, Greece, and Portugal, despite their obvious 'socialist' credentials. Germany is not more 'socialist' than the USA, because neither are socialist. Germany's collectivism is - for the moment - looking pretty good, but it still has a debt-to-GDP of 80%... and climbing.

Germany, the USA, the UK... you're all just comparing horses in the collectivist glue factory.

GeneMarchbanks's picture

You're absolutely clueless about Nordic countries and cultural references such as "Protestant work ethic" as a supposed explanation for 'wealth' of nations is just plain ridiculous.

You're in dire need for another set of books BigJim, not all collectivism is the same.

BigJim's picture

Well, I'm all ears, GeneMountebank. Please do tell us all about the Nordic countries' Catholicism and the heterogeneous cultures of their working populations.

Germany's collectivism is - for the moment - looking pretty good, but it still has a debt-to-GDP of 80%... and climbing. And it's looking pretty good because the ramifications of its outsourced monetary policy haven't yet caught up with it.... but they will.

If you see your unemployed neighbor living high on the hog because he's not yet exhausted his credit cards, do you leave your job and join him?


GeneMarchbanks's picture

Well, I'm all ears

No my friend, as a libertarian you are anything but 'all ears'. An ideologue of the most rigid type.

Firstly you must stop clinging to religious affiliation as an explanation of anything economic related. That's step one. If you need ask why I'll just simply state that this has been debunked long ago and point you to a simple little work:

Chapter 9 should be enough.

Secondly, instead of viewing social movements through the (very narrow prism) of the Austrians, Hayek etc, I suggest you find some socialist literature and even, *gasp* Marxist scribblings -- some of which will surprise an open minded intellect.

But again I doubt you'll take the challenge.


BigJim's picture

Chapter 9. I got about half-way through when I finally had to admit I couldn't stand the strawmen any longer.

Here's an example. The author himself says

   Few of us would dispute that people who display forms of behaviour like ‘thrift, investment, hard work, education, organization, and discipline’ will be economically successful.

and then comes the strawman

    Cultural theorists, however saymore than that. They argue that these forms of behaviour are largely, or even entirely, fixed because they are determined by culture, If economic
    success is really determined by ‘habits of national heritage’, some people are destined to be more successful than others, and there is not much that can be done about it.
    Some poor countries will just have to stay that way.

No, culture can change within a generation or two, either for the better or the worse. We see this in the US, when minimum wage laws, as well as welfare for single mothers, destroyed the burgeoning black middle class. We can see it in Sweden, which was one of the most backward countries in Europe until it adopted free-market policies in the late 19th century. By the sixties, it was one of the richest countries in the world... then the people elected collectivist governments, and their economic decline set in. Since their recession in the 90's they've trimmed their collectivism somewhat.

His next canard is to say that because most cultures contain traits that are both good and bad for economic development, we can't say that cultural traits have a bearing on economic development. For instance, he points out that 'Confucianism'

     emphasizes hard work, education, frugality, co-operation and obedience to authority. It seemed obvious that a culture that encourages the accumulation of huma
     capital (with its emphasis on education) and physical capital (with its emphasis on thrift), while encouraging co-operation and discipline, must be good for
     economic development.

But wait! In the past, when governments were explicitly Confucian, they discouraged

    people from taking up professions like-business and engineering that are necessary for economic development....To make matters
    worse, the civil service examination only tested people for their scholastic knowledge of the Confucian classics, which made the ruling class scornful
    of practical knowledge....Confucianism also discourages creativity and entrepreneurship. It has a rigid social hierarchy and, as 1 have noted, prevents certain
    segments of society (artisans, merchants) from moving upwards.

What he fails to see is that as Confucianism evolved, and dropped many of the aspects that hindered economic development, it became a culture that was better suited for economic development.

Culture isn't everything, obviously; you could drop a group of the most successful, hardest working people into a communist state and it would still function poorly.

If you really are interested in this subject, I suggest Thomas Sowell's Race and Culture:

I'm afraid I can't give you a free link to it because it is written by a man of enormous scholarship and people are willing to pay to read his work.

I guess here, at least, you get what you pay for.