Plot Twist In France While Businesses Are Dying

Wolf Richter's picture

Wolf Richter

France, tangled up in a presidential election with major implications for the Eurozone, has gotten used to watching President Nicholas Sarkozy getting clobbered in a historic fashion by socialist François Hollande. But today, the country woke up to the news—quelle horreur—that their presumed and possibly written-off loser was suddenly ahead in the polls, or in one poll, to be precise. And the main media outlets, which had been so ready for a change at the Elysée, fell all over each other to doubt the results.

During the first round, when a whole slew of candidates go at each other with knife and fork for the top two spots, Sarkozy would obtain 28.5% of the vote, and Hollande 27%, both well ahead of the pack. Forty days till the election, and there's finally a poll that shows Sarkozy in first place.

“That’s just froth,” deadpanned Sarkozy.

Perhaps it has something to do with Hollande’s ambitious tax-raising program—ambitious even for the French who tax everything out the wazoo. Key element: a 75% income tax bracket aimed in his populist manner at the chieftains of the largest companies and banks. Instantly, a hullabaloo broke out, not among his targets, but in the world of soccer, the people’s sport. For how this has mushroomed into a calamity for Hollande, read.... Killing the 75% Income Tax.

In the second round, Sarkozy would still get clobbered with only 45.5% of the vote, against Hollande's 54.4%. Nevertheless, the first-round numbers were a glimmer of hope for Sarkozy. In his desperation, he’d made Germany the economic model for France, which didn’t sit well with French workers when they noticed what it would mean for them, and he’d even made a pact with German Chancellor Angela Merkel, who is trying to protect her own oeuvre, a Europe of balanced budgets tied together by a new fiscal-union treaty—which Hollande had vowed to eviscerate. But now, Merkel raised the stakes by roping in three powerful allies and lining them up against Hollande—to keep Sarkozy in power. Read.... Next Phase in Merkel’s Desperate and Risky Gamble.

Amidst this plot-twist chaos, two fundamental cross currents with harsh impact on the future of the French economy went practically unnoticed, though they should have caused an outburst of national soul searching during the campaign: record high bankruptcies so far in 2012 and a plunge in venture capital investment.

The first two months were brutal: 10,900 companies filed for bankruptcy, a trajectory that might establish another sad record, beating the prior record of 2009 at the height of the financial crisis, when 61,595 companies went bust. And where is the new blood in the French economy supposed to come from? Not from startups and venture capital, it turns out.

Last year, venture capital firms invested only €822 million ($1 billion) in startups, down 21% from 2010, and down 10% from 2009 when France was in a recession. And only 604 startups were funded—during a period when over 58,000 companies went bankrupt. It's hard to imagine how France can regenerate itself. The decline accelerated in the second half of the year with VC funding dropping a breathtaking 24% from the same period a year earlier—after having fallen 19% in the first half.

And the future of startup funding doesn’t look bright: intentions by banks and insurance companies to allocate capital to venture investing collapsed by 69%. This is perhaps why there is such a vibrant community of French entrepreneurs and software engineers in Silicon Valley. They're going where they can thrive.

Bright spot: internet and ecommerce attracted over a quarter of VC funding in the second half. It now is the preferred sector, replacing biotech and medical devices. Some internet startups in France have proven that they can produce profitable exits for their investors—who, like their brethren in the US, are all looking for the next Facebook or Google.

And just then, an insidious and at once funny internet-age issue erupted in France, or more precisely in a tiny village in Maine-et-Loire, with worldwide implications. Read....  Can’t Even Urinate in his own Yard Anymore.

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BlackholeDivestment's picture 

...U,S,, France, England, Germany etc,,, New World Order Whores riding the global market beast, which holds labor etc... in complete contempt. Still the people continue as they were, Fed Zero food. How strange. Why are people so muted by the lawless Suicide Vampire Squid of the Great Wal Mart of China? The spirit of independence, valor and honor, has not risen above the contempt of the market whore and the people can see they are exposed and getting screwed. The people are obviously too weak to stand up and restore order, which means the strength of lawless scum will run their due course, headed all the way down the black hole. Amazing! What will 2014 look like on the books by then? Should there not be blood by then? Carmen Reinhart well defined what is historically in store

go to 13:13 

''what we are seeing now is really pre war''

Sandmann's picture

The Internet is proof you don't need to be in France - Luxembourg is far better for Francophones and is where Amazon runs its is also proposing a new rate of VAT on E-Books of 3% in violation of EU Law. France is not a place to incorporate simply a place to live and not draw an income. French corporates probably invoice through Ireland or some French tax haven - hell, even in Britain the top public officials are laundering their incomes through shell companies to get taxed at 20% instead of 61%......

Noone believes in the system any more and it is like Friedrich Duerrenmatt's play "The Tunnel"

EmileLargo's picture

France is fucked.

ChrisFromMorningside's picture

Scorpio: By the way, Homer, what's your least favorite country? Italy or France?
Homer: France.

Scorpio: Heh heh heh. Nobody ever says Italy ...


I for one am excited about France, the snob nation par excellence, getting its come uppance. Have fun eating dirt pies and living in Sarkozy-villes, frogs.

Don Diego's picture

they are just introducing a new gun law in France. The law is very vague and leaves the details to the prefet (the region's represant of the executive power). This means that they can take all the guns from the people at the President's whim.

Haddock's picture

Internet start ups saving the day? Je ponse non.

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nah's picture

but taxes are good for the state

Dermasolarapaterraphatrima's picture

Who needs businesses when we have a Central Bank to print?

lamont cranston's picture

Zut alors! Merde!!! Les becassine plus gros cochons... aw what the hell, let's do Amercain.

Marx was wrong when he stated that religion was the opiate of the European masses...Karl, try sports. It's much better. ManU fan IQ = mebbe 86 on a good day, about where a Ohio State U fan wishes he were. 

France has been down the tubes since Colbert. I loved The Iron Lady, but that North Sea Crude $$$ sure helped Britian's temporary resurgance. 

When capital formation is under attack, and I do mean a meaningful attack by semi-knowledgeable but well-intentioned individuals, we're fu#*ed. The beeg boyz will always have capital in reserve to pivk up the pieces at 10% of FV. When the creative, sorta underfunded class that is the margin that propels innovation and growth sez FU, then we be ded meat. And that's where we are now. 

WYSIWYG. Situation FUBAB. 

Schmuck Raker's picture

"Love the Wolf" [ala Seinfeld]

Great article, TY.

pmm009's picture

75% marginal bracket...things will be booming in Monaco!

SAT 800's picture

10,900 bankruptcies. Hmm, well, no-one is perfect.

hedgeless_horseman's picture



Things are indeed booming in Monaco.  We recently had dinner at Le Grill with a table for two at the center balcony, thanks to Aurelian, our hotel concierge.  The restaurant was absolutely packed, the caviar was perfect, and le poisson was magnifique!  The souffle was devine.  We then walked across the street and played several hands at The Casino, which was also full.  The marina, too, seemed to be full.

Oh, by the way, it was mostly Russians.  The Bride and I seemed to be the only Americans, although we do not look the part.

One of my ten favorite restaurants.

prains's picture

looks absolutely packed, did you have to go wide lense so as to not get too many people filling the frame?  /s/

lakecity55's picture

If there is any of Operation Gladio left in France, Sark is begging the Taupe Wonder too have Panetta activate it.

Bartanist's picture

Sark, probably just asked his US counterparts for and received the keys to media and voter fraud. Nothing to see here.

el Gallinazo's picture

Wolf, just FYI one gets taxed up the wazoo, not out the wazoo.  The second phrase does bring up interesting images though, something Banzai7 could undoubtedly work with.    Of course it is totally colloquial usage.

Zero Govt's picture

another good round-up of the crumbling business sector in France Wolfy

despite the poll numbers i can assure you: Sarkozy is toast

nmewn's picture

It's all oui'd oui'd up ;-)

Apostate2's picture

Cheered to read the Franciliens have overcome the fin de siecle and embraced the internet age. Adieu Darty box and vive le pisseur!

john39's picture

elections are show in almost every country...  just follow the strings back to the money changers...

Vince Clortho's picture

Why would they permit honest elections in France?

bank guy in Brussels's picture

Because in this part of the world, we remain revolutionary in our hearts ... people are ready to take to the streets and storm the Bastille ... for us, 1789 was just yesterday.

We understand here that democracy is not 'voting' which can be a manipulated fraud and a farce, or some 'Constitution' that can turn into toilet paper like it has done in the USA, under corrupt lawyers and bribed judges who work for oligarchs.

Democracy is people who are ready to take to the streets, people ready to shut down the nation and the government in a general strike, or something even more serious if that is warranted.

We have the same spirit in Belgium. The French Revolution of 1789, also led to a revolt against Austria whereby the Belgian peoples briefly became independent, before becoming part of France and then Napoléon's empire, a prelude to our 1830 Revolution against the post-1815 Dutch control, which established free Belgium for good.

And in Belgium we have kept our rebellious ways ... the smoking in the cafés despite the bans ... people on the trams drinking out of their tall-boy half-litre Belgian beer cans while on the way home in the evening ... delightful place to live.

ChrisFromMorningside's picture

Can't tell if you're being sarcastic or not. Drinking beer in public? Violating smoking bans? That's what you call "rebellious"? In the U.S. we rock AR-15s at political rallies on the Capitol lawn. Try that on for size. Ya'll are bigger bitches than I thought.

Heyoka Bianco's picture

Yes, the idea of technocratic rule and a reign of terror is always just around the corner for frog talkers . . . .

brettd's picture

Rioting and lopping of people's heads didn't change things at the Bastille.  Just devolved into anarchy.

OWS didn't accomplish even one indictment from our Justice Department.  It too devolved in to incoherent violence. 

What really changes things are solutions.

sun tzu's picture

Europeans live under the thumb of the unelected bureaucrats in Brussels. They have taken away your only means of overthrowing the EU aristocrats. You are no different from Americans or Chinese

disabledvet's picture

You mean...The Bank Guy in Brussels. (Cue ominous "da-da-daaaaaa")
I've already got the opening line: "I was huffin' down a litre of Chimay at Francois's when...the Bank Guy from Brussels walked in."

Bringin It's picture

bgib - You're kidding yourself. 

This may be a true statement, but it doesn't seem to apply to Europe right now.  Greece has riots and no democracy, the rest of europe has no riots, but no democracy either ... according to NF.

Democracy is people who are ready to take to the streets, people ready to shut down the nation and the government in a general strike, or something even more serious if that is warranted.



Gromit's picture

I've heard it said that in France the police are afraid of the people? Not the case in the USA where our authorities can be heavyhanded, Waco, Ruby Ridge etc.

That said I was in Paris June of 2010 when they increased pensionable age up from 60 - the Unions were out in force, nearby SWAT police looked loaded for bear, didn't stick around to see the action.

I am Jobe's picture

Amerika it is shoot to kill policy. Yeap Cop are are trigger happy at best and the common folk has no chance period.

Rynak's picture

Bullshit.... as usual from your account (click on his username, and choose "track").

While it is true that the french are among the most willing to protest and riot.... something for which i do admire them.... there are two things you do not mention:

1) It has little to do with the political system in place.... culture pretty much goes full opposite to the governing system in place... in france.... which has led to the public and elite considering unrest as "business as usual"... something "normal" that can be ignored..... which brings me to....

2) Any outburst of unrest, in france tends to calm down as quickly as it erupted. THAT makes it highly impotent from a strategic POV: Even though unrest easily starts in a highly emotional way... it just as quickly goes away - making room for the next "business as usual" trigger for riots.

So, in france even though the populace has a culture of rioting fast and furios, it has become an ignorable cliche... a routine-task to deal with even for the ruling class.

Which historically is pretty much the inverse of germans: Germans lack the "short-fuse" of the french, and will tolerate abuse up to ridiculous degrees... but if unrest breaks out, it is a truck, rather than a racecar.

Unfortunatelly, both is easily controllable: The french lacking any "endurance" in public discontent, makes their voice "transient".... and the german high threshold of even starting an unrest, makes their discontent "manageable without any actual symptoms triggering". France got what germany is missing, and germany got what france is missing.

And as long as that is so, their populations will both fail at forcing their opinion on the ruling class.

ChrisFromMorningside's picture

Indeed. It's all political theatre. Pre-programmed. Routine. Unions bring out there members and cause a hubbub. Police come in and everyone disperses. Everyone goes home at night and pats themselves on the back for a great performance. That's all it is. Nothing real is ever at stake in these "flavor of the week" Euro protests.

Gromit's picture

Not sure what your problem is....but thanks for teaching me to use Track!

Rynak's picture

My problem is that:

- this guy is a regular troll

- he is portraying france as the "power to the people" utopia, when in fact it is just does thing X right, while doing thing Y equally wrong

France does right, what many nations do wrong.... yet is incapable of sustaining it, where most other nations were able to sustain it (but because of the high bullshit-tolerance, never get to do so)

France: Short-term power of the populace, but no longterm endurance

Most other nations: No short-term power because of tolerating too much bullshit... but if their bullshit tolerance were triggered all accumulated hell would break lose.

Problem: To in this global governance get anything pushed through, you need energy AND endurance... not just one of both: "We want this, and we will not back down!"