French Socialist Nightmare: 'The State Cannot Do Everything'

Wolf Richter's picture

Wolf Richter

The preannouncement came Thursday evening: PSA Peugeot Citroën, France’s largest automaker, would have a write-down of €4.7 billion. On top of a hefty operating loss. It would be colossal. An all-time record. Rumors spread immediately that PSA would need a bailout. The second in four months.

PSA passenger car sales in France dropped nearly 17% in 2012 from an already awful 2011. In January they dropped another 16.7%. Sales for all automakers dropped 15%, and PSA’s market share had eroded further. Kia-Hyundai sales jumped 21.2%, the only major automaker with gains. Even Volkswagen Group got clobbered: down 23.9%. PSA isn’t internationally diversified enough. It doesn’t have much in China and nothing in the US, the largest markets in the world, both growing. It’s mired in Europe where auto sales have ground to a halt. It’s bleeding €200 million a month. It’s trying to lay off 8,000 workers and shutter its plant in Aulnay-sous-Bois. And its Banque PSA Finance was bailed out last October with €7 billion in taxpayer money.

The government was so worried that it was actively studying a bailout, sources told the Liberation after the losses were announced. It was just hypothetical. “But if a capital infusion would become inevitable, the state could participate,” the source said. Instantly, a cacophony of discord erupted—within the Socialist government.

Another chapter in the saga of the deindustrialization of France—a process that has afflicted France, like other developed nations, for decades as manufacturing has wandered off to cheaper countries. But now there’s a near national consensus: the state needs to step in and stop it, according to a poll that CSA conducted for Les Echos and the Institut Montaigne....

The same Institut Montaigne that had shocked the establishment last April with a new French Paradox: employees in France were more dissatisfied with their jobs and more stressed at work than their counterparts in the rest of Europe—despite highly protective, “dense and complex” labor laws that allowed the French to work fewer hours, work less often over the weekend, and have a “less sustained pace of work.” And it dared to wonder if the sacrosanct labor laws were still protective, or if they’d become counterproductive even for employees. Gasps all around.

Deindustrialization has been on the front burner since the presidential campaign last year. But now, in the poll, it came down to a single question: Is the decline in manufacturing a phenomenon that can be reversed? The resounding response spread across all professional levels, all ages, and the entire political spectrum—78% of the respondents said yes.

The French expect the government to do “the maximum” to prevent plant closures, explained Jérôme Sainte-Marie, director of CSA’s political opinion division—something that those on the extreme right and left had been clamoring for all along. Now they “find themselves comforted” by the survey results, he said. And it puts the government in a quandary.

So far, it has shied away from nationalizing troubled plants. A risky path: the phrase by Lionel Jospin that “the state cannot do everything” was “absolutely impossible to maintain,” Sainte-Marie said. “Public opinion doesn’t want to hear it.”

He was referring to a Socialists nightmare. Jospin, Socialist Prime Minister from 1997 to 2002, had admitted that he could not prevent layoffs at a Michelin factory, that the state couldn’t do everything (“l’État ne peut pas tout”). A phrase—or a concept, rather—according to some political soothsayers, that contributed to his humiliating defeat in the 2002 presidential election. He was trounced in the first round by right-wing Jean-Marie Le Pen, which forced the left to vote for Jacques Chirac in the second round just to keep the unpalatable Le Pen out. An unforgettable horror story still for the Socialists.

For a Socialist government to admit again that the state couldn’t do everything, that some layoffs and plant closures would be allowed, was fraught with perils. During the presidential campaign, they’d promised the “reindustrialization” of France, and “the French took them by their word,” said Sainte-Marie.

So what to do about PSA?

“This company cannot, must not disappear,” said Budget Minister Jérôme Cahuzac Friday morning during an interview. “We have to do what we have to do so that it survives.” He’d already worked out the details: the bailout money would come from the state-owned Strategic Investment Fund (FSI).

Minutes later, Finance Minister Pierre Moscovici disagreed: “Jerome Cahuzac talked about a theoretical scenario and the tools available to the state,” he said. But “such a state bailout is not being considered, is not necessary, and would not add anything.” Sources in his entourage agreed, “A capital infusion by the state is not on the agenda.”

By midday, Prime Minister Jean-Marc Ayrault jumped into the fray. A bailout was not “on the agenda,” he echoed. PSA hadn’t requested it. Though there was “a tool, the FSI,” that could do it. But “this question hasn’t been raised today. Therefore, there is no question.” But if necessary, he grumbled, PSA would have to “be saved at all costs.”

And so continues the saga of the decline of the private sector à la Française. Tuesday morning, the 168 employees of automotive component maker DMI in Vaux, a tiny town near Montluçon in the Department of Allier, smack-dab in the middle of France, rigged about ten gas cylinders throughout the factory they’d been occupying and threatened to blow it up—unless their demands were met. Read.... French Workers Threaten To Blow Up Their Factory.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
OldE_Ant's picture

PSA needs to start building tanks for the Mali war!  Govt borrow money to buy them, all is good.

As to automobiles I already did the math regarding efficiency and energy use and automobiles are only second to electricity generation/distribution in terms of being 'least' efficient at least in the US.

What IS interesting is that going electrical can almost double automobile efficiency out of the gate.   We already have the solutions to almost every human problem except one.  Greed and power.  Once greedy people have power they will bury everyone else before giving any of it up.

Frankly all this 'production' stuff will go the way of the Chinese and Indians (India) the point here is that in a global world everything will end up being equal and it's highly unlikely Chinese workers will end up with jobs paying equivalent of European or US workers especially when a corrupt govt lies and steals everything from the rest of the world with pride.

If we thought the US or Europe was bad from a govt perspective - take a good long look at China folks.   Totalitarian regimes here we come.   Freedom there she goes and not so much as one shot fired or one riot put down.   Back to your regularly scheduled boob programming.

End of Line

besnook's picture

most of you just don't get it. the form of .gov doesn't matter. the philosophy of .gov doesn't matter. the people of .gov do not matter. all .govs eventually fail by distorting the market and subjugating the people. right, left, communist, socialist, democratic, republic, monarchy, dictatorship doesn't matter. all of them end in the same place.

what made the usa unique was that .gov was purposely designed to limit it's power to control the individual(emphasize individual) liberty of the people. it is done now. there is no longer any limits to .gov power and individual liberty has given way to group liberty, a euphemism for control over the individual. blame it on whoever you like but the truth is history, as manifested in human behavior is to blame. god bless the former usa.

Slightly Insane's picture

"besnook" - Bullsye!

The thing to note is that Government opperates in such a parsitical way that never shrinks.  When the private sector is shrinking, the Government sector (otherwise referred to as "extremely wasteful forced Overhead") continues to grow.  In the USA, we have passed the point of "no return".  Taxation and regulation will exceed the private sector's abilities to pay.  We are now on the road to complete stoppage.  I wonder when the US will enact "price freezes".

Deficit spending is completely useless.  What the government should be doing is "cutting itself" .... and reducing regulations and taxes.  Not likely considering who we have in office.

smartstrike's picture

Best advice to the French--don't listen to Americans.

logicalman's picture

"During the presidential campaign, they’d promised the “reindustrialization” of France, and “the French took them by their word,” said Sainte-Marie."

Taking politicians by their word - always a misake, whatever country you find yourself in.

bugs_'s picture

Its every Statist for Himself!!!

jharry's picture

Let's play kick the can until a miracle occurs, maybe like a cheap sustainable energy resource, like Bucky.M Fuller's idea to tap Iceland's thermal energy for a world wide electrical grid, or cold fusion or using wind mills and solar and store the energy in a recent MIT developed storage battery to use in off hours. This will help France and everyone else, too.  We wouldn't have to bicker and fight so much.  We could use our war money to do it.

exartizo's picture

No "wandering" has taken place.

Capital simply flows where labor is cheapest. Neither France nor any other nation can prevent it in the long term, as a tidal wave cannot be prevented.

This is the obvious reason why Kia is profiting in Europe. They have newer cheaper to operate plants and a lower cost structure, as well as superior quality.

The French suffer from the Same Delusion that the United States, and indeed the rest of the industrialized West does:

"The State CAN Do Everything."

rsnoble's picture

The FED will transfer the required zero's early monday am before markets open.

rsnoble's picture

Or more likely tell them to just add their own zeros to their acct.  Why bother with the trouble.

DutchR's picture
'The State Cannot Do Everything'


Status Quo, Can:
brucyy's picture

Sadly , i'm french.  which is both quite unfortunate and interesting , since i get to see a once civilized country (so far) sink

in some dream of marxism , socialism , and hardcore interventionism from the inside (at least as long as i have to stay here)

Most "people" here do believe the state should "do something" about everything that went wrong in the(their) world, that must be why they pay so much taxes, Right ?


While they are not stupid and understand where capitalism failed , or rather why it became corrupted (they will often quote the most obvious MSM visible headline ,rotten AAA products , or their credit rating , which is utter bullshit according to them)

they are litteraly obsessed by "neoliberalism" , portraying Hayek and Friedman as complete mad men (you'll often read about Pinochet and the chicago boys) And the markets , whatever they are , as anglosaxon tools of destruction of the traditional French way of life ,which should only be based on their "real economy"(which is disastrous , btw) , as opposed to financial speculation (which is uber Anglosaxon-evil)

So. what they see as the only tangible option is reestablishment of the glass steagal act of 1933 (i did warn about the french being romantics) , while quoting some unknown keynesian/marxist french economist.

Basically , they fear what they don't understand. Austrian economics is to be bashed at all costs , and rather than accepting markets as a tool of price discovery that should be approached with due caution and fat tailed risks , they often believe (forced) solidarity , and state-determined , averaged-down wealth distribution is key to a better future.

They are also arrogant enough to think the whole world should follow suit, but that's another story. 

tango's picture

Thank you Thank you Thank you - for pointing out that the goal of an economic system is not employment of health care or taxes but price discovery.  I maintain (well, most Austrian economists maintain) that when the pricing mechanism is arbitary and political, danger is just around the corner.  Markets are remarkably prescient - the sum is greater than the whole - and until France (and Europe) learn this they will be forced to endure these endless adjustments to what is real and what they say is real.   

andrewp111's picture

France is simply too small to support a Socialist protected industry, and France does not control its own currency. Only an EU-wide Socialist Dictatorship can do this, and even the EU might not be big enough. To work, the EU might have to form an Anschluss with Russia to secure internal energy supplies.

AnAnonymous's picture

As usual with 'americans', production of ad hoc conclusions is the main trend.

That should be a wonderful piece of news, according to what 'americans' claim.

If the State does not grow, it shrinks. So in France, the 'american' State will shrink of that and therefore the economy will start to fare better.

Oh wait, 'americans' produce ad hoc conclusions just to spur consumption? Well, one can guess they are going to produce ad hoc conclusions to explain why a collapsing State does not produce the effects on the economy 'americans' claim it would.

Northern Lights's picture

Look I may get flammed for this, but I'm gonna bring up what was noted in that Micheal Moore documentary from 5 years ago.


In it he (Moore) was ranting about how Europe's healthcare system and social safety-net was so much better than the USA's. During one moment of the film, he and his film crew are in Paris, France having a conversation with ex-Pats from the US about what it's like to live in France and what the healthcare system is like. All ex-Pats are yapping away about how great it is, no stress, guaranteed vacation times, and if you give birth and are having trouble with keeping up with house chores, the baby, and cooking, you can call up 911 and they'll send a nurse right over from the hospital to do it all for you!  The cost.......................FREE!!!

Moore is just standing there with his jaw hitting the floor ooh-ing and ahh-ing. Asking the question why can't America borrow this fantastic idea from the French and do the same in the USA.

Now the French are screwed! I wonder if those US ex-Pats interviewed in the documentary still reside in France.  Probably not.  Left long ago to get away from the insanity.

Fuck the French I say.  They're just as bad as the Greeks.  It'll be hilarious when the food trucks back up into the streets of Paris and they start throwing out bread to the crowd of women all dressed up in their best French designer clothing!

andrewp111's picture

It will be more hilarious if those well dressed women storm the food trucks in a bloody mob scene because there isn't enough to go around. Remember, the French love to riot.

thewhitelion's picture

Not really my idea of hilarious.

dunce's picture

I loved the line at the end "it must be saved no matter what the cost". Refusing to acknowledge costs is what got them to this point. Obama is really good at this kind of business. He is always throwing around general measure words like more, most, less, balance, surplus, deficit, fair distribution,and of course the %1. Numerical concepts are hard.

joego1's picture

Wee wee more Poojoe

Stud Duck's picture

Is it possible that Jame Howard Kunstler is right??? His main hypothesis is that modern society has misallocated more on the automobile than any civilization in human history. That included all the tunnels, bridges, interstates as well as the actual automobile every 2-4 years while society let the railroads decline into what they are now.

He actually has a point that history may see as correct, we will see soon!


dogbreath's picture


Where did he say that.  My city is perfectly described by that description, it covers an enourmous area with a low density of population.  Its winter here and the roads are crumbling 

sun tzu's picture

Cars are more efficient than trains unless you live in a crowded megacity where you are packed like rats living on top of each other

dogbreath's picture

The design of the modern(sic) north american city makes automobiles neccessary even though  there are many people who work and live in the city that wouldn't need a car if the public transportation systems were better.  In north america you need a car to drive from walmart across the parking lot to macdonalds and back to your cage in the suburb.

CompassionateFascist's picture

Precisely why JewKunstler wants White suburbia/ruralia depopulated. The Jews will not sleep soundly until the Kulaks are disarmed then destroyed. 

steve from virginia's picture



The world auto industry dies ugly ... a country at a time.


That is, one country dies before another country dies. Eventally, all the countries are dead, killed by the stupid metal boxes at the ends of everyone's driveways.


Nobody can afford the cars because the cars cannot be used in any way to repay their cost or that of the fuel wasted in them. Instead, massive amounts of money must be borrowed, these are the large debts everyone hates. Large governments are needed to manage these debts and guarantee them ... the same large governments everyone hates.


Cost, cost, cost ... drill it into people's heads, the costs of our precious toys have become ruinous. One car company is ruined at a time, one country at a time. France is next ... then Japan.



sun tzu's picture

Don't forget how the auto industry killed the Soviet Union and Argentina

AnAnonymous's picture

Good point. Indeed, overconsumption has its demands. One is that squeezing them out of their consumption increases the consumption of others. Such systems resiliency lie into the resiliency of those who are squeezed out of their consumption.

Unfortunately for 'americans', it seem that this resiliency is about to be extinguish and therefore 'americans' have to face by themselves the demands by overconsumption.

Pyramids always collapse by the bottom, never by the top.

As lower levels go down, the top is less high.

Time for some 'american' middle classers to be pushed under the train in order to save the rest of the 'american' middle class.

The'american' servants to We The People know no other ways.

otto skorzeny's picture

who is that-someone from Dionne Warwick's Psychic Friend Network?

Yes We Can. But Lets Not.'s picture

I can't believe these French dumbasses can't see the obvious solution.  Can they not see the future?

They need to convert the manufacturing at PSA over to production of 100% ELECTRIC CARS.

sun tzu's picture

Such a simple solution but nobody has done it yet. I wonder why?

SoCalBusted's picture

Ally "Bank" should open up offices in France.  Clearly there's a lack of car loans, causing demand to decrease.

Walt D.'s picture

"He mentioned that all employees, no matter the industry, are guaranteed 4 weeks paid vacation per year."

And we are giving Obama shit for taking 3 weeks a year?  Time for BO to move to Paris!

John_Coltrane's picture

I think most on ZH would like to see the telepromter-in-chief take 52 weeks a year off-preferably spent underground.

RSBriggs's picture

3 weeks per year?  Fuck - between he and Mochella, they take 3 weeks per MONTH of vacation.  OBullshit spends 30 hours per week on the fucking GOLF COURSE, and flying to and from...

WTFUD's picture

well he des have 3/4 million employees to do the hard graft. don't be a meanie and give the dude his space.

jamie D

CompassionateFascist's picture

Yeah, well...finishing off a country that Genghis Bush all-but-destroyed ain't exactly a full-time job. 

mightycluck's picture

Like bailing out shitty PSA. Peugeot, Citroen, etc? Like the US with GM and Chrysler? Or Argentina and Venezuela?


Look at the old Citroen that this guy has below the PSA story.

notadouche's picture

I don't suppose the French have ever heard of the "Law of Diminishing Returns".  It looks like they are discovering it the hard way.  It's a pretty sound thesis in just about everything in life, not only economic theory.

Spigot's picture

The fact that politicians in France are even talking about limitations of the State, when in fact they are the ones who created the problems in the first place,....wellllll I guess its a start, but a long journey ahead.

AnAnonymous's picture

It is very hard to imagine an 'american' society without a State since the success of 'americanism' is the success story of the State.

new guy's picture

notadouche- I would give one hundred up arrows for that comment if I could. The law of diminishing returns is the most abused law in the universe.

ramacers's picture

let 'em eat grapes.

Mugatu's picture

No need for a bailout since all French workers are on vacation next month.  Any talk of layoffs will also need to wait until French Summer vacation is over in August.  After all, you have to be at work to be laid off.

Meat Hammer's picture

Freshly after graduating from college I went to Europe for some backpacking and recreational drug use.  I remember talking to a waiter at a little cafe in Amsterdam.  He mentioned that all employees, no matter the industry, are guaranteed 4 weeks paid vacation per year.  I waited tables in college and we got approximately NO paid vacation.  I remember thinking "how can the businesses in Europe afford that?"  I guess they couldn't.

AnAnonymous's picture

What a deed.

Waiting tables as a full time job plus learning at the college... One can understand the urge for drugs.

TheFourthStooge-ing's picture

What a deed.

Washing dishes and washing laundry as two full time jobs plus propagandating in the behalfs Chinese Citizenism Communautist Party Ministry of Truth... One can understand the popularity of Peoples Liberation Opium Parlours.

sun tzu's picture

...but it's FREE! Why don't you want FREE stuff?

Freddie's picture

Unions and leftists wrecking manufacturing companies.  These leftist then also push open borders to wreck countries.  Poor France.