TCS Daily

TCS EU Summit Coverage: The Paris Agenda

By Sylvain Charat - March 22, 2005 12:00 AM

"Economic liberalism would be as disastrous as communism," stated French President Jacques Chirac in lashing out against the EU's so-called Bolkestein directive (named for Frits Bolkestein, the Dutch commissioner who authored it), which would guarantee the free movement of services across the single market.

Strengthening individual rights and promoting free trade are not public policy priorities in France. State rights and intervention are high up on the political agenda whether it be from the Right or the Left. All political and economic measures have a common point: market control. That, of course, is contrary to what Europe intended to be. The 1957 Treaty of Rome proclaimed four fundamental freedoms: the free movement of persons, capital, goods and services. This has been strongly restated in the Lisbon Agenda, which aims to make Europe the most competitive economic zone in the world by 2010.

Convinced that liberalization of services would be an important source of wealth and jobs, the European Commission was asked by EU leaders to draft a directive ensuring it. This was done on January 13th, 2004. Important footnote: the two French commissioners at that time, Michel Barnier, now foreign minister, and Pascal Lamy, hoping to run the WTO, signed onto it. Additionally, the French government did not protest.

The directive has two main aims. First, it would allow free movement of services among member states by making easier the settlement of a service provider in another member country. Second, it would allow free competition for almost all services, including social, cultural, educational and health services. A market-based economy is the way to make a stronger European Union, and this directive helps achieve it by forcing member states to have competitive regulations. Under the country of origin principle, service providers would be able to operate in the most competitive environments.

Yet in France the Bolkestein directive has triggered vigorous opposition from unions, the ruling political class and the government. Trapped in its anti-globalization and anti free-trade rhetoric, the Right rouses with the Left against what it considers to be social dumping. For them, free competition is not acceptable, not before undertaking a harmonization process all over the Union that somehow satisfies Bolkestein's adversaries. This harmonization, of course, should be faithful to the French principles of market control that would transform Europe into a USSR Light at best.

The truth is that France cannot sustain competition. The fact that the World Bank considers France the "world's top reformer" for start-up businesses, with 224,000 created in 2004 - a 12.5 percent increase over 2003, is a mirage. In France, welfare is a core principle, not entrepreneurship. In 2001, about 6 million people - that's 10 percent of the French population - were receiving some kind of social welfare benefit.

Let's consider the most important of the eight "social minimums", or French welfare benefits: the RMI (Revenu minimum d'insertion, given to people who do not have any work to help them live but is not an unemployment aid). In 2004, about 1.2 million people received the RMI, amounting to €700 million. That was a 9 percent increase from 2003. But the most striking is that in 1989, when the RMI was created, only 370,000 people received it: that is a 223 percent increase in only 15 years! This is the French social model.

There will only be more beneficiaries of the RMI since unemployment is above 10 percent now. It clearly shows the inability of the French economy to create work. It's only logical since the ideology applied by both the Right and the Left is the Marxist principle that work cannot be created but must be shared. Thus the 35 hour-week law.

This welfare society is dominated by civil servants or state employees. About 27 million people represent the French active population and some 25 percent of them are state employees, that is more than 6 million. Recently, Prime Minister Jean-Pierre Raffarin, yielding to street demonstrations once again, granted a 1 percent increase to state employees' wages. This amounts to €1.6 billion more in public expenditures, which already reached 54 percent of GDP.

It's clear that France's agenda is not and cannot be Lisbon's. People relying on welfare or depending on the state for their job are scared of a free market economy.

They want state interventionism and Chirac, in a speech given on January 4 of this year, showed he understood it too well. Explaining his government's action, Chirac drafted a milestone for dirigisme. Among its different measures, the French state aims to preserve the social cohesion of the French society and help consumers by regulating competition to help consumption, protecting consumers from market abuses, etc. On a wider scale, the state's duties are to foresee economic changes to help companies, to give employees new freedoms, to find new sources of jobs for people.

Translation: The government is the father of all actions even for private businesses. "The state must promote entrepreneurship," declared Michel Piberau, president of PNB-Paribas Bank, summarizing the real French spirit of free enterprise and free trade: the State must always give a hand. That is social and economic control and that is France in 2005.

France is no longer an engine in the EU, but a powerful brake jeopardizing the building of a free Union. So, a straight question comes to mind: Does France still belong in the European Union project?

The author is director of policy studies in the French think-tank Eurolibnetwork.



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