Chirac's France in the 21st Century

Probably not since Charles de Gaulle at the height of his power during the Fifth Republic has France’s destiny been so fully in the hands of just one man.

What makes this finding even more stunning is that Monsieur Chirac was essentially elected by default — rather than by deliberate choice.

Even more curiously, all of this occurred at a moment when France desperately needs both economic and social reforms to modernize — and a thorough reshaping of its European policy.

The key question is this: In what direction will Chirac drive France? At stake is nothing less than France’s position in an enlarged Europe.

Will France once again emerge as a leading player in the new geo-strategic set-up of the European continent — or will it become increasingly marginalized?

The answer will lie in a key choice that will be Chirac’s to make: Will he commit his government’s creative energies to in-depth reform of the French economy?

And, by extension, will he have the guts to modernize the European Union's Common Agricultural Policy (CAP)?

Alternatively, he can opt to put destructive energies in the powerful 'deadlocking capacity' that France has within the EU.

If he opts for that path, his moves could even entail reverting to some contemporary version of the (in)famous 'politics of empty chair' that General de Gaulle deployed in 1966, to prove that nothing within the EU can happen without France.

Looking at the economy first, there are some signs that France is flexing its muscles. Mr. Chirac and his Prime Minister, Jean-Pierre Raffarin, may be preparing for an open struggle with the EU authorities. The issue is how far they can go with politically popular changes in the domestic economy that would nonetheless worsen France's budgetary position.

Therefore, the French government would call into question its fulfilment of the 3% budget deficit limit built into monetary union via the 'Stability Pact’. France is under pressure from the European Commision to present a balanced budget for 2004.

President Chirac had vowed in his campaign to carry out tax reforms, which include a 5% income tax reduction — as well as a further decrease of the overall tax burden by roughly 30%. In combination with planned increases in public spending on families and internal security, that would lead to a deficit of some 45 billion — instead of 30 billion euros.

This increase in the deficit of some 0.2% would bring France very close to the 3% threshold, in particular because France is also working on the assumption of an economic growth rate of 3%.

What’s more, a tight fiscal policy will severely constrain Mr. Chirac’s industrial policy initiatives and reduce his overall room for maneuver. This is doubly painful since it occurs at a time when he may wish to increase the French government's stake in major French players such as Vivendi and France Telecom, which are currently going through profound business difficulties.

And yet, he also has to be concerned about the fact that France wants to place Jean-Claude Trichet at the head of the European Central Bank in mid-2003, when the institution's current president Wim Duisenberg retires. With that goal in mind, Mr. Chirac would be poorly advised to simply disregard France’s European engagements, especially on the budgetary front.

Clearly, Jacques Chirac will have to balance his ambitions for the domestic economy with a sustainable pro-European stance. It's all well and good for France to undertake various reform plans — such as introducing the flat-tax and new pension schemes, opening up its energy-market, pushing privatization and back-pedaling on the 35 hour work week.

These are all good economic policies. But in an ever larger Europe, it is hard to envision that they could come at the expense of France’s European commitments.

To most Europeans, 'l'exception française' — or the collective willingness to be prepared to cut the French a special deal at all times — is on the road toward extinction.

Essentially, President Chirac will now have to choose between two positions: Does he want to go down in history as the heroic defender of the special interests of French farmers, representing some 4% of the active population of his country? Or does he want his legacy to be that of a founding father of a new, powerful and enlarged Europe of the 21st century?

Evidently, the key to the complex process of EU enlargement and its financing lies in reforming the EU's agricultural policy, which currently accounts for roughly half of the entire EU budget.

And the key for agricultural reform lies in the Elysée Palace. Without French agreement, there can be no reform. But getting such an agreement is hard because France is by far the greatest beneficiary of the present system.

Many analysts forecast a major Franco-German confrontation over this issue. Germany does not want to increase its own net contribution to the EU budget. France, meanwhile, does not want to give up its agriculture support payments from Brussels.

At the same time, the EU accession countries don't want to be 'second-class' members of the European Union — not benefiting from agriculture spending at all. If all three sides stick to their positions, the resulting deadlock could threaten enlargement.

Luckily though, Jacques Chirac is a political animal. And in this regard, a forthcoming birthday event could serve him well. In January 2003, France and Germany will celebrate the 40th anniversary of the famous Elysée Treaty which established the Franco-German engine that became the driving force in European policymaking.

This symbolic date could become the occasion of a major trade-off along these lines: France and Germany agree on a common declaration on the future of the EU. Germany accepts a continued role for a Common Agricultural Policy at the European level.

And France, for its part, accepts partial national co-financing. In addition, both nations agree on decreases in the total share of agriculture spending in the EU budget from some 50% to the low 40% range. This frees money for other tasks of the European Union — such as common research and technology, as well as foreign and security policy.

A declaration of principles in January 2003 would be sufficient for the moment — and ease the way toward enlargement. Details could be fixed later, beginning as early as 2004, but definitely by 2006 — when the new budgetary framework of the enlarged EU will have to be negotiated.

This scenario might be especially politically compelling to both countries if opposition leader Edmund Stoiber wins the forthcoming German elections in September. This outcome would result in an alignment reminiscent of the historic couple of de Gaulle and Adenauer, two conservatives who signed the original Elysée Treaty.

All that President Chirac needs for the moment is a bit of time to get France onto the right track — and an indulgent German government that does not put too much pressure on him right now. After all, the trade-off between the French farmers and Europe's future only becomes easier for Chirac to handle over time. Since he can't be re-elected in 2007, he may indeed choose Europe's future over France's past. This would earn him a prominent place in history books.

It's his choice to make. Especially now that Mr. Chirac enjoys a position almost as powerful as General de Gaulle's, if he wants to be remembered as a great EU modernizer, he can.

Just as Helmut Kohl promoted the European vision in the 1990s after the crumbling of the wall, perhaps France's Chirac will emerge as the European leader at the outset of the 21st century.