France’s Message to Germany: Back to the 19th Century?

Anybody who thought that we live in the early stages of the 21st century – and not in the middle of the 19th – must be sorely disappointed about the latest round of political rallying calls from Paris.

A chorus of voices stretching from the very left to the far right of French politics is united in demanding satisfaction from the German government. They say the “honor” of France has been compromised and that an apology is in order.

Also, senior politicians argue that the German ambassador must be called in immediately to make amends by receiving a protest note from the French government.

Choice words

What caused all this hoopla? Nothing more than a remark by Germany’s (actually Francophile) finance minister, Wolfgang Schaeuble, in Washington last week during the just concluded World Bank/IMF spring meetings.

At a discussion forum at the Brookings Institution, he risked the tongue-in-cheek remark that France would benefit if its parliament were “forced” to pass the long debated economic reform measures. But, Mr. Schaeuble added, that really isn’t in the realm of possibility in a democracy.

What was intended as a friendly assist to his fellow finance minister, Michel Sapin, and economy minister Emmanuel Macron, to get reforms moving ended up being perceived in France as an affront.

Even Mr. Sapin felt that he needed to respond that “France detests to be forced” – which, of course, is not what his German colleague had meant. What Schaeuble had wondered aloud is what it will take to get things done in France – a worry that, no doubt, Sapin shares.

Mr. Schaeuble has not been challenged to a duel as yet, at least not so far. But that is about the only positive thing to be said.

This tempest in a teapot really tells the world a lot about the precarious state of politics and economic policymaking in France.

All the more so when such a remark causes the head of the governing Parti Socialiste, Jean-Christophe Cambadélis, and Florian Philippot, the Number 2 of the Front National, the extreme right wing party in France, effectively to make common cause. Jean-Luc Mélenchon, the former PS firebrand, also jumped into the fray.

Variably accusing the German finance minister of “francophobia” and “a new level of arrogance” might make political hay domestically. But it does nothing to get the pervasive lethargy unstuck that has the French body politic and economy increasingly in its firm grip.

Make no mistake about it: It is not German “arrogance” to express concerns about the hyper slow-motion reform process. Mr. Schaeuble, who was born close to the Franco-German border and still has his home there, is very familiar with trends and developments in France.

He undoubtedly knows that, contrary to what many people with a more superficial understanding of France believe, the recent electoral successes of Mr. Sarkozy’s conservative party are by no means a sign of more reform mindedness.

No better under Sarkozy

The core of the electorate of Sarkozy’s UMP (which is likely to rebrand itself soon) consists of notaries and those other “protected” professions that are the target of opening up certain high-end labor markets. Those professions are very lucrative for the people who hold such positions, while their privileges and protections impose steep costs on the rest of the French economy.

These powerful professional groups can be counted on to extract their pound of flesh from whoever will be the conservative party’s leader to take back the French presidency. They will demand to stop even these limited reforms.

In the past, France was considered a statist society and economy because it relied far too much on the powers of the state to manage its economy. Now it is statist in the sense of static – none of the vested interests want to change anything about the particulars of the formula that served them well in the past.

The inevitable result of such statism is a France that stagnates. If that occurs, all the grand plans of Mr. Juncker and the European Investment Bank to revitalize the Eurozone economy via investments won’t amount to much.

All that Mr. Schaeuble really sought to express was his desire for a France that actively pursues changes at home to promote growth.

The 19th century style choice of sending protest notes and demanding apologies is definitely not useful.

It must truly pain Mr. Schaeuble to remember the times when the Germans and the French were in a tight competition for who had the smarter fiscal policy and the more innovative companies. That is very much the Europe – and especially the France – he wants.