The move is indicative of a larger problem that exists within Hollande’s government currently: that the reform necessary to avoid economic crisis seems absent, and that reform which does exist appears anachronistic or misguided.
In his defense, Hollande assumed power at a difficult time. As a leading country in the European Union, domestic politics had inevitably taken a back seat to the impending crisis within the Euro zone, as one by one nations around them succumbed to economic collapse. Hollande has assumed a role that must champion the cause of Europe, lest it edge closer to what some consider its inevitable doom, while also protecting the French economy from following a similar pattern.
Domestically, Hollande has faced the challenges of high unemployment with one in 10 currently out of work, including one quarter of young people, as well as stagnant economic growth. Furthermore, the nation remains very divided politically.
Hollande replaced the center-right President Sarkozy with a socialist platform, promising more jobs and greater social equality. If anything, Hollande has further polarized the nation in his first six months; for, while he has raised the minimum wage and proposed changes to the education system to better serve the poor, he has crippled small businesses with high tax rates and a raised minimum wage. It is no wonder that his approval rating has declined every month since being in office.
Perhaps the biggest source of Hollande’s troubles lies with France’s economic forecast. Last month, credit rating agency Moody’s downgraded France from AAA status to AA1. Earlier this year, Standard and Poor’s similarly dropped France to the second tier of ratings. This alone may not appear to be a major issue, considering most other members of the Euro zone fall way below that score. The reason this has caused such a stir, however, is largely due to the symbolic effect created when doubts are cast over such a stalwart of European stability.
France has maintained a leadership role in the EU paralleled only by Germany since the union’s most primitive form in the 1950s. Together, the leaders of France and Germany have attempted to calm the waves of the recent economic crisis, possibly saving the currency union from total collapse.
However, as the ailing member states such as Italy, Spain and Portugal implement critical changes, France finds itself deficient in the area of reform. The high public spending associated with a socialist agenda is doing little to help France’s cause, as it sits on debt of nearly 90 percent of its GDP, while government expenditures are over 50 percent of GDP which is the highest in the EU.
Hollande’s shortcomings are likely tied to his socialist outlook that has little compatibility with capitalist development. He appears to have shown insufficient fiscal aptitude by stifling the creation of small and middle-sized businesses and taxing existing businesses at rates not conducive to growth.
This is not to suggest France is on course for economic collapse. Rather, it is a sign that it may find itself incapable of shouldering the weight of Europe’s economic woes, a problem far worse for the global economy. Germany has already shown signs of pulling away from France in terms of growth and competitiveness, and any signs that France may cede its position as a buttress to the struggling union will place huge pressures on Germany, both financial and political.
In short, France must succeed. A study released this week showed that fertility rates for French men have dropped by 32 percent since 1989. One can only hope that there is no metaphorical value in this fact, and that France can reignite growth lest it succumb to economic impotence and seal the fate of the European Union.