Thursday, September 11, 2003

France Butts Head With EU Over Budget

Tensions rise between the French Prime Minister and the EU Trade Commissioner as France projects to exceed the EU cap on public deficit

French Prime Minister Jean-Pierre Raffarin angrily scolded Pascal Lamy, the EU Cabinet of Trade Commissioner, this week after the latter criticized France’s economic state and affirmed that the Commission planned to “kindly, firmly” remind the country of its obligation to meet EU budget requirements. Raffarin, who just last week was denouncing télé-réalité, turned to French television station TF1 to tell Lamy that as France’s appointee to the Commission he should be working for France and not against it.

“France cannot be compared to any other country. It’s a large country with an international role, with missions to accomplish. Not every country has a defense system, an army as we do," he said during a TF1 broadcast.

Perhaps, but Lamy is in no enviable position: although appointed to the Commission in 1999 by Lionel Jospin, his role as Trade Commissioner makes it difficult to ignore France’s non-compliance with EU rules. Under the EU’s Stability and Growth Pact, EU member states in the Euro Zone must limit their public deficit to 3% of their GDP. The pact allows members one year to recover if they exceed the limit, but imposes penalties of up to .5% of the GDP if the deficit persists.

France is hardly on track, and informed the Commission this week that its 2002 deficit of 3.1% would be followed by deficits of around 4% in both 2003 and 2004. And Budget Minister Alain Lambert does not expect France to fall back under the pact limit before 2006. But with the controversial 3% tax cut announced last week by Raffarin, some estimate that it may take even longer for France to fall back in line with the pact.

However, insiders say that Raffarin is much less concerned about budget criticism from Brussels than with the level of unemployment in France—currently expected to approach 10% by the end of the year. As a result, the Prime Minister is pushing for the creation of an EU-wide initiative to stimulate employment, claiming such a move will help member states meet the pact’s deficit requirements. Raffarin is counting on Germany to add extra weight to this request, and the two countries are expected to prepare a joint proposal for next week’s EU Ministers’ meeting in Berlin.

Fall in Public Support

The Prime Minister continues to feel heat back home as well, as the summer break has not lessened the heightened emotions displayed during the spring strikes. In fact, less than one week into the new school year, thousands of teachers across France struck on Wednesday to protest the decentralization of the school system, reform of the Social Security system, and the threat to public services.

This week’s strikes and EU criticism continue the spate of difficulties faced by Raffarin and French President Jacques Chirac, who have seen their approval ratings drop to new lows over the past month. According to BVA poll results released this week, Raffarin’s popularity has been in a near constant slide since he registered a 60% rating in January, hitting 43% in August.

Meanwhile, French President Jacques Chirac has managed to remain largely unnoticed through much of the spring and summer controversy, and has only registered a 6-point fall to 54% since January’s 60% rating. (The president hit a 69% approval in March with his vociferous opposition to the Iraq War.)

The steadily lower ratings come as little surprise given the spring strikes and a rising level of unemployment. But any hope the two politicians may have had to recover in early fall was definitively squashed by the August heat wave, during which the mortality rate climbed to 11,435 deaths above average—the most deadly month France has experienced in 50 years.

According to the official government report realized this week, the August crisis was met by a “lack of anticipation, organization, and coordination,” and was further heghtened by a severe lack of medical professionals on hand during the vacation month.

In other words, it hasn’t been an easy week for the French Prime Minister, nor does it look like his fortune will turn anytime soon. However, the Prime Minister may have gained at least a few supporters this week as rumors circulated that his opposition to a proposed tax hike on wine was behind the plan’s imminent demise. The proposal, which would have placed a five Euro cent increase on each wine bottle, was expected to recoup 800 million Euros for the state and help mitigate the Social Security deficit.

So raise your glasses and give a quick salute to the beleaguered Raffarin. Come what may, the French Prime Minister plans to keep our glasses full.

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