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Showing posts with label Hollande. Show all posts
Showing posts with label Hollande. Show all posts

Wednesday, October 29, 2014

France and Italy get preliminary approval of their budgets, but it's not the end of the story

The European Commission has given France and Italy a preliminary nod through on their draft budgets for 2015. In a statement released yesterday evening, Commission Vice-President Jyrki Katainen said:
"After taking into account all of the further information and improvements communicated to us in recent days, I cannot immediately identify cases of 'particularly serious non-compliance' which would oblige us to consider a negative opinion at this stage in the process."
An outright rejection of the French and Italian budget plans was always unlikely, as it was in no-one's interest to trigger an almighty row involving the second and third largest Eurozone economies. However, doing nothing was also never really an option for the Commission. Had it let France and Italy get away with draft budgets that were not only clearly deviating from their deficit reduction commitments but also not even acting to try and meet them, the credibility of EU fiscal rules - already wafer-thin - would have been shattered.

Over the past few days, both France and Italy pledged to make additional cuts to those initially planned for next year. Therefore, at least in terms of political narrative, the Commission got the upper hand in this first round. It stood up for budget consolidation, and it made its demand for extra efforts heard in Paris and Rome. On the other hand, for all their anti-austerity bluster, French President François Hollande and Italian Prime Minister Matteo Renzi are likely to come across as eventually bending to the will of Brussels.

That said, this is by no means the end of the story. The measures proposed by France and Italy to achieve the extra deficit reductions look far from structural. Also, as the FT notes, the changes are still short of what the Commission demanded and remain vaguely defined: 
    • In his letter to Katainen, French Finance Minister Michel Sapin mentions the lower interest rates on French debt, the lower contribution to the EU budget recently announced by the Commission (we have written extensively on this issue, see here and here), and a strengthening of the fight against tax evasion.
    • Similarly, his Italian counterpart Pier Carlo Padoan said he would use a €3.3 billion tesoretto (literally 'little treasure', but basically a reserve fund), originally set aside to lower the tax burden in 2015, to reduce deficit instead. However, there seems to be no guarantee that Italy will be able to find the same amount of money every year.
      The Commission will issue its final verdict on the draft 2015 budgets of all Eurozone countries by the end of November. We would expect the Commission to come up with a set of stringent recommendations for France and Italy, although an entirely negative opinion looks unlikely. In the end, we may well see a replay of the current discussion. In the meantime, as the contrasting headlines from the New York Times today show, some may struggle to discern who exactly capitulated... 

      The print version and online version of the New York Times today struggle to judge who blinked first...

      Wednesday, September 17, 2014

      Confidence vote won, absolute majority lost: not the best start for the new French government

      The new French government, led by Prime Minister Manuel Valls, yesterday won its first vote of confidence in the National Assembly. That was expected, but the big news is that Valls and his government have fallen well short of winning an absolute majority.

      269 MPs voted in favour, 244 against, and 53 abstained. The absolute majority is set at 289 votes.

      Most importantly, the voting records reveal that 31 MPs from the Prime Minister's Socialist Party chose to abstain. Back in April, when Valls sought the confidence for his first government, he got 306 votes in favour. Hence, yesterday marked a substantial step backwards.

      The outcome of the confidence vote seems to confirm that the 'left wing' of the French Socialist Party remains opposed to the economic policies being pursued by Valls - which in substance means remaining critical of the approach defended by the European Commission, Germany and other northern eurozone countries.

      Incidentally, these divergences forced a cabinet reshuffle at the end of August - which saw the ousting of the three most left-leaning ministers, notably including Economy Minister Arnaud Montebourg.

      French history shows that it is possible to govern without an absolute majority in parliament. Another Socialist Prime Minister, Michel Rocard (widely seen as one of the political mentors of Valls), did it between 1988 and 1991.

      However, it remains to be seen to what extent Valls will be able to push through the wide-reaching reforms and sizeable spending cuts demanded by the EU if he fails to win back the full support of his own party. As an alternative, he may try and strike deals with the smaller centrist parties in parliament - but the success of such a move would be far from guaranteed.

      Indeed, this is hardly great news at a time when the French economic situation is not encouraging, making it essential to move forward quickly with the necessary measures.
       
      The road to recovery may have just become longer and bumpier for France.

      Saturday, August 30, 2014

      Tusk and Mogherini: Europe's new 'dream team'? Our initial thoughts

      Europe's new 'dream team'?
      As we noted in our previous post, Cypriot President Nicos Anastasiades had sort of spoiled the surprise. Anyway, now it's official: Polish Prime Minister Donald Tusk has been appointed new European Council President, and Italian Foreign Minister Federica Mogherini will succeed Baroness Ashton as the EU's foreign policy chief (aka High Representative for Foreign Affairs).

      A couple of initial thoughts:
        
      Donald Tusk 

      Tusk has economically liberal and pro-free trade instincts. Most importantly from the UK's point of view, he comes from outside the euro area - and will therefore be sensitive to the concerns of non-euro countries when it comes to safeguarding the integrity of the single market, a point he made during his press conference:
      Tusk also explicitly committed himself to ensuring the UK stays in the EU and endorsing (some) EU reforms:
      That said, Tusk is also likely to oppose fundamental changes to EU rules on free movement; although he did say that so-called 'welfare abuse' can be addressed, as we've noted, for many the debate has moved on from the issue of 'fairness' to that of 'volume', something Cameron will be under huge pressure to place at the centre of his potential renegotiation. In the more immediate future, Cameron's early support for Tusk as new European Council President could increase the UK's chances of securing a big portfolio in the new European Commission.

      Significantly, it has been confirmed that Tusk will also chair the summits of eurozone leaders - despite coming from a non-euro country. This looks like a big concession made, in particular, by French President François Hollande - who was reportedly sceptical of such an arrangement. Perhaps Hollande hopes that giving ground on this point can help him secure the key post of European Commissioner for Economic and Monetary Affairs for his former Finance Minister Pierre Moscovici.

      Federica Mogherini

      The resistance to Mogherini, put up by Eastern EU member states over the past few weeks, has clearly been appeased by Tusk's appointment as new European Council President. It was noteworthy that Herman Van Rompuy stressed that Tusk and Mogherini would "work closely together to secure Europe's interests and values".  

      Italian Prime Minister Matteo Renzi, who has invested a great deal of political capital on Mogherini, seems to have achieved what he was looking for: a diplomatic victory in Brussels to sell to the electorate once back in Italy - where the big reforms are not going forward as fast as announcements, and the economic situation shows no signs of improvement. With the country in recession and deflation, it remains to be seen how much Italian voters will be impressed.
      As we noted in our recent flash analysis, the role of High Representative is less crucial from the UK's point of view - as foreign policy remains primarily a national competence, with every EU member state having a veto. However, in light of the various geopolitical challenges facing the EU (and its neighbourhood), it is possible that Mogherini will play a greater - or at least more visible - role than her predecessor.

      EU top jobs summit has kicked off: here is a round-up of doorstep declarations

      EU leaders have all arrived in Brussels for today's summit. There are two big issues on the table: the appointments of the next European Council President and High Representative for Foreign Affairs; and the worsening situation in Ukraine (although the situation in the Middle East is also bound to come up).

      Here's a round-up of what EU leaders said upon arrival. Let's start with the assignment of the remaining EU top jobs. Italian Foreign Minister Federica Mogherini and Polish Prime Minister Donald Tusk are the frontrunners for the posts of High Representative and European Council President respectively. However, Mogherini's appointment looks more like a done deal than Tusk's - at least from EU leaders' doorstep declarations:




      Mogherini has travelled to Brussels herself, and has met European Commission President-elect Jean-Claude Juncker - possibly a further sign her appointment is drawing closer. Tusk walked into the European Council building without saying a word, although reportedly with a smile on his face.

      Meanwhile, it seems no decision will be made on the name of the next President of the Eurogroup of eurozone finance ministers:


      As regards Ukraine, a few EU leaders stressed the need for a reaction if Russia does nothing to de-escalate the situation. However, the emphasis has significantly differed from one leader to another: 




      And that's all for the moment. The summit is under way, and we will continue monitoring it. Follow us on Twitter @OpenEurope, @pswidlicki and @LondonerVince for real-time updates and analysis.

      Thursday, July 17, 2014

      EU leaders fail to agree on the remaining top jobs. Anything to remember from yesterday's summit?

      Yesterday's European Council summit ended without an agreement on the remaining EU top jobs. However, something interesting still came out of the meeting.

      A socialist (and a woman?) for next EU foreign policy chief

      EU leaders appear to have established that the next High Representative for EU foreign policy will be a centre-left politician. German Chancellor Angela Merkel, French President François Hollande and Italian Prime Minister Matteo Renzi all said it in the respective post-summit statements.

      Renzi, who is pushing for Italian Foreign Minister Federica Mogherini to get the job, also stressed that, "Everyone agrees that there's no other candidacy than Italy's." Hollande added that the High Representative "will necessarily be a woman, taking into account the image of Europe we have to offer". The French President also made clear that he backs Mogherini's candidacy.

      The next European Council President will be appointed by unanimity, and could be one of the 28 sitting EU leaders

      As Hollande put it during his press conference, the next European Council President "will be a personality that will have to gather consensus". Similarly, Merkel said, "We need a personality...who can hold us 28 together."

      Interestingly, Renzi told Italian journalists:
      "Hollande said that, according to him, the next European Council President has to be one of the 28 [sitting EU leaders]. It doesn't matter whether [he/she is] from the eurozone or not. He got broad support [for this idea]."
      Speaking after the summit, Polish Prime Minister Donald Tusk confirmed that his name has been informally floated for the post of European Council President (an option we discussed here and here), but that he had not been approached officially.

      Tusk reiterated that he would prefer to remain in Poland, but then added:
      "We have to play out a complicated game and sometimes in this game the argument goes that all options remain on the table. Therefore, if you ask me if this is impossible, I will say that in the negotiations I prefer to keep every eventuality in reserve in order to achieve the maximum that Poland could possibly achieve."
      And that was it. EU leaders will meet again on 30 August to try and wrap up a deal. We will be monitoring the meeting very closely, despite it being on a Saturday.

      Friday, June 27, 2014

      Post-Juncker press conference round-up

      We have been following the post-summit press conferences of EU leaders. Here is a round-up of the highlights, starting with German Chancellor Angela Merkel:

      In his press conference, David Cameron took his defeat on the chin but noted that it would make his reform strategy harder:
      “Today’s outcome is not the one I wanted. And it makes it harder, and the stakes higher…This is going to be a long, tough fight and sometimes you have to be ready to lose a battle to win a war. It has only stiffened my resolve to fight for reform in the EU, because it is crying out for it.”
      Cameron was asked whether much more of this kind of thing would prompt him to recommend an ‘Out’ vote in a referendum. He declined the offer but did make the point that:
      “And at the end of 2017, it will not be me, it will not be the House of Commons, it won’t be Brussels who decide about Britain’s future in the European Union. It will be the British people. It will be their choice, and their choice alone.”
      He also pointed to the paragraph in the Council conclusions dedicated to the UK:
      1. The UK raised some concerns related to the future development of the EU. These concerns will need to be addressed.  
      In this context, the European Council noted that the concept of ever closer union allows for different paths of integration for different countries, allowing those that want to deepen integration to move ahead, while respecting the wish of those who do not want to deepen any further.  
      Once the new European Commission is effectively in place, the European Council will consider the process for the appointment of the President of the European Commission for the future, respecting the European Treaties.
      Italian Prime Minister Matteo Renzi was particularly keen to claim victory on a more 'flexible' application of EU fiscal rules. Van Rompuy’s agenda for the next European Commission is “very very very good on substance. For the first time, the focus is on growth. Insisting on growth is a turning point for Europe,” he said.
      “Those countries who implement structural reforms have the right to greater flexibility, which is the most important political point for us.”
      Renzi also touched on other EU top jobs, and made clear that:
        “The name of [former Italian Prime Minister] Enrico Letta for European Council Presidency has never been made”
      As for French President François Hollande, he tried to wrap his battle for looser EU fiscal rules into a European flag:
        “I did not intervene only to defend France. When I evoke the flexibility in the margins of the Stability Pact [EU fiscal rules], I defend a conception of Europe.” 
      And as regards the next European Commission, he said France wants “an organisation around big Vice-Presidencies. I will demand a Vice-Presidency for France.”

      Read our take on what Cameron's defeat means for the reform agenda here.

      Wednesday, June 25, 2014

      The stakes are raised: Will Renzi and Hollande back Juncker even absent more lenient eurozone fiscal rules?

      As we anticipated on our blog last week, the discussion over Jean-Claude Juncker's appointment as next European Commission President has in part turned into a debate over whether the EU's fiscal rules - enshrined in the Stability and Growth Pact - should be applied in a more 'flexible' way.

      France and Italy are making their support for Juncker conditional on the new European Commission granting them more budget leeway while they push ahead with structural reforms, and Germany is reluctant to make concessions.

      This also matters for David Cameron's battle against Juncker, as an increasing number of Germans now see what can happen when Britain gets isolated and Berlin is left facing a Mediterranean bloc, armed with Qualified Majority Voting. It may be too late in the day for Merkel to U-turn, but it will definitely serve to focus minds in Berlin following this episode. But could Cameron hold out hope for Italy and France?

      Renegotiating the Stability and Growth Pact seems off the table, and neither French President François Hollande nor Italian Prime Minister Matteo Renzi are actively calling for changes to the rules. The key is what each country means by 'flexibility'. Renzi wants to exclude a number of 'strategic' investments from EU deficit calculations. Hollande wants more time to cut France's deficit. And Merkel wants things to stay just as they are, because she thinks that the existing rules are flexible enough.

      As a result, things may just be squaring up for a stand-off at this week's European Council. German Finance Minister Wolfgang Schäuble told ARD yesterday that he opposes any "re-interpretation" of EU fiscal rules, and added:
      "More debt only leads to a deepening of the problems instead of solving them."
      In an interview with La Repubblica, Italian Europe Minister Sandro Gozi hit back:
      "It is for [EU] leaders to discuss a new course for Europe. Therefore, we are not concerned about declarations by this or that minister, even if from an important country."
      Meanwhile, Hollande yesterday circulated a paper outlining France's priorities for the new European Commission. The document, seen by Le Monde, calls for "an application of [EU] budgetary rules that favours investment and growth", while taking into account "the reforms undertaken by countries and their economic situation".

      However, Merkel doesn't sound prepared to back down. She told the Bundestag this morning:
      "[EU fiscal rules offer] clear guard rails and limits on the one hand, and a lot of instruments allowing flexibility on the other. We must use both just as they have been used in the past."
      If a vote on Juncker eventually takes place at this week's European Council, Hollande and Renzi will have to abandon their convenient 'priorities first, names later' line and make a clear choice. Then the key question will be: do they think they have been given sufficient guarantees that their requests will be taken on board by the next European Commission? If the answer is 'No', Juncker's candidacy could still be struck down.

      It is going to be interesting but it'll take a major turn of events for Juncker to be dropped now.  

      Friday, June 20, 2014

      Could France and Italy provide Merkel with an excuse to drop Juncker?

      The appointment of Jean-Claude Juncker as next European Commission President is often boiled down to a stand-off between David Cameron and Angela Merkel. And it looks increasingly likely that there will be a vote on Juncker as early as at next week's summit of EU leaders. He is still the favourite to land the job.

      However, Juncker's road to the Berlaymont building is unlikely to be incident-free, and a degree of unpredictability remains.

      Over the past few days, France and Italy have made clear that their support for any candidate to the European Commission Presidency is tied to a substantial change in EU economic policies. French Europe Minister Harlem Désir held talks with his Italian counterpart Sandro Gozi in Paris yesterday, to refine a common strategy. Furthermore, France will host a mini-summit of the seven centre-left EU heads of state and government tomorrow, to discuss their priorities for the new European Commission.

      The proposal Paris and Rome have been working on is clear: growth-enhancing investments and the cost of structural reforms should no longer count as deficit under EU rules. Merkel has so far resisted the proposal, but Vice-Chancellor Sigmar Gabriel - of the SPD - has come out in support of giving more budget leeway to countries that undertake a wide-reaching reform process.

      Unlike Cameron, neither French President François Hollande nor Italian Prime Minister Matteo Renzi seem to have a personality problem with Juncker. Nor have they openly criticised the principle of Spitzenkandidaten. But there is a chance they could end up on the same side of the debate, although for different reasons.

      There are many factors at play here. But if Hollande and Renzi push it too far and make it clear that the price of their support for Juncker is a weakening of the eurozone's fiscal rules, they could provide Merkel with an excuse to drop Juncker, sacrificed on the altar of German budget discipline. That would make such a decision more acceptable to the German public, surely?

      Monday, June 02, 2014

      France comes under fire in latest European Commission economic assessment

      The European Commission has just released its latest round of country-specific recommendations (the Commission’s advice on how the country can boost economic growth and maintain stable public finances).

      As with the broader economic state of the eurozone, the recommendations are a bit of a mixed bag. There are some positive assessments of the peripheral countries, but also warning over continuing problems with high debt levels and high unemployment.

      We would argue that there is also still too much complacency on the former and not enough urgency on the latter points. Below, we've picked out some of the more interesting points for the big four countries.

      FRANCE
      The European Commission’s assessment of the French economy is quite damning, given the context of a supposed economic recovery. The Commission says that the “level of detail of the fiscal consolidation measures is insufficient” to ensure France meets its targets and that the economic forecasts used for 2015 are “slightly optimistic” and the planned savings are “very ambitious”.

      The Commission also takes aim at areas of the economy which the Socialist government will not be too pleased with, specifically arguing that “sizeable short-term savings cannot be achieved without” curbing health and pension costs through reforms of both sectors. The report also hits out at French labour costs, warning that they reduce “firms’ profitability”, and its ranking in surveys of business environment which has “deteriorated” not least due to regulation which hampers growth of small business in France, the significant number of protected professions and the high overall tax burden.

      Therefore, the European Commission calls for action on all these areas. Ultimately, the report does a decent job of highlighting the on-going flaws in the French economy and the lack of strategy displayed by the French government. While it has taken tentative steps towards reform in some areas others fly under the radar while the government does not yet seem to have fully bought into the reforms it has laid out for the coming years.

      GERMANY
      The recommendations for Germany feel very familiar with early comments regarding its current account surplus. Specifically the report calls on Germany to:
      “Improve conditions that further support domestic demand, inter alia by reducing high taxes and social security contributions, especially for low-wage earners.”
      However, there is not an extensive discussion and the report focuses on other areas which include some interesting recommendations such as “more ambitious measures to further stimulate competition in the services sector” (something we have long advocated) and “more efficient public investment in infrastructure, education and research”.

      ITALY
      The European Commission seems to have doubts over Italy’s latest budget forecasts labelling them "slightly optimistic.” “The achievement of the budgetary targets is not fully supported by sufficiently detailed measures, in particular as of 2015”, the Commission continues. This will certainly revive the domestic debate between Italian Prime Minister Matteo Renzi and his critics, who argue that there is not enough money to cover for the tax cuts for workers and businesses recently announced by the Italian government.

      On labour market reform it notes, “Globally, the Italian labour market continues to be marked by segmentation and low participation…Therefore, the limited steps taken so far need to be extended.” Here, the recommendation is to “assess the need for additional action” by the end of the year. Another long-running issue in Italy is services liberalisation. According to the Commission, “There are still a number of bottlenecks to competition (reserved areas of activity, concession/authorisation schemes, etc.) in professional services, insurance, fuel distribution, retail and postal services” – and these need to be removed.

      Interestingly, the European Commission also notes that “one of the key levers to improve the implementation performance [of Italy]…lies in enhanced coordination and a more efficient allocation of competences among the various levels of government”. This reform is already on Renzi’s radar. Still, we’re not sure how well this specific ‘suggestion’ will go down in Italy, given that it touches on a politically sensitive issue – the distribution of powers between the central government and the regions, which is laid out in the Italian constitution

      SPAIN
      The European Commission finds Spain’s budgetary forecasts “broadly plausible for 2014 and subject to downside risks in 2015”. However, “for 2016-2017, the GDP growth rate in the [Spanish government’s] programme seem somewhat optimistic.” Similar to Italy, the European Commission’s recommendation to Spain is to “reinforce the budgetary strategy as of 2014, in particular by fully specifying the underlying measures for the year 2015 and beyond.” 

      Although the European Commission acknowledges that Spain’s labour market reforms have gone some way in ensuring greater flexibility, limiting job losses and reducing the number of dismissals challenged in court, “Segmentation remains an important challenge for the Spanish labour market, the number of contract types remain high and the gap between severance costs for fixed-term and indefinite contracts remains among the highest in the EU even after the reform.” Furthermore, “the inadequate labour-market relevance of education and training and the high proportion of unemployed without formal qualifications contribute to the high youth unemployment rate, as well as to long term unemployment.” Therefore, the European Commission recommends that the Spanish government “enhance the effectiveness and targeting of active labour market policies, including hiring subsidies” and “reinforce the coordination between labour market and education and training policies.”

      Some variance from country to county but a couple of clear themes can be found here. Much more work needs to be done on labour market reform and improving the business climate. On top of this the forecasts continue to be optimistic. Plenty of work to be done on many fronts then. 

      Wednesday, April 02, 2014

      Meet the new French cabinet

      The new French cabinet has just been unveiled (the picture comes from Le Figaro's website). A few ministers have been re-shuffled around, but actually there are only two new entries compared to the previous team: Ségolène Royal as Environment and Energy Minister, and François Rebsamen as Employment Minister.

      The most interesting change took place in the Economy and Finance Ministry. Pierre Moscovici has not held onto this post (which means we may see him in Brussels soon as France's next European Commissioner), and his portfolio has been split into two: Michel Sapin is the new Finance and Public Accounts Minister, while Arnaud Montebourg is the new Economy and Industry Minister.

      From the names of the two ministries, we assume Sapin will be the one leading in negotiations over deficit targets with the European Commission in future. Similar to his predecessor Moscovici, Monsieur Sapin seems to think France needs to take the medicine and continue with deficit reduction. He said in a radio interview last year,
      There's a state, but it's totally bankrupt. This is the reason why we had to put in place deficit reduction programmes, and no siren must divert us from this objective.
      It will be interesting to see how he will interact with Arnaud Montebourg, who recently described the people in charge of competition and state aid policy at the European Commission as "talibans of the law" and "fundamentalists who apply the [legislative] texts blindly to the detriment of European interests." Montebourg is also one of the most vocal supporters of a devaluation of the euro to help French exports.

      We don't know the rationale behind the decision to split the Economy and Finance Minister yet. One idea could be achieving some sort of good cop (Sapin) / bad cop (Montebourg) dynamic when negotiating with Brussels. That said, after adding the views of the new Prime Minister Manuel Valls and President François Hollande into the mix, it could become tricky to figure out who is in control and which direction the French government actually wants to head on economic policy.

      With regards to other ministers, Laurent Fabius, Jean-Yves Le Drian and Christiane Taubira have all kept their jobs as Foreign, Defence and Justice Ministers respectively. Budget Minister Bernard Cazeneuve is the new Interior Minister. The budget portfolio has been moved to the Public Accounts part of Sapin's post.

      The next step for Manuel Valls and his cabinet is a vote of confidence in the lower house of the French Parliament, the National Assembly, which should take place on Tuesday.

      Follow us on Twitter @OpenEurope for more updates.

      Tuesday, April 01, 2014

      Le (premier) flic, c'est chic: Hollande picks Manuel Valls as new Prime Minister

      As expected, François Hollande yesterday named Interior Minister Manuel Valls, France's 'top cop' (premier flic, hence the title of this blog), as new Prime Minister. The composition of the new cabinet is expected to be announced tomorrow.

      For the moment, we know that the two ministers from the Green Party, Cécile Duflot and Pascal Canfin, are not interested in taking part in the new government. They explained in a communiqué that "the ideas supported by the new Prime Minister [Valls] for several years...do not constitute an appropriate response to the problems of the French". We also know that Finance Minister Pierre Moscovici is not in Athens for today's Eurogroup meeting - probably a sign that he is not going to be confirmed either.

      It is fair to describe Manuel Valls as an 'atypical' French Socialist - and not just because of his firmness in dealing with certain crime and migration-related issues. The Barcelona-born new Prime Minister has upset quite a few fellow party members in the past. For example, Valls has come out in favour of scrapping France's 35-hour working week and raising retirement age to 65. 

      He voted 'No' in an internal Socialist Party referendum on the European Constitution in December 2004 - but then aligned himself with the rest of the party and campaigned for a 'Yes' vote. He even suggested that the name 'Socialist Party' was "dated" and had to be changed. Perhaps not surprisingly, Valls only won 5.6% of votes when Socialist Party members picked their Presidential candidate in October 2011.

      In other words, the choice of Manuel Valls as new Prime Minister could be seen as a sign of Hollande's renewed willingness to go ahead with at least some of the supply-side reforms recommended by the European Commission to put the French economy back on track. However, the road ahead for the new French cabinet looks far from easy, for at least two reasons:
      • The reaction of the aile gauche (left wing) of the Socialist Party to the appointment of Manuel Valls has been cautious, to say the least. Rebellions in parliament on future economic reforms cannot be ruled out.
      • The Socialist Party's majority in the Assemblée Nationale (the lower house of the French parliament) has been shrinking following a number of by-elections, and will be down to only one seat - 290 of a total 577 - once outgoing minister Cécile Duflot of the Green Party claims her seat back. This risks making it more complicated for the new government to pass meaningful economic reforms - although Valls could try and muster case-by-case alliances with some of the smaller centrist parties.   
      The first test for Valls and his cabinet will be to push through the so-called 'responsibility pact' - a plan to cut taxes on businesses in return for more hiring announced by Hollande in his New Year's address, and the details of which are due to be unveiled later this month.

      We will be monitoring the situation in France closely. For now, one last interesting fact for football geeks (of which there are a few in the Open Europe office): Catalan composer Manuel Valls i Gorina, a cousin of the new French Prime Minister's father, is the author of the official anthem of FC Barcelona. And no, this is not an April's Fool day hoax.

      Monday, March 31, 2014

      Hollande expected to announce cabinet reshuffle after local election 'punishment'

      If you want to get a sense of how badly the latest French local elections went for President François Hollande, have a look at today's front page of left-leaning French daily Libération:

      The headline means 'The punishment', and it summarises the outcome of the local vote pretty well. According to data from the French Interior Ministry, the centre-right (that is, the opposition UMP and its allies) gained 139 towns with more than 10,000 inhabitants compared to the 2008 local elections. The centre-left (Hollande's Socialist Party and its allies) lost 160. The fact that the Socialist Party managed to retain Paris - where Anne Hidalgo was elected as the city's first female mayor - cannot compensate for what was an unequivocal defeat nationwide.

      Marine Le Pen's anti-EU Front National took control of eleven towns - in addition to Hénin-Beaumont, where the party won an outright victory in the first round. Though not impressive in absolute terms (see this blog post from last week for some more background information), the score is nonetheless politically significant. It shows how French voters increasingly see Front National not just as a mere 'protest party', but as a credible alternative for power - albeit so far only at the local level and in a very limited number of towns.

      Meanwhile, the immediate consequence of yesterday's local election fiasco is that Hollande is expected to announce a cabinet reshuffle any moment. The French President has just come out of a two-hour meeting with Prime Minister Jean-Marc Ayrault, whose departure looks very likely, judging by the headlines in the French press over the past few days.

      Interior Minister Manuel Valls, who enjoys a pretty high approval rating compared to his fellow cabinet members (in part thanks to his tough stance on certain crime and migration issues), is broadly seen as the favourite to replace Ayrault as Prime Minister. Laurent Fabius, currently serving as Foreign Minister, is another name being mentioned by the French media. 

      However, in light of the latest macroeconomic indicators, the impression remains that moving a few ministers around will not be enough to restore the French government's credibility vis-à-vis the electorate - unless the policies also change and France makes some real progress in pushing ahead with the reforms needed to restore its competitiveness within the eurozone.

      Monday, March 24, 2014

      Marine means business: Front National makes big gains in French local elections

      Yesterday was a big night for Marine Le Pen's anti-EU Front National, which emerged as the main winner of the first round of the French mayoral elections. The party won an outright victory in Hénin-Beaumont, a former mining city in northern France, and finished ahead in six other towns - where its score ranged from 27.69% (in Digne-les-Bains) to 40.3% (in Fréjus)

      In Marseille, the second most populous French city, Front National finished second with 23.16% of votes, behind the centre-right UMP (37.64%) - relegating President François Hollande's Socialist Party to third place, with 20.77% of votes.

      We will have to wait until tomorrow evening for the final results. But, according to the preliminary figures made public by French Interior Minister Manuel Valls, the centre-right (that is, the UMP and its allies) won 46.54% of votes nationwide - well ahead of the centre-left (Socialist Party and allies) on 37.74%. So not exactly a night to remember for Hollande.

      Le Pen's party was only running in 597 of the almost 37,000 municipalities up for grabs, and therefore won only 4.65% of votes nationwide. However, this is much better than in 2008 - when Front National only managed to run in 119 municipalities and won around 1% of votes nationwide in the first round. This suggests it may be consolidating as an electoral force at the local level.

      The second round of the mayoral elections will take place on Sunday 30 March. Interestingly, several top Socialist figures (from Hollande's spokeswoman Najat Vallaud-Belkacem to Prime Minister Jean-Marc Ayrault) have called for the centre-right to support a so-called Front Républicain - whereby the Socialists, the UMP and other centrist parties join forces to stop Front National candidates prevailing in the second round. However, UMP leader Jean-François Copé has this morning dismissed the idea.

      So unlike Geert Wilders in the Netherlands, whose PVV party saw its support decrease slightly in last week's Dutch local elections, Front National is on a clear upward path - and it would be no surprise if it came out as the largest party in the upcoming European Parliament elections. It will be interesting to see how yesterday's results will influence the campaign. We have already noted that several centre-right French politicians - including Nicolas Sarkozy himself - have embraced, at least in rhetoric, a less idealistic approach to 'Europe'. Given the Front National's strong showing, this is only likely to continue.

      Tuesday, February 18, 2014

      French public opinion and Europe: Winds of change?

      With the European Parliament elections approaching, the number of EU-related opinion polls is growing. Beyond the mere voting intentions, these surveys help get a clearer picture of how citizens see Europe in various countries.

      Two separate opinion polls published in France over the past few days caught our attention. Just in case you don't read our press summary every day - France is a particularly interesting case, given that the anti-EU Front National may well win the most votes in the upcoming European Parliament elections.

      The first poll, conducted by IFOP and published by French news site Atlantico over the weekend, found that 59% of French would be in favour of France "reconsidering the Schengen agreements [which created a passport-free travel zone in Europe] and restraining the conditions for the circulation and the establishment of European citizens on its territory."


      A separate OpinionWay poll for Le Figaro and LCI found that, while a solid majority of French want to keep the euro, the number of those against a return to the franc dropped from 62% to 53% since April 2012. Also, the share of respondents who think EU membership is "a good thing" for France went down from 48% to 42% over the same period - again, still a relative majority.  

      Interestingly, one of the questions in the poll was, "Which one of these feelings comes to mind when you think of the EU?" Well, 45% said 'disappointment', 18% 'hope' and 12% 'indifference'.


      It would be exaggerated to claim that the French are turning their back on the EU, but the winds do seem to be changing somewhat, and the French electorate seems to be shifting towards a less idealistic approach to the 'Europe' issue. Looking at the bigger picture, this also highlights that, without sweeping reform of the EU, the risk is that voters will increasingly turn to anti-EU and anti-immigration parties - and potentially throw the baby out with the bathwater.

      An increasing number of politicians across Europe have realised this, including in France. Rachida Dati, a French MEP from the centre-right UMP party, told our pan-European EU Reform Conference last month that the "disregard" of the EU elite for the citizens had to stop, adding that "it is the peoples that must impose their will to Brussels and not the other way around".

      Monday, October 28, 2013

      'Handygate': The number of EU countries involved growing by the minute

      Well, this one snowballed quickly. The number of countries either implicated - or feeling the need to comment on - "Handygate" (as the Germans call it) is growing by the minute. Here's a round-up.

      Germany: The fallout over allegations that the NSA hacked Angela Merkel's phone continues. According to Bild am Sonntag, US President Barack Obama was personally briefed about the eavesdropping by NSA Director, Keith Alexander, as far back as 2010. Several papers claim that the American embassy in Berlin was used as a hub for the alleged bugging.

      However, according to US officials quoted by the WSJ and FAZ, Obama was unaware of the whole affair. The reason? The NSA has so many tapping operations going on that it wouldn't have been practical to brief the President about all of them. The article suggests the White House did scrap some monitoring programmes upon learning about them, including the one tracking Angela Merkel.

      Spain: Spanish daily El Mundo dropped a bit of a bomb today, claiming that the NSA bugged over 60 million phone calls in Spain in just one month - between 10 December 2012 and 8 January 2013. The report, also based on former NSA agent Edward Snowden's secret documents, suggested the eavesdropping didn't involve the actual content of the phone calls - just their duration and where they were being made from. But still.

      The Spanish Foreign Ministry summoned the US Ambassador in Madrid, James Costos - who later stressed in a statement that the wire-tapping activities have played "a fundamental role" in protecting both US  interests and those of its allies.

      Italy: Italian magazine L'Espresso alleged last week that not only the US, but also the UK had been spying on Rome. The latest is that, according to the Cryptome website, the NSA allegedly bugged some 46 million phone calls in Italy between December 2012 and January 2013. But the Italian intelligence service has urged caution, saying there's "no evidence" supporting the claims.

      France: Though the French press has been relatively quiet about the episode today, the country has already summoned the ambassador with the accompanied public outrage from politicians. It seems to be dying down a bit in France, though.

      Poland: Notoriously Atlanticist, Warsaw has also been forced to go public, with Polish Foreign Minister Radoslaw Sikorski saying over the weekend that the alleged hacking was a "scandal which undermines trust" and that he would be inquiring with Washington whether Poland was also affected by NSA surveillance. However, asked in the interview whether Poland was under surveillance, he apparently answered with a smile: "We also use surveillance".

      Sweden: Foreign Minister Carl Bildt has been taking a chilled approach, insisting that he knows "what kind of world we live in" and that "I never say things over the phone that could hurt Sweden if it ended up with a foreign power."

      Netherlands: Prime Minister Mark Rutte has said that "I will support [Merkel] completely in her complaint and say that this is not acceptable. I think we need all the facts on the table first."

      Belgium:  Belgian Prime Minister Elio Di Rupo commented, "The idea is to have a working method [at the EU level] by the end of the year, which should avoid that friends spy on each other." However, asked on whether the EU should suspend free trade talks with the US, Di Rupo said, "We want to avoid blackmail."

      UK: Finally, though the worst fears over suspension of the EU-US trade deal so far have not materialised (although it's still balanced on a knife's edge), David Cameron remains stuck between a rock (the US) and a hard place (Germany). In the Commons today, Cameron talked up the need for a robust intelligence service, saying it has "also allowed us to warn our EU allies about terrorist plots aimed at their people."

      Friday, August 30, 2013

      Europe reacts to David Cameron's defeat on Syria

      Europe has reacted with surprise - and a degree of shock - to David Cameron's defeat in the House of Commons, which has de facto ruled out British participation in any potential military operation in Syria, at least for now. Here is a first round-up.

      In an interview with Le Monde, French President François Hollande commented the outcome of the vote as follows,
      Each country is sovereign [and can decide] to take part in a [military] operation or not. This is valid for the UK as well as for France.
      Hollande suggests France could go ahead with or without the UK, and says,
      If the [UN] Security Council is unable to act, a coalition will be formed. It will have to be the largest possible…It will have the support of the Europeans. But there are only few countries that have the capacity to inflict a sanction through the appropriate means. France is one of them. It’s ready [to act]. It will decide its position in close contact with its allies.
      An editorial in Le Monde carries the headline, "The Commons vote against...Tony Blair", and notes,
      It's the trauma of the Iraqi episode…that explains the 'no' of the British parliament to a [military] action in Syria. It's not David Cameron…who has been defeated. Rather, he pays for Tony Blair – as Mr Cameron himself acknowledged during the debate. 
      As regards the international implications of yesterday's vote, the article goes on,
      Washington has indicated that the decision of the UK – the privileged ally, the one of the 'special relationship' – would not stop the US intervening. But [the UK’s decision] can’t not embarrass Paris – even though, officially, France’s position remains that it is impossible not to react to the use of chemical weapons.
      Germany's Die Welt has a comment piece entitled, "Cameron experiences his greatest humiliation". The article notes,
      The refusal of the British House of Commons to participate in a military strike against Syria has left Cameron badly damaged - and with him the 'special relationship' with the United States.
      Die Welt's chief correspondent Michael Strümer stresses how, once again, when it comes to 'hard power' the EU disappears. He writes,
      While all eyes are on Washington, New York, Moscow, and on Damascus, Ankara, Cairo and Jerusalem, awkward silence reigns in Brussels…In the corridors of powerlessness in Brussels you can sense frustration and little momentum.
      Christian Zaschke of Süddeutsche Zeitung describes the vote as,
      A political slap in the face of historic proportions” for the Prime Minister, adding that it will define his tenure…On the international stage, [Britain] will be taken less seriously.
      In Denmark, the only other EU country that has signalled it might take part in a strike, political leaders have this morning signalled that the country remains committed - although Foreign Minister Villy Søvndal also warned that the UK vote "calls for reflection".

      When asked about the vote, Polish Foreign Minister Radoslaw Sikorski dodged the question, replying that it is important to have confidence in the UN inspectors' evidence. Sikorski also suggested that a possible solution could be for Russia to secure the Syrian regime's chemical weapons stockpiles - as the majority of them dates from Soviet times.
       
      In Spain, an article in El País under the headline, "A blow to Cameron", argues that, as a result of the vote,
      The British Prime Minister sees his authority seriously dwindled and, in an unprecedented event in the country’s modern history, has lost control over foreign policy.
      Italian political commentator Gianni Riotta notes in La Stampa,
      Paradoxically, Hollande, a French Socialist, seems to be the ‘hawk number one’. After securing a very prudent pension reform, he’s now trying to use strength against an ex colony inherited by the Turks to titillate the nation’s imperial pride – although Cameron’s defeat will lead him to take a milder stance.
      We will keep updating the blog with any other interesting reactions throughout the day.

      Thursday, July 04, 2013

      Frenchelon: Is France really shocked it might be spied on?

      I am shocked to find that the US has been spying
      Earlier in the week President Hollande was calling for the EU USA trade talks to be broken off following allegations of US spying.

      Today Le Monde reports on "Révélations sur le Big Brother français" which details the French Direction générale de la sécurité extérieure (DGSE)'s world wide spying network nick named 'Frenchelon' which includes their own version of the US system PRISM, which, according to Le Monde, includes a giant computer storing data gleaned from phones. Interestingly their network also includes a base at Mutzig conveniently close to the German border!
      
      So what do we make of this? Well obviously, unless they are very poor spies, the French and US/UK operations know what each other are up to. So why call for the trade talks to be stopped? Well perhaps you never wanted them in the first place... Will Hollande now go quiet?

      French ship: Dupuy de Lôme - giant golf anyone?

      Monday, July 01, 2013

      I-spy: EU-US trade talks under threat?

      To what extent have the latest leaks harmed the EU-US trade talks?
      Fugitive whistleblower Edward Snowden’s leaks just keep giving.

      First there was Prism, then Tempora. And now, as reported by online by German magazine Der Spiegel over the weekend:  the US has allegedly been spying on EU missions and institutions on both sides of the Atlantic.

      Here's a round-up the European response at the national and EU levels:

      National

      The leaks have caused the most outrage in Germany, which was allegedly monitored more than other countries, leading the Federal government to respond on Monday.

      "If it is confirmed that diplomatic representations of the European Union and individual European countries have been spied upon, we will clearly say that bugging friends is unacceptable...We are no longer in the Cold War", said a government spokesman in Berlin. He added that Chancellor Merkel will soon be speaking to President Obama about the matter.

      Other German politicians that had been clamouring for a US explanation include German President Joachim Gauck (who quoted Benjamin Franklin: "Those who give up liberty to gain security will lose both'"), Vice-Chancellor Philipp Roesler and Justice Minister Sabine Leutheusser-Schnarrenberger. The SPD, the Greens and Die Linke had also been agitating for Chancellor Merkel to intervene.

      France isn't happy either, with French President François Hollande calling for an "immediate" end to the alleged spying if the EU-US trade negotiations are to continue. "We cannot accept this kind of behaviour between partners and allies...There can be no negotiations or transactions in any areas until we have obtained these guarantees, for France but also for all of the European Union, for all partners of the United States."

      French Foreign Minister Laurent Fabius added the reports were "completely unacceptable," if corroborated, while his colleague, Christiane Taubira, the Justice Minister,  called US actions “an act of unqualified hostility.”

      Italy’s Defence Minister Mario Mauro weighed in this morning, saying that US-Italian relations would be “compromised," if the reports are true. "If we are allies, if we are friends, [then] it’s not acceptable that someone in this relationship behaves like the Soviet Union used to behave towards its satellite states,” he added.

      EU

      EU officials, political groups and MEPs are miffed too.

      Catherine Ashton, The EU's foreign policy chief said the EU is seeking  “urgent clarification." Meanwhile Martin Schulz, President of the European Parliament, said he was “deeply worried” by the reports, and warned of a “severe impact” on EU-US relations if they are true (remember, the EP's role in EU trade talks was enhanced under the Lisbon Treaty).

      Schulz told French radio station France 2 that the US had crossed a line,"I was always sure that dictatorships, some authoritarian systems, tried to listen ... but that measures like that are now practiced by an ally, by a friend, that is shocking, in the case that it is true."

      This was echoed by Viviane Reding,  the EU justice commissioner: “Partners do not spy on each other,” she said. “We cannot negotiate over a big transatlantic market if there is the slightest doubt that our partners are carrying out spying activities on the offices of our negotiators."

      “How should we still negotiate [a free trade agreement with the US] if we must fear that our negotiating position is being listened to beforehand?” said Elmar Brok, the chairman of the European Parliament’s Foreign Affairs Committee.

      In an interview, Czech MEP Libor Roucek, the deputy chairman of the S&D group for Foreign Affairs and Transatlantic Relations, said he "can't exclude the option that [he's] being monitored by the US secret services."
       
      Some went further, calling for a suspension of the US-EU trade talks altogether. This included the European Parliament's Green Group, and MEPs like the Dutch social democrat Thijs Berman: "[The] US spies on EU diplomats. That's not how we can negotiate a free trade deal. Suspending is logical step," he tweeted on Sunday.

      Press
       
      The revelations have caused an uproar in the European press (Le Parisien’s ‘hammy’ front page of Obama ‘listening in' captures the general drift), and most of all in Germany. 

      Spiegel Online published a commentary today that not only criticised America, but also the lack of action by the government.“The federal government has failed to protect Germans from America’s spy-attacks. This is unacceptable to citizens," it says, calling for an “independent education”  for the US from the German Constitutional Court and a European Committee.

      Meanwhile, Austrian Daily Der Standard published a commentary that diverged from the general thrust of European media feeling. Spying is to be expected says the piece: "It would be surprising indeed if the opposite were the case. Being spied on by an ally is about as normal as the systematic surveillance of political opponents."
        
      Perhaps Der Standard is right that much of this skulduggery does go on, even amongst allies. But, still, although this is unlikely to deal a fatal blow to EU-US trade talks, the political consequences could well be that certain European countries dig their heels in a little firmer in the negotiations.

      On a more general note, for individuals concerned about their privacy and civil liberties, this type of issue only heightens fears that the increasing amount of personal data shared among EU governments isn’t safe and that the protections are inadequate.

      In recent years the EU has been developing more and more data sharing databases, and it is not always clear to the general public what happens to their data – this will only fuel ‘big brother’-type fears that is open to misuse, abuse or simply could be accessed by anyone.