France and the downgrade

Calmez-vous! (FRANCOIS GUILLOT/AFP/Getty Images)

The French reaction to Moody’s downgrade of the country’s credit-rating has been studiedly cool. Pierre Moscovici, the finance minister, dismissed Moody’s move as a reaction to yesterday’s news – in other words, it’s all Sarko’s fault, and things have changed.

Le Monde confines its reaction to the Economy pages, where an analyst remarks – “Le timing est très surprenant.” (And so is the use of the franglais word, “timing” – is there no decent French alternative?)

Yet behind this display of sang froid lurks real anxiety.

That anxiety was on full display in the fierce official reaction to this week’s Economist cover story, which proclaimed that France is the “time-bomb at the heart of Europe.” To be fair, the contents of the report were rather less explosive than the headline. But it’s the headline that counts, and the magazine was given the honour of being denounced by the French prime minister, the finance minister and the head of the employers’ association. I think it would have been rather cooler for the French just to have loftily ignored the report.

The most substantive French criticism of The Economist and other doom-mongers is that they are out-of-date. President Hollande has just moved to reduce the cost of social charges to employers. And the Gallois report has just come up with all sorts of proposals to boost French competitiveness.

Still, on a recent trip to Paris, I found leading French businessmen unconvinced by all this. (And, it should be noted, that what people like this say in private is often strikingly at variance with their public pronouncements, since there is an understandable reluctance to run down France, on-the-record). One said that the cuts in social charges were a good start, but no more – “It’s like deciding to stop banging your head against the wall.”

As for the Gallois report: first, it’s by no means clear that the Hollande government will implement its major recommendations. Second, one of my interlocutors argued that the report is not all its cracked up to be anyway. He says that both Gallois and the Hollande government neglect the services sector which accounts for over 80% of the economy, in favour of industry. “They have a vision of a country that is covered in factories. They are obsessed by manufacturing. Still, that is an improvement on Chirac who was obsessed by agriculture.”

So, if this analysis is right, French official thinking has moved from the eighteenth to the nineteenth century. It’s progress – but is it fast enough?