No right turn

International | France's left turn threatens to provoke an E.U. crash

Issue: "Bailing Out," June 14, 1997

Like Canadian Prime Minister Jean Chretien, French President Jacques Chirac called elections nearly a year early to reignite support for his own parliamentary agenda. Unlike Mr. Chretien, Mr. Chirac badly miscalculated the mood of his country. The day before the June 1 elections, his conservative coalition had 464 seats in the National Assembly; the day after, it had 253.

Replacing the conservatives is a leftist coalition led by Socialist Party head Lionel Jospin, who becomes France's new prime minister. Mr. Chirac gets to keep his office under France's quasi-parliamentary system.

Conservatives and Socialists drew clear lines in this campaign: Mr. Chirac wanted to reduce budget deficits and government spending so France could qualify for participation in a new common European currency (the euro) by the 1999 deadline. Mr. Jospin promised 350,000 jobs in the state sector and a halt to privatizations of major industries. Mr. Chirac's insistence on a program of economic austerity is roundly blamed for the defeat.

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The conservative defeat, along with the Tory defeat in Britain last month, is a sign that the European Union and the euro are in trouble. Voters want the benefits of trade partnerships and open borders but not the economic makeover required to position the E.U. as a global player.

Paul Borticelli, assistant professor of political science at Grove City College, said, "It is so typical of European welfare states. Their leaders know they have to do what we had to do on welfare reform. They have had welfare 20 years longer than we have, so it is foreign to them to do without it."

Social spending in France extends well beyond the impoverished. One-quarter of all workers labor in the public sector, even though France has the highest unemployment rate in the West, at 13 percent. Unemployment stems from an elaborate social welfare system and government-sector spending that already guzzles 54 percent of France's economy. Industrial heavies like the carmaker Renault and French Telecom are still government-run. Mr. Jospin promises to keep them that way. He pledges to reduce unemployment by creating more government jobs, rejecting the belt-tightening of other Western nations that aim to compete with Asia's aggressive low-wage labor force. What he proposes, Mr. Jospin says, is an "evolution of statism."

Statism in Europe, however, still turns the old-fashioned way. Actions of the European Parliament in Brussels-which legislates for the E.U.-are a picture of big-government creep. Until 1987 all major decisions were made by unanimous vote. The passage of the Single European Act meant only a majority vote was needed for most lawmaking. That procedural move stripped member nations of sovereignty, saying essentially, "We now make laws by committee," according to Grove City's Mr. Borticelli.

Since then the regulations issuing from bureaucrats in Brussels have gone from the sublime to the ridiculous. E.U. observers chortle over the "Euro-apple" and the "Euro-condom," two items now regulated down to weight and size by the organization.

When Mr. Chirac went public with his plans to lower taxes on high-demand items among teenagers like CDs, his advisers later chastised him. Such a move was prohibited, he was reminded, unless all 15 members of the E.U. went along with him.

Ironically, conservatives in Europe, led by German Chancellor Helmut Kohl, have pushed for E.U. hegemony and a common European currency as a means to compete with the American dollar and the Japanese yen. Liberal parties like Mr. Jospin's Socialist Party and France's Communist Party, which will form a coalition government with Mr. Jospin, don't like monetary union because of the threat to social spending.

"The Communists and the Socialists understand that the common currency won't work as long as the welfare state grows," said Mr. Borticelli. "They don't mind big government-as long as they are in control of it."

Ruling liberals may not abandon the common currency plan, however, and Europe's turn to the left has economists worrying that they will turn the euro into a marshmallow. It could come into being but turn out to be as worthless on world markets as a peso.

"If they can't get the euro on good terms they'll do it on bad terms rather than not at all," said Robert Royal, an expert on Western Europe with the Ethics and Public Policy Center. "Unless Europeans get disciplined on social spending and unleash their companies so that they are not semi-nationalized, they simply are not going to be able to compete on the world market."


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