A cry to a country in the danger zone

Réveillez-vous!, by Nicolas Baverez, Fayard (RRP €11.90; ebook RRP €8.49)

When François Hollande became France’s first Socialist president for 17 years in May, there were dire warnings from his defeated rival Nicolas Sarkozy that financial markets would turn against France within days, plunging it into a Spanish-style emergency.

Instead of meltdown, four months later the country is borrowing at record low levels of interest; the eurozone crisis many had feared would erupt over the summer has been averted; and Mr Hollande is about to underline his commitment to fiscal rectitude by imposing on the country what he has called the toughest budget in 30 years.

Business is restive over the president’s preference for concentrating new taxes on companies and the wealthy rather than cutting spending; and there is rising tension over mounting unemployment, declining industrial output and the prospect of, at best, feeble growth next year. But so far, the worst of the eurozone emergency has been held at bay.

That may not last long, if Nicolas Baverez, the maverick liberal economist, is to be believed. In his book Réveillez-vous! (Wake up!) – the title is intended to be a counter-echo to Indignez-vous! (Get Angry!), the anti-capitalist pamphlet by Stéphane Hessel – he seeks to blow away any complacency. In his portrayal, France is a country on the verge of debacle – and not just a French debacle.

“There is no doubt that France, which last had a budget surplus in 1973, is on the same trajectory that today threatens to carry off Spain and Italy,” he writes. “If it hits the debt wall after Spain and Italy, the probability of the single currency surviving is minimal because Germany could no longer, even if it still wanted to, prop up the eurozone alone.”

The book is far from being a party political assault on Mr Hollande, who is scarcely mentioned. Baverez’s thesis is that France has for decades been led by both left and right down a path of debt-financed welfare and declining productivity, and into a dangerous state of denial over the true state of its economy. In a dismissive comment on Mr Sarkozy’s five-year term, he says that the former president, who promised “rupture” when elected in 2007, “tore up the mandate for reform which he won from the French”.

The whole French establishment, including its vaunted administrative elite schooled in the grandes écoles, is condemned by Baverez for refusing to adapt to globalisation and the emergence of the new economies and for “exonerating itself from all the disciplines and all the obligations implied in the single currency”.

The result is that the country passed from the Trente Glorieuses – the 30-year postwar boom – to what he calls the Trente Piteuses (the title of one of his previous publications).

The book is more polemic than economic analysis. Written by a foreigner, it would seem unbalanced and downright hostile. Baverez demolishes the three great French principles, writing that liberty today is “denounced”, equality is “abusively confused with the right to unlimited withdrawals from a welfare state living on credit” and fraternity is “dissolved in a resort to nationalism and hatred of foreigners”.

But he deploys stark figures to illustrate his point that the debt-laden economy is in the danger zone – none more stark than those that make a comparison with Germany.

Annual public spending, at 56.6 per cent of gross domestic product, is the highest in Europe apart from Denmark and €163bn more than in Germany – which has 17m more people. France, which in 2013 will have the biggest borrowing requirement in the eurozone, had a trade deficit last year of €70bn, while Germany had a surplus of €150bn.

Baverez calls for a wholesale reform of the French social and economic model to create a “competitive shock”, citing the cases of Canada, Sweden and Germany as examples to follow. This is where the question of Mr Hollande’s programme comes in.

So far there has been little sign that he is prepared to take the kind of radical swing at the public sector and welfare state that Baverez – and many others – advocate. Where Baverez argues for the need to break the “hyperprotection” of public workers, Mr Hollande has promised to maintain the overall level of state employment; where Baverez calls for three-quarters of deficit savings to be made by cutting public spending, the president plans cuts that would represent only one-third of savings next year.

For Baverez, without a more fundamental shake-up to revitalise the economy, “French decline is on the point of turning into a crash”. If he is right, the easy ride Mr Hollande has enjoyed so far from the debt markets will not last much longer.

The writer is the FT’s Paris bureau chief

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't cut articles from FT.com and redistribute by email or post to the web.