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Thoughts from the Frontline

Austerity is a Four-Letter French Word

June 21, 2013

The France that I see as I look out from the bullet train today is far different from the France I see when I survey the economic data. Going from Marseilles to Paris, the countryside is magnificent. The farms are laid out as if by a landscape artist – this is not the hurly-burly no-nonsense look of the Texas landscape. The mountains and forests that we glide through are glorious. It is a weekend of special music all over France, and last night in Marseilles the stages were alive and the crowds out in force. The French people smile and graciously correct my pidgin attempts at speaking French. I have found it diplomatic not to mention that I think France is in for a very difficult future. Why spoil the party?

But for you, gentle reader, I will survey the economic landscape that I see on my computer screen. It shows a far different France from the one outside my window, one that resembles its peripheral southern neighbors far more than its neighbors to the north and east. The picture is not all bad, of course. There is always much to admire and love about France. But there are a lot of hard political choices to be made and much reform to be undertaken if this beautiful country is to remain La Belle France and not become the sick man of Europe. This week, in what I think will be a short letter, we'll look at a few of the problems facing France.

A Great Deal If You Can Get It

Yesterday (June 20) the French called a Grand Summit of businesses, unions, and government officials to address the needed reforms to make France more competitive and its national budget more sustainable. Debt and deficits are high and rising as the country rolls into yet another recession in response to President Hollande’s hard left turn last year. One of the key issues is a very…

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Dutoit Leon

June 27, 2013, 7:30 p.m.

I see a very strange thing in almost everything written by foreigners about France : they all think that Hollande returned the retirement age at 60 instead 62. This is not true, except for very few workers, who had a hard and difficult job and began to work when they were very young, between 15 and 20.

David Home

June 27, 2013, 2:30 p.m.

I spoke with friends that, according to your description, have a similar place at Bloor and Bedford in Toronto.  They replied as follows:
“we found what we were looking for in Murano, (Venice).  There are so many shops with beautiful glass pieces.  If Murano glass is something he likes, then I would suggest a trip there for a couple of days.  They can do custom pieces of almost anything, and they have many unique pieces from which to choose.” 
As you are in Europe, it may be easy to pop over to Venice (what a lovely idea!) and check out the shops.  David Home.

June 25, 2013, 9:23 a.m.

Hi Mr. Mauldin,
I’m a young surgeon who has enjoyed reading your articles for a couple of years now.  I’ve got a very contemporary/modern house in the desert that I’ve been furnishing/decorating for the past 3 months.

Although you don’t want a “chandelier” per se, I think you should look at  As you scroll down, you’ll see some great hand-made work out of Seattle.  Enjoy!

June 24, 2013, 10:30 p.m.

Dear Mister Mauldin,

It is nice to hear that you appreciate the French countryside, however admiring its beautiful landscape will not provide you any deep insight about how the French economy works or how it will perform in the coming years. As a Frenchman I am more than used to this mainstream French bashing and I hoped from such article to read about new facts or data.

The challenges that French governments are facing are very well known by most of us, the lack of competitiveness due to the rigidity of its labor market, the overweight of the state spending in the GDP, the national budget continuous deficit since 1972, the education system, the immigration, the euro… Your article does not provide any new fact or idea to better understand these issues and is also quite misleading or simply wrong on ma n y other aspects.

No France is not Greece. We are talking here about a GDP 10 times bigger and actually it would be a waste of time to go through every massive differences that make France a far far more resilient economy than Greece. You could have the view however that “France is on its way to becoming the new Greece” but let’s have a look at your arguments to support such statement:

1) IMF is predicting 2.0% recession in 2013 and 0.8% growth in 2014?
Not true. The IMF is actually predicting a 0.1% recession in 2013 and 0.9% growth in 2014
Greece? -4.2% in 2013, +0.6% in 2014

2) French President F. Hollande is worsening the situation by undoing what Sarkozy did well (putting back the retirement age from 62 to 60)?
Not true. The legal age for retirement in France is still 62, FH did not changed that. Had you looked a bit deeper into the details you would have understood that he only did a minor adjustment for the people who started working very early. The cost of this was nearly €200 m (1% of the 2020 estimated deficit of the pension system). And to give more color to your lecturers, the French government is currently working on a reform to balance the pension budget by 2020. The first pension reform by a socialist government ever.

3) Nobody likes F. Hollande because he is not doing anything?
Not true. Most of the people disapprove FH because they dont see any improvement immediately. When G. Schroeder launched his 2010 Agenda in Germany he was despised as well and it took 10 years for the German economy to elevate from the sick man of Europe to the most powerful one. FH is not good at marketing himself but people must be aware that things are moving silently but significantly. The recent bill allowing more labor flexibility to French companies facing hard time is historical given French track record to find agreement between worker and employer unions. It can be a game changer and we should expect more structural reform to come in the next 2 years. FH is not Sarkozy, he has no charisma and does not waste as much energy, but he is much smarter and understand what social dialogue means (one of the greatest strength of Germany)

4) Interest rates will go up and destroy any effort achieved so far?
Maybe. But what makes you say that? The FED could potentially act in the short/medium term but only if the unemployment goes below 6.5%. With a 11% unemployment rate in Europe, nothing actually support a similar increase of interest rates by the ECB. The contrary is far more likely (most economic reports expect a negative deposit rate by the ECB at its next council meeting). Investors keep buying the French OAT because the ECB will do “whatever it takes” to support the euro, and without France there is no euro. Who could argue that the same apply to Greece?

David Home

June 23, 2013, 2 a.m.

Hello John,
I sent your request for suggestions for a decoration to friends who have solved a similar issue with a trip to Venice! Their place sounds similar to yours and is located at Bloor Street/Bedford in Toronto—one of Toronto’s tonier residences.

Here is a copy of their reply:

“We found what we were looking for in Murano, (Venice). There are so many shops with beautiful glass pieces. If Murano glass is
something John Mauldin likes,I would suggest a trip there for a couple of days. They can do custom pieces of almost anything, and they have many unique pieces from which to choose.”

David Home, Whitby, Ontario.

pierre l

June 22, 2013, 4 p.m.

toc toc what? France the new Greece? What kind of paint they brush on your wall?
Non France n’est pas pas la nouvelle Grèce parce que il n’y a pas de corruption si on compare. Je suis d’accord que tout entrepreneur qui fait de l’argent en France est vu par le peuple comme un voleur. Une nouvelle France se forme qui essaye d’éloigner le passe syndicale de la France. Sarkosy a essayé et échoué. La France a toujours une aucune idée de la mondialisation. C’est quoi ça?
Mais attention pour avoir une assurance du futur de ce beau pays il faut regarder le sports français, rugby ou football. Pour une simple explication je dirais que il n’y a qu’a demander au New Zélandais ou au Brésilien. Les Français un peuple ingouvernable et plein de surprise.

Alan Shaver

June 22, 2013, 9:10 a.m.

I believe there is a mis-statement in this piece.  Quoted from above:

“Total social security revenue is around €200 billion per year and the social security budget is higher than the gross national product (GNP), i.e. social security costs more than the value of what the country produces.”

It is arthimetically impossible for total social security payments in a budget year to exceed the GNP.  I suspect what was meant is that the total social security liability is greater than the annual GNDP.  Would that not also be true of the US?

Donald Giffels

June 22, 2013, 7:56 a.m.

With 10 foot ceilings, there is a host of politicians who could be hung without their feet touching your dining room table.

Arthur Simpson

June 21, 2013, 7:26 p.m.

For the art light above the table. Suspend a sheet of glass horizontally, art carved with a floral design. Use a neon colored light perimeter as a fuschia color with enough led light to be picked up by the incised artwork to cast light onto the table. Of course Dale Chihuly is the best in gla$$.

Sky Carver

June 21, 2013, 7:26 p.m.

John, a fine gold coin changed hands in Vienna last year over a bet based on Charles’ comment. It seems I should keep in mind the context of his comments rather than the content. This year I’m hoping for sage advice that may lead to the consumption of the contents of a fine Bordeaux!

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