Europe's 'France' Problem: With the British out of the picture, Germany will be hard-pressed.

AuthorVaubel, Roland

French President Emmanuel Macron has started a major European offensive. He is calling for a eurozone budget on top of the EU budget, more transfers to countries experiencing high unemployment, more subsidies for European "champions," a softer anti-trust policy, tighter labor market regulation, the mutualization of bank losses, and majority voting on taxation. When the European elections are over and the new Commission takes office in November, the battle for Europe will begin. The British will be out of the way. However, in Germany a federal election is looming in September 2021. Chancellor Angela Merkel, a weak and willing partner, will step down. Macron knows that 2020 is his narrow window of opportunity.

France has always tried to export its social and economic model to the rest of Europe. According to the index of economic freedom published by the Heritage Foundation each year, France occupies the third but last rank among the 36 OECD--that is, industrial--countries. The French share of government spending and of social spending in GDP is the largest among all OECD countries. As for the level of labor market regulation--for example, regulation of dismissals and the minimum wage relative to market wages--France ranks second after Turkey in the OECD. No wonder that, despite very low interest rates, the French unemployment rate stands at 8.8 percent and is the fifth highest in the OECD.

The French have little confidence in the market. In an opinion survey conducted by the University of Maryland (as part of its Program on International Policy Attitudes), people in twenty industrial and emerging economies were asked whether they are for or against free markets. The support for free markets was lowest in France (36 percent). For comparison, it was 65 percent in Germany, 66 percent in the United Kingdom, 71 percent in the United States, and, at the top, 74 percent in China. Why is France so "etatiste" and anti-market?

The roots are historical and ultimately geographical. Looking back at European history since the middle ages, France was the first large language area to be permanently united in a centralized state. In the twelfth century, the crown land had been limited to the small area of the Isle de France--comprising Paris and Orleans. By 1488, Charles VIII had become the sole ruler over the whole of French-speaking France. "La Grande Nation" was born.

Why was France unified four centuries ahead of Germany? Geography played an important...

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