The good news is that France’s new Socialist government is back
from vacation. President François Hollande, known locally as
Monsieur Normal, Prime Minister Jean-Marc Ayrault, and all the many
and varied cabinet ministers — strictly 50-50 men-women,
conforming to the party’s feminist dogma — took off in August for
some much-deserved rest and recreation after laboring in office
nearly two whole months. Hollande’s splashing around on a Riviera
beach with his chubby, bikini-clad First Girlfriend, Valéry
Trierweiler, was thoroughly described and photographed by the
celebrity press. And in this country where, if the president is an
elected monarch, the cabinet ministers are his courtiers, the
French were also duly informed of their summer antics, along with
the progress of their tans.
The bad news is that, back on the job, the government has to
deal with a France in even worse shape than before it left town.
The economy is dead in the water, now in its third quarter of zero
growth, even if the government tiptoes around the dreaded word
recession. The trade deficit is at a record high. Unemployment has
surged for 15 straight months and now stands at 10 percent, with
fully 3 million of the active population living on the dole. More
will be joining their ranks as company after company announces
closures and job cuts. Those planning to lay off thousands in
coming months range from biggies like Air France and the giant
supermarket chain Carrefour, to carmaker Peugeot-Citroën, not to
mention the country’s largest chicken processor out in Brittany.
The leftist CGT labor union, which supported Hollande’s campaign,
now plans a major national strike in early October.
The problems are not only economic. Simmering violence has
erupted in cities north and south. Disaffected young rioters in
Amiens, north of Paris, recently torched cars and public buildings,
firing buckshot at police, while two dozen have died in Marseilles
this year as drug gangs fight turf wars with assault weapons; the
government briefly considered the drastic step of sending in the
army, but that would look too much like civil war. When the
government did act forcefully on another problem and evacuated
several illegal gypsy camps, it led to dissention within its own
ranks — Socialists traditionally have protected Roma. More
internecine political strains loom over nuclear power, which the
Socialists favor as France’s main supply of electricity, and their
ecologist governing partners flatly oppose.
As they trudge back to work from their own vacations, the French
sense that the feckless Hollande administration is passive and
floundering. A new poll shows that a convincing 72 percent think
the government has not been active enough in handling the problems
it was elected to deal with. As for their opinion of Hollande
himself, his approval rating has skidded to 44 percent from above
60 percent when he took office in May. His grace period has ended
much faster than that of his predecessor Nicolas Sarkozy at the
same stage of his presidency. Going from one extreme to another,
they voted out an annoyingly hyper-active president, only to be
just as unhappy with a listless hypo-active one.
Even some of the usually loyal left-wing press has started to
express doubts in editorials. Libération headlined “The
very mediocre summer of François Hollande.” Another former
cheerleader, Le Monde, charged him with “hesitation” and
“immobilism.” The discontent is surprisingly strong in the ranks of
the political left itself. Saying aloud what many disappointed
Socialist members of parliament are thinking, the pugnacious
far-left leader Jean-Luc Mélenchon said Hollande’s first 100 days
were “virtually worthless.”
Far be it from me to say Hollande and company have no idea how
to fix France’s problems. They do at least have one, amounting to
an idée fixe. The new president never met a tax he didn’t
like, and his administration may well win the gold for creative
taxation. Somehow he has to find an additional $41.3 billion in his
2013 budget to meet his pledge to cut the deficit to 3 percent. It
being against his Socialist faith to cut government spending on
entitlement programs to achieve that makes his administration a
one-trick pony: its only way of dealing with France’s problems is
— you guessed it — more taxes.
Hollande repeatedly pledged during his campaign to soak the
rich, making them bear the brunt of painful measures to fix public
finances. He is on safe ground there. Ever since the rabble stormed
the Bastille in 1789, the congenitally envious French have loved to
stick it to the wealthy. Polls show that fully 75 percent favor
that, including, perversely, a majority of those claiming to be
conservatives. (The French are notoriously hung up on the subject
of success and the money derived from it: surveys find something
like 80 percent are constipated when it comes to talking about it.
Ask a Frenchman about his mistress, but never, ever, about how much
he makes.)
Thus it is that the country’s wealthiest households, banks, and
big businesses are targeted for some $9 billion in tax increases
this year, with more to come in 2013. France, already the only EU
country with a wealth tax, thanks to the previous Socialist
presidency of François Mitterrand, will increase it, with people
worth more than about $1.3 million paying a special surcharge, a
taxe exceptionelle, this year — just to get them used to
the idea of paying more for the privilege of living in France.
On the fiscal horizon are increased inheritance taxes, along
with Hollande’s promised 75 percent tax rate on individuals earning
over $1.3 million, and a new 45 percent rate on income over
$185,000. His Robin Hood approach to taxation approaches the
punitive when it comes to top executives of state-controlled
companies. New regulations will prohibit their making more than 20
times the salary of the company’s lowest-paid employees. Thus for
example the CEO of France’s lone electric power company will have
his salary slashed by 68 percent, or from $1.9 million to
$621,000.
Many other top managers at the 52 companies where the French
state wields board control will see their pay shrink. Some
high-net-worth people could actually end up paying a marginal rate
of 90.5 percent tax on certain income. “It is exorbitant,
confiscatory and scandalous,” the tax lawyer Jean-Philippe Delson
told the Guardian newspaper. “This is a punitive tax. It’s
not that France doesn’t like the rich, it hates them.” Some
well-paid French executives have gotten the message. A number of
those due to rotate back to France from posts in the U.S. and
Britain are reportedly asking to be left where they are.
The Socialists’ creative taxation is hitting successful
businesses themselves with new levies on bank profits, dividends,
and bonuses, while oil companies are singled out for special
treatment. The financial sector is also feeling the tax heat as
France proudly became on August 1 the first European country to
impose a “Tobin tax” on financial transactions, just the thing to
attract investors. The 0.2 percent tax will be applied to shares
bought in over 100 French companies with market capitalization of
more than $1.2 billion. A similar levy of 0.1 percent is now
imposed on high-frequency trading. “French companies are the most
taxed in Europe,” laments Laurence Parisot, the head of Medef, the
equivalent of the National Association of Manufacturers. “We’re the
champions of corporate taxes.” Some French companies have had
enough of that. Michelin, the giant tire maker, recently decided to
build its first plant in the U.S. in 35 years because of the better
business climate there.
If he thinks he can tax France’s way out of financial trouble,
someone should remind Hollande of the example of British Premier
Gordon Brown’s Super Tax for the Super Rich, which he applied for
ideological reasons in 2009. He hoped to fill government coffers by
raising the tax rate from 40 percent to 50 percent on those making
over $233,000 a year. But, like Hollande, he reckoned without the
ability of free individuals to adapt and adopt defensive measures.
After two years, tax revenues from the wealthy actually dropped by
$48 billion.
Meanwhile, Monsieur Normal’s live-in girlfriend has
resourcefully found a way to scratch up a bit of extra money.
Valéry, unhappy with the figure she cut in a bikini, sued one of
the newspapers that used the vacation photos of her, claiming an
infringement of privacy, even though such vacation photos of
Sarkozy and his wife Carla were routinely published. Sore beset
French taxpayers will surely be grateful if she contributes the
$2,500 she won in damages to the French treasury to reduce the
national debt.
