Monday, June 18, 2007

Sarkozy gently sliding toward crisis.

I say 'gently' because he isn't actually in the shit yet. His party, the UMP, has won the parliamentary elections, but with a much smaller margin than anticipated, and fewer seats than in 2002. Polls had given the right an astonishing 401-436 seats, more than enough to batter through any agenda they like, while the total left vote was predicted to result in a mere 137-174 seats, with remaining seats for centrists and others. However, the UMP and its one ally looks like it has finished with 319, the PS and its allies 208, the 'New Centrists' 22, the PCF 18, and the Greens 4. (Alternative estimates here). The fascists don't seem to have won a seat at all, and have recorded their worst vote in years. At the same time, Alain Juppe - Sarkozy's 'number two', in several ways - lost to a little-known Socialist. The capitalist press understandably worried, although Sarkozy is still described as having a mandate for 'reform'. Okay, there is no doubt that Sarkozy won, and most people were aware of his programme. There is no doubt that the UMP has won, and most people are aware of their programme. However, as any fule know, the fabled 'democratic process' does not end there. Le Figaro, the conservative French newspaper, writes:

What happened yesterday was certainly not a defeat for Nicolas Sarkozy because Nicolas Sarkozy has a clear majority, but it certainly is a warning ... is ample proof that if the French have adopted the idea of reform they aren't ready to accept those which haven't been amply considered.

What sort of warning shot? Well, this is what has the Wall Street Journal so concerned:

over the past few days, diverging positions have emerged within the government over how to finance Mr. Sarkozy's flagship economic measure: a package of tax cuts that Mr. Fillon has pegged at €11 billion, or $14.72 billion.

France's European Union neighbors are concerned that Paris will fail on its commitment to balance its budget in 2010 if planned spending cuts and new levies aren't adopted this year.

Last week, Finance Minister Jean-Louis Borloo said the government was looking into the possibility of raising the country's value-added tax to help offset the missing fiscal revenue. Mr. Fillon then suggested that the VAT could be increased to 24.6% from its current 19.6% in order to help finance cuts to the social charges paid by companies.

But Mr. Sarkozy himself subsequently stepped in to say he would never approve a VAT increase if there was evidence that it might affect households' spending power ... Mr. Sarkozy hopes that stronger consumer confidence will help create a favorable window to push through tougher labor-law changes later this year and in 2008 ...

To boost the morale of French households, Mr. Sarkozy has carefully sidestepped debates over how to finance France's health-care system.

Sarkozy's key policy is to attack the strength of the labour movement and to roll back worker protections, but to achieve these measures he needs to placate working class voters as consumers. At the same time, a crucial part of his programme was a massive dose of Bush-style tax cuts for the very rich and corporations (the WSJ doesn't mention this part). In order to fund it, at the same time as balancing the budget, they've got to tax the poor a lot more - increasing VAT to 24.6% was the plan - which French workers won't accept. Sarkozy is evidently not confident about starting that fight yet and nor does he seem ready to make significant cuts in public spending. It seems that when the prospect of increased VAT was raised, it generated a widespread reaction against it. Other EU states are a bit wary of Sarkozy's plans at any rate, since their main concern for now is that he balances the French budget rather than cutting taxes for the capitalist class.

It's a very difficult road ahead for the government, then, and a strong labour reaction could easily put their plans under and sink the government. Sarkozy has only been in office since April, and already he's in decline. Wait til he actually tries to do something.