I love France. Most of us do. In general, I even like the French. That is best achieved by taking them as they are and not getting too fussed about what they could be. Though that has not precluded me from pulling their collective legs at any suitable opportunity. Thus it was that one of my very long term-readers who resides in the Swiss Alps on Friday dropped me a WhatsApp that read “Michel Barnier. Looking forward to your next write up”, along with one of those laughing emojis.
The Possum – the trading floor nickname of my Swiss interlocutor – would no doubt now be expecting a Brexit diatribe about what a miserable piece of dog poo Barnier is and how he did all he could to make Brexit as painful as possible for the United Kingdom. That would of course be true but, at the same time, it must be conceded that this was the job he had been given by the Commission for which he deserves the highest of marks. Casting our minds back to 2016, there was one item at the very top of Barnier’s agenda and that was to make sure that no other country should begin to toy with the idea of leaving the Union. There was going to be no “half in, half out”, no concessions, no going back, no quarter given. And with that in mind, Monsieur Barnier played an absolute blinder.
Now, Young Macron has taken French electoral democracy and has thrown it into the gutter. I have never thought that Emmanuel Macron had much to commend him, and I well remember sitting in a committee meeting with an old chum who declared that she had met him on one of his campaign trips to London and that the sun shone out of a multitude of orifices. I’m afraid I could never see that, and I suppose that, in the fullness of time, I might have not been entirely wrong. Macron has tried to be all things to all men, all women and all those in between and has ended up being nothing to anybody. The French are perplexed. He had been touted as a brilliant man, as one who would supersede many of the old party lines and offer his country the reset it desperately needed. Mene mene tekel parsin.
Macron could not believe that the French voters, looking at the alternatives on the far right and far left would not coalesce around him in the middle and now he is sitting in the Elysée Palace dressed in the emperor’s new suit of clothes. I’m not sure appointing Barnier will be the big winner, but he has chosen an old-style conservative with a strong track record of taking no sh*t from no-one. I suppose Macron has decided that NFP, the Nouveau Front Populaire, will crumble under pressure which historically more or less all left-wing alliances have tended to do. With a putative bruiser of Barnier’s format in the Prime Minster’s office, Macron may be thinking that he can split the left and end up with informal centre-left to centre-right backing. And, for that, he needs a tough PM.
Barnier is probably better known in the UK than in France. Macron’s gambit will prove to be either one of genius or a complete disaster. Personally, I would be tempted to suggest tendentially the former. On vera.
Both France and Germany are in a spot of trouble and, in two weeks, the next of Germany’s Eastern states, Brandenburg – in an otherwise quite clever article in The Spectator it was repeatedly referred to as” Brandenberg” – will be voting in local elections. The polarisation between the centre and the wings might not be as clear as it was in Thuringia but that’s not saying much.
Both France and Germany have strong automotive industries, and both are suffering from a collapse in demand. The EV transition has been a wet squib and a very expensive one to boot. Yes, we know that European car buyers who had been urged to save the planet have been cocking a snook at the transition. But there is a much deeper problem. EVs are technically a lot simpler than ICEs and the long-developed and passed on skill sets required to build Mercs and BMWs and Audis and Renaults and Citroëns count for not a lot. Building EVs brings on a lowering of the technical bar. Thus, Asian makers, especially Chinese ones, can rapidly build up low-skilled and cheap workforces which is something with which the Europeans with all the will in the world cannot compete. They lose on every front and now even what they can make is suffering from falling demand.
I have over the years worked hard at cultivating low friends in high places and now and then I have ended up with the occasional high friend in a high place. Thus, one of my closer personal friends is the erstwhile chairman and CEO of Jaguar Land Rover, JLR. Although now closing in on 80, he remains a towering figure in the industry. He has often spoken of the meetings he has had in Westminster with a variety of secretaries of state and also lesser ministers, and he wonders why and to what effect. When it comes to “Please don’t confuse me with facts, my mind is made up…”, there are few industries that have suffered more than automotive.
But that is just one of the issues. The other is the downscaling of skills. Germany is reporting a manageable unemployment rate of 3.4% although that only tells part of the story. Replacing a highly skilled job in a car plant with a low skilled job in elderly care keeps the statistics ticking over but also raises the question as to how we can drive an economy by caring for one another? At the outbreak of the GFC in 2007/2008, a similar question was being asked with respect to how long we could fuel growth by selling one another insurance. The conundrum is not dissimilar. I am now also a septuagenarian, so elderly care is a subject to which I ought to dedicate some thinking time – not that I do – although, as an economist, I keep on coming back to the dichotomy of GDP and of value added.
Making cars with highly skilled, highly paid engineers and technicians creates value added. With no disrespect to the folks who populate our care homes on a minimum wage, they do not. Apart from that, the former funds the latter and if the former goes into decline, the latter will ‘ere long also become unaffordable. The boomer generation has the reserves with which to finance its elderly care, Gens X and Y and Z and Alpha might, without defined benefit pensions and several decades of staggering residential property price inflation, not be able to walk away in their mid-50s or early 60s to play golf and travel the continent in a motorhome and even less so if they are not earning the high incomes with the concomitant savings ratios which skilled employees do.
Macron first won the presidency when the boomers were in the driving seat. Now in his second term, he is faced with the problem of having to recalibrate France’s generous social security system as its fiscal burden and unaffordability are to the rest of the world, but not to Jean-Jacques and Marianne SixPack, becoming glaringly obvious. How could he appoint a Prime Minister from the NFP, given that their core electoral promise was to cut the state pension age back to 60? In the appointment of Barnier, Macron has played his last big card.
Whether the game is played aces high, or aces low is to be seen. The frustrated left will be calling for demonstrations in the streets. They surely have the right to demand at least a chance to form the government – they did after all, for all intents and purposes, win the election – but, at the same time, I have sympathy for poor Macron who sees that la Grande Nation does not have the fiscal headroom to experiment with something as illusory as a lowering of the pension age.
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