The Price of Deregulation

The Agenda 2010

With its latest job market reform, the French government is - again - seeking to copy Germany's "Agenda 2010." Implemented during the SPD/Green, and later the grand coalition governments, the "Agenda 2010," provided Germany's economy with considerable advantages - also in relationship to its French competitor. Deregulation in the economy and the labor market as well as painful cuts in social spending have also reduced Germany's non-wage labor costs by 1.3 percent, between 2000 and 2009, while these were growing by 17 percent in the same period in France. Real wages were reduced by 0.8 percent in Germany between 2000 and 2008, while they rose in all other EU member countries, for example, by 9,6 percent in France. This has reduced costs of production to such an extent in Germany that a growing number of German enterprises were able to win out over their Euro zone rivals. Between 2000 and 2009, the German share of the euro zone's total foreign trade exports had increased from 25 to 28 percent, while the French share had fallen from 16 to 13 percent.[1]

Ruined

The German industry's competition advantages have also directly affected German-French trade. In 2000, France had already had a serious trade deficit in relationship to Germany (minus 16 billion Euros). Over the ensuing years, German companies succeeded in grabbing even larger shares of their French competitors' own domestic market. The French trade deficit continued to increase, reaching around 25 billion Euros in 2005, nearly 30 billion in 2010, and roughly 40 billion in 2012. Since then it has been oscillating between 36 (2013, 2015) and 34 (2014) billion Euros. The German export offensive has not only applied massive pressure on French companies. Since 2008, it has also siphoned off to Germany more than a quarter trillion Euros from France. To a considerable extent, the French economic crisis has been caused by its eastern neighbor's aggressive economic onslaught. Germany has "ruined its European partner" with its Agenda policy, a former state secretary in the German Finance Ministry concluded.[2]

Model Germany

France's President, François Hollande, like his predecessor Nicolas Sarkozy,[3] had initially sought to do everything to resist Germany's deregulation and austerity offensive within the framework of confronting the Euro crisis [4]. Therefore, having been defeated in this power struggle with Berlin,[5] he has now reverted to copying the German "Agenda 2010" model. The current job market reform is the most recent measure, aimed at watering down employees' protections against dismissals, undermining collective bargaining agreements, and, thereby, seriously weakening the trade unions. For weeks, there have been hefty protests against these reforms. Claire Demesmay, an expert on France at the German Council on Foreign Relations (DGAP) has shed light on the current debate in France, explaining that there is "perpetual comparison" to Germany's 'Agenda' policy. While the one side contends that, "what had worked in Germany," must now be "caught up with" in France, the other is warning "the social price was much too high and we don't want to pay it."[6]

Poverty is Growing

Indeed, the social price paid in Germany for "Agenda 2010" is high. Already in the years of the Agenda's implementation, the number of those in low-wage jobs rose from 5.82 million (18.4 percent of all employees) in 1998 to 7.94 million (23.6 percent) in 2009. This has contributed to the fact that, in spite of the fall in the number of unemployed, those earning less than 60 percent of the average wage has increased from 10.4 percent of the population (1998) to 15.3 percent (2009). Whereas the permanently poor represented 4.7 percent of the population in 1998, by 2009 it was already 8.5 percent. From 2000 to 2010, the wealthiest tenth of the German population became even richer, while pensioners, in the same period, lost one-fifth of their purchasing power. Child poverty rose 67 percent - from 15.7 percent to 26.3 percent between 2000 and 2006. This list of examples could be continued.

Protests with Broad Support

In consideration of the social price to pay for "Agenda 2010," a grand majority of the French population adamantly opposes Paris' imitation of Berlin's policy. From the mid-80s to 2008, France was "the only major developed nation" where "the discrepancy between the available household incomes" had not increased, noted the DGAP back in 2013.[7] People are obviously willing to continue their determined resistance against these cutbacks. According to a poll, published last week, 62 percent of the population consider the protests against the job market reforms as "justified." Fifty-nine percent see President Hollande and Prime Minister Manuel Valls being responsible for the current social tensions and not the striking trade unions. Not even the blockades of refineries and the shortages of fuel have dampened their support for the protest movement, pollsters report. On the contrary, 69 percent of the population are in favor of immediate annulations of the job market reforms to end the blockades.[8] The government no longer even has a parliamentary majority behind its plans to copy Berlin's Agenda policy. The parliamentary group of the ruling Parti Socialiste (PS) is clearly divided, with its left wing, reacting to the pressure of the protests, opposing the president's deregulation measures.

Bypassing the Parliament

Therefore, the French government is now seeking to impose the passage of the German "Agenda 2010" without a democratic legitimacy. On May 10, Prime Minister Manuel Valls applied Article 49.3 of the emergency law of the French Constitution, permitting a law to be imposed without parliamentary consent. Now the job market reform requires passage only by the Senate. The government had already called on this paragraph, to impose deregulation measures, February 17, 2005. That time it was to impose the "Loi Macron," - the law named after Emmanuel Macron, the incumbent Minister of the Economy, at the time - to extend night and Sunday work hours.

Disintegrating Democracy

The subversion of democratic processes to impose a German-inspired austerity policy has evolved, in the meantime, into the norm in a Berlin-dominated EU. For years, the "Troika" - comprised of the EU Commission, the European Central Bank, and the International Monetary Fund (IMF) - has been operating on this basis, imposing Germany's model of austerity - most recently draconian cuts in pensions in Greece. From November 2011 to April 2013, an un-elected "cabinet of experts," under the leadership of the former EU Commissioner, the technocrat, Mario Monti, governed Italy. Its function was to implement the German austerity dictate. Last year, the Greek population was severely punished with even harsher austerity measures for having voted 'No' in their referendum on the EU's austerity dictate.[9] Under Berlin's pressure, not only is poverty on the rise in the EU, but democracy is disintegrating.

[1] See Die Frage der Führung.
[2] Heiner Flassbeck: Trüber Fischer, verfangen im eigenen Netz. makroskop.eu 11.05.2016.
[3] See Die deutsche Frage and Die Macht in Europa.
[4] See Camouflage and Deception and The Next Crisis Victory.
[5] See The Disengagement of France and Le Modèle Gerhard Schröder.
[6]"Klassische Form des Machtkampfs". www.deutschlandradiokultur.de 27.05.2016.
[7] Arnaud Lechevalier: Ende einer Ausnahme? Der französische Sozialstaat im Wandel. DGAPanalyse No. 4. Juni 2013. S. 8.
[8] Valls et Hollande ont échoué à retourner l'opinion. www.lesechos.fr 26.05.2016.
[9] See Eurocracy.