France has an alternative to Hollande-ism, but are the French ready for it?


Eddie Reeves

Anyone noticed how svelte Jean-François Copé is looking?

Sporting the silhouette élancée of a slippery French centre in a Six Nations nailbiter, the UMP Leader and Mayor of Meaux looks remarkably en forme for a 49 year-old father-of-four from the town better known for its Brie.

For those who don’t follow every shrug, drame and crise of Gallic politics, there was an important election across La Manche (that’s The English - definitely English - Channel) this time last year.  

The election (cue, Napoleonic drumroll…)? The ‘Who Wants To Be Interim Leader of The Opposition After Ten Years in Government?’ election. A cul-de-sac politique you might think for a baldy ambitious ex-Minister looking to run for the top job in 2017. 

That’s what I thought, a year ago. So too the 50.03% (yes, .03) of partisans who preferred him to outgoing Prime Minister François Fillon: elect a pro-Sarko figure to prepare for the grand retour in 2016 and, failing that, a proper party-wide Presidential contest.

Well, apparently no-one told M. Copé. Far from cutting the traditional consensus figure of the popular French Right, the UMP chef du parti has busily set about making his already dismally low approval ratings a virtue on media outlets across the land. 

A suicidal tack against a Socialist incumbent less popular than a Brie and grape baguette in a Cheddar Gorge tearoom? Perhaps. But if the greatest of virtues in religion is love, the greatest in politics is consistency. And so on M. Copé goes. 

His message? A clarion call to private enterprise and public thrift. After the hard rhetoric of Sarkozy candidat in 2007, it remains to be seen whether France will be ready for it again in 2017. Francophile Tories hope she will be.

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While the Euro remains on life support, it’s business as usual for the City

Daniel Cowdrill 10.04am

Listening to David Cameron’s opponents during the weekend, you would think his veto signals the end of civilisation - or at least the UK’s participation in it.

One of their scare stories is that the City of London is worse-off than before the EU summit. In reality, however, it is in much the same position.

The sticking point was the financial transaction tax (FTT). This is a tax on every sale or purchase of stocks and bonds or other financial products by banks. On these pages, Craig has dismissed a FTT as an unhelpful ‘soundbite tax’, while Alex described it as ‘misguided’. Elsewhere, Sir John Major has labelled it a ‘heat-seeking missile aimed at the City of London’.

As 75 per cent of the EU’s financial services industry is located within the City of London the burden of this tax would fall disproportionately on the UK economy and the two million people who are employed in financial services in this country.

Unfortunately, France was not willing to listen to British demands. President Sarkozy’s refusal to concede led to a fiscal ‘pact’ rather than the fiscal union the markets had desired. What is set to be agreed over the coming months without the UK is unlikely to be enough to stop the deterioration of the European debt crisis, and President Sarkozy won’t be so ‘heartened’ if (or when?) France’s credit rating is downgraded.

However, beyond all this the fundamentals remain the same for the City. The UK remains part of a single market that allows the (reasonably) free movement of people, capital and services across a trading block of 500 million people. The City will continue to benefit from the single market - Mr Cameron’s veto does nothing to alter this.

To be sure, it could be argued that the new 17+ euro block will foist regulations on the City when Qualified Majority Voting (QMV) is introduced in 2014. But these are future deals that are yet to be negotiated and agreed. When the time comes there is no reason why Britain can’t win support and obstruct the worst that might come our way.

In any case, there are some people who believe that had the UK not vetoed the new treaty the French would be less determined to impose other regulations on the City. This thinking is deluded. French dirigiste tendencies have been strengthened by a financial crisis that many in France perceive as the fault of speculators in the City of London. This isn’t going to change no matter how much sovereignty we sign away.

Furthermore, access to the single market is not the only thing that attracts business to the City. In the 1980s the ‘Big Bang’ attracted financial services to London from all over the globe, not just Europe.

The UK’s competitive regulatory and tax framework continues to attract financial services to these shores. We are also near the main European continent and, of course, we speak English. Even the EU tends to deliberate great matters in English - now the global lingua franca (such irony might be lost on the French).

The City will live to fight another day. The euro, on the other hand, may not.

The eurozone crisis: what Cameron & Osborne must do next

David Cowan 4.29pm

Eurozone leaders have announced a new 109 billion bailout package for Greece, which includes restructuring Greece’s national debt and inflicts further cuts to public spending. Money markets have rallied but the fear is that this cannot last. Meanwhile, Westminster remains mesmerised by the hacking scandal.

Ireland and Portugal have already been bailed out. Greece has now been bailed out twice. Italy is teetering on the edge of collapse and Spain looks risky - bond markets remain turbulent. A new European rescue fund is reported to have $464 billion ready to defend these two countries should markets scramble. If any of these eurozone countries fall to an uncontrolled default then financial contagion could spread right across the continent, cause the eurozone’s collapse and unleash a new global recession.

I think that a default in one of these countries is now inevitable. Bailouts can only prolong the wait. This leaves only one viable option for the PIGS: a controlled default outside the eurozone. New currencies (or re-introduction of old ones) would allow exchange rates to fall to more realistic levels and permit an economic recovery based on increased exports. Once recovery was secured and necessary reforms were implemented in order to comply with the Stability and Growth Pact’s original 3 per cent cap on deficits, such nations could return. However, as President Sarkozy has said that the word ‘default’ (or defaut) is not in his vocabulary, this option appears to be off the table.

The Government seems to have a new EU policy, outlined by David Rennie in this week’s Economist:

Thanks to a great scoop by George Parker of the FT, it is clear the government now believes the following: (a) a big leap towards fiscal union is the only way of saving the single currency, (b) Britain has a strong interest in the survival of the single currency, (c) Britain must play no part in bailing out the single currency and will stand aloof from fiscal integration, thus (d) our national interest now lies in allowing Europe to divide into markedly different zones of integration, with us on the outside.

Whereas eurosceptics such as Bill Cash and Daniel Hannan are clamouring for a radical renegotiation of the UK’s membership of the EU, such changes are unlikely as long as the Conservatives govern in coalition with the Liberal Democrats. However, David Cameron does risk a Conservative backbench rebellion if he does not take some advantage of the situation, particularly when one considers that the 2010 intake of Tory MPs is the most rebellious since the Second World War.

The European Commission’s budget proposals - an unrealistic 100 billion euros increase - could offer the best opportunity for Mr Cameron. At a time of budget cuts across Europe, the Government must demand a 10 per cent cut to the EU budget over the next budgetary cycle (2014-20). In return, there should be negotiations about revenue raising powers for the EU. A VAT increase or new Tobin Tax should be ruled out in favour of options such as replacing the EU Emissions Trading Scheme and carbon price floor with an EU-wide Carbon Tax (see my previous post).

William Hague should also push for a Single Market Act. This could be the greatest supply side reform in EU history by significantly reducing regulations, regulatory bodies, quangos and unnecessary bureaucratic obstacles (see also Nik’s article in March about Tory Reform Group MPs demanding EU deregulation). We must help to liberalise the European economy to enable it to become more productive, dynamic and innovative.

David Cameron envisages an EU that allows the free movement of goods, capital, services and labour, and where there is multilateral co-operation over global trade, the promotion of human rights, international aid and tackling climate change. As the 2010 Conservative manifesto makes clear, this does not include oversight of social policy or the rule of law.

The eurozone crisis is both a huge threat to the UK economy and the greatest opportunity for genuine, lasting reform in Europe. Let’s hope that the Prime Minister and his Chancellor face down this threat and grasp the opportunity in front of them.

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