French elections and the future of the EU

Marine Le Pen, Leader of the French National Front (Blandine Le Cain, CC BY)

Europe faces a super election year, as the series of elections in the Netherlands (March), France (April) and Germany (September) can have negative impact on political and economic stability of entire continent.

Elections used to be good news, even the key to legitimacy of liberal democracies. Today, the arrival of post-truth politics and hardcore populism with their very embodiment—the Brexit referendum and the election of Donald Trump—makes many observers think about elections in terms of instability, arbitrary decisions and ill-informed political and economic measures.

Currently, the French presidential elections can be considered the most decisive for the future of Europe, probably even more than the Brexit referendum. The reason are growing chances of Marine Le Pen, the leader of the right-wing populist Front National, to become the next French president. The French right candidate, François Fillon is on the edge of self-destruction, due to the financial scandal surrounding his wife and children, and might even be forced to resign his candidature, the candidate of the left, Benoît Hamon is close to the populist left, highly inexperienced and toying with unrealistic ideas. Hamon preaches for instance a basic income for every French citizen which would cost the French state up to EUR400bn annually—not exactly a happy prospect given the current 98.21 per cent of debt to GDP ratio in the books of the French government.

With the two main parties—The Socialist Party and the Republicans—on the brink of collapse, the chances of a duel of Marine Le Pen against the independent Emmanuel Macron in the second round of the presidential election are on the rise—with Le Pen not unlikely to win.

Right or Left but above all French

The positions of Front National (FN) on immigration, ethnicity and borders are well known. But what about its economic policies? They are presented in a 106 pages long document entitled “Our Project: Political Program of the FN” including foreign policy, the role of the state, economic and social policies. The latter are a wild medley of nationalist, left-populist and autarkist ideas located between statist nationalism of Marshal Pétain of 1940-44 and Lukashenko’s Belarus with its state-controlled gas and electricity prices.

The main thrust of the economic program of the Front National strongly resembles the economic ideas of Marshal Petain who said on a broadcasted speech in Vichy on 11 October 1940 that the French government would be “national in foreign policy, hierarchical in internal policy and coordinated and controlled in economy […] We had to overthrow established customs and disregard particular interests.” This authoritarian, anti-market and collectivist economic program is the ideological core of the FN. While the FN under Jean-Marie Le Pen still espoused market libertarian ideas (combined with anti-Semitism and nationalist French grandeur), Marine Le Pen moved towards leftist populism. The "old" FN used to criticize the European Currency Union by quoting Milton Friedman, nowadays the wording of the FN critique of the EU could as well be expressed by the French Communist Party. This evolution seems to be common among many right-wing populist parties. Also the Alternative for Germany, still market libertarian in 2014, competes now for electoral support with the left wing populist Linke.

There are series of economic measures that the FN wants to introduce, starting with setting up elements of command economy and “end the dogma of free competition”. This does not only include government-controlled strategic industrial planning (with the goal of reindustrialization of the country—intriguingly also one of the main points of Theresa May’s post-Brexit economic program) but also tariffs and quotas for imported goods from China and Eastern Europe. In addition, all imports should be taxed by 3 per cent which would guarantee the money flow to finance EUR200 increase of salaries and pensions, up to EUR1,500.

On top of that, there should be a 5 per cent reduction of gas, electricity and train prices, as well as 20 per cent price discount of gasoline, the latter paid by the big energy corporations (preferably the foreign ones). Prices for gas, electricity and public transportation will be fixed and—even more reminiscent of Belarus—the agriculture will be strongly regulated, with the government gathering “stocks d’intervention”, thus allowing administrative interventions into production prices. One of the more surprising aspects of the FN economy policy is the plea to leave the Common Agriculture Policy of the EU, which is actually immensely profitable to French farmers—all in the name of new French autarky.

Secondly, FN wants to leave the Eurozone and reintroduce the Franc—the proud totem of the French grandeur. Interestingly, the FN seems to forget that the Franc has constantly been under pressure from the strong Deutsche Mark, thus being rather a source of frustration, than French pride. It was France that wanted to give up its national currency already in 1960s, rather than Germany. Moreover, according to the FN the “new” Franc should be “competitively” devalued by 20 per cent, the state should be able to receive interest-free loans from the Banque of France and commercial banks should be “partially” nationalized in order to “secure the savings” of the French people.

Since the FN distrust foreign capital (perhaps with an exception of loans from Russian banks, as the party happily accepted a USD9.9m loan from the First Czech Russian Bank, a Kremlin-friendly outfit with the seat in Moscow and sought further USD30m from Russia to finance its political campaign), it intends to tax all private (EUR-denominated) foreign deposits in order to finance the remaining debts of the French state.

However, the FN is silent on the debts of French enterprises amounting to EUR1.7 trillion now, which would increase even more as the result of the Franc devaluation. The FN expects its new financial policy to overcome the current austerity policy of current French governments, stimulate the economic growth of the Grand Nation and end the financial monopoly of banks by administrative measures.

The command economy will go hand in hand with nationalization of public service companies including public transportation, and the will to reverse privatization of state companies. In addition, 15 per cent of the profits of the large corporations will be transferred directly to the French state to set up a “réserve speciale de réindustratilisation”. All these measures will be supported by newly recruited “patriots” in the ENA (the elite training center for the French public administration), while the (potentially dissident) university professors will be “reintegrated” within the structures of the French state.

Eastern Europe: a threat or an ally?

The FN victory in the French presidential elections would be certainly bad news for the EU in general and for Eastern Europe in particular. The FN treats Eastern Europe as a traditional German sphere of influence with limited (if any) options of cooperation. Of all countries in the region only Romania, due it its belonging to the Romance language culture, might deserve some FN attention.

Still, Le Pen is attempting to capitalize on the current anti-German sentiments combined with the anti-migration policies, for instance in Hungary, to present herself as anti-Merkel.

The FN is strongly pro-Kremlin and places Russia in its current political form in the center of the new European security and economic order. The party clearly states in its political program that it wants to forge a strategic alliance with Russia to counterbalance the NATO.

The new pillars of the defense industry should be rebuilt with Russia, with which the FN also envisages a deepened partnership in military and energy policies. Moreover, the party wants to replace the European Union by a Pan-European Union with Russia and Switzerland in the center. Marine Le Pen herself is adamant about the formal recognition of the Crimea as an integral part of Russia and proclaims the ending of the EU’s sanctions against the Russian Federation.

Ukraine as an independent country does not appear in the FN’s program, which should not surprise, as the FN program gives much weight to the reconstruction of France’s relations with its oversee territories, thus mobilizing its supporters with the idea of France recovering its imperial greatness. In this sense, the FN shows more understanding for neo-imperial policies rather than sovereignty of nations in the periphery.

At the same time, Marine Le Pen lobbies for support in Eastern Europe presenting herself as a new partner in a struggle against the undemocratic EU, in which she sees the main source of French economic problems, very much in tune with the rhetoric of the Brexiters.

For instance, in April 2016 she visited Romania to take part in a meeting organized by the new Romanian nationalist party Forta Nationala, attended by delegates representing right-wing nationalist parties from the region and beyond (for instance the Movement for Liberty and Democracy of the Czech Republic, FPÖ of Austria, New Right Party of Poland), some of them with strong ties to Moscow. In her speech, Marine Le Pen assured that Romania would be better off leaving the EU, as the EU poses “a threat to its inhabitants” and proposed instead a Union “from the Atlantic to the Ural Mountains”.

France is Romania's third biggest trading partner, while for Poland it is the fourth biggest partner. Only in 2008-2014, the value of Polish exports to France rose by 50 per cent, as a result of a growing economic interdependence between Warsaw and Paris.

This suggests that any protectionist measures in France’s trade policies will have negative effects on Polish or Romanian economy. What will happen to Romanian and Polish exports if France were to introduce tariffs and quotas for goods from Eastern Europe?

The FN is quite explicit in depicting Eastern Europe as a source of cheap products flooding the French market and sidelining the more valuable French products. Therefore, the FN wants to introduce the “beggar-thy-neighbor” policy of currency devaluation, taking into account that it might provoke a protectionist spiral in Europe, hurting East European economies.

In addition, the victory of Marine Le Pen might mean the end of the redistributive EU policies: the direct payments to Polish, Czech and Romanian farmers, regional funds and the EU’s research programs, let alone any coherent foreign policy of the EU towards Russia. The economies of Eastern depend heavily on a free trade and foreign investments, for which economic ideas of the FN will be very harmful.

Welcome to Argentina or a recipe for disaster

There are many uncertainties about the FN but there is a consensus among the experts that the economic measures espoused by the FN are a recipe for disaster. The French think tank la Foundation Concorde points out that the economic program of the FN leads directly into a fiscal shock and economic recession comparable to the crisis Argentina experienced in 2001.

According to the FN economic ideologues, such as Florian Philippot and Bernard Monot, the devaluation of the Franc is supposed to increase French competitiveness with regard to Germany or the Netherlands. However, it is well documented that currency devaluation in the 1980s did not work out for France, while it additionally caused capital to move abroad.

Today, 64 per cent of all French debts (state, enterprises and households) are to foreign creditors and the debt amount would increase even more when exchanged into devalued Francs—a huge burden for the French economy. Two French economists Paul-Adrien Hyppolite and David Amiel estimated the cost of the initial 20 per cent devaluation (propelling a 35-50 per cent overshoot devaluation of the new Franc on the financial markets before readjusting towards an equilibrium of 15-25 per cent) for the 62 biggest French corporations as of EUR70bn generating a 3.5 per cent slump of French GDP.

Another disastrous effect would have the salary increase by EUR200 to be financed from 3 per cent tariffs on imports. La Foundation Concorde estimated that in France there are 7.5 million salaries which are subject to this increase, and this would produce a financial burden of EUR18bn for the state budget. The 3 per cent tariff would bring revenues of EUR15bn, and this only in purely arithmetic terms without taking into account political repercussions of the French protectionism. Other countries, such as Germany and the Netherlands, would not sit idly and watch with envy the newly discovered protectionist happiness of France. They would certainly introduce their tariffs on French products, thus causing further damage to French economy.

In addition, in order to reestablish such a protectionist tariff and quota regime Paris would need not only to leave the EU but also the WTO. By leaving the WTO, France would end up in a group of countries including Somalia, Cuba and North Korea. That might be a less than happy perspective, given the FN’s dreams of French greatness.

Ireneusz Pawel Karolewski is an Associate Professor of Political Science, Willy Brandt Centre for German and European Studies, University of Wroclaw in Poland. He was Kosciuszko foundation fellow at Center for European Studies, Harvard University in 2014 and visiting professor at the John F. Kennedy School of Government, Harvard University in 2015. His research interests are social and political theory, European Union governance and EU foreign policy.

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Comments

2017-02-24 22:31:31 | Aleksandra Sojka

Excellent job at this detailed analysis of the anticipated results of different policy proposals. In a nutshell, the FN economic program reads about as sound and credible as Brexiters' promises of funding the NHS with money saved on the EU check and Trump's promise of bringing back jobs to the US by playing the protectionism card. This is of course not at all surprising, we live in times when experts and facts are not very popular. Let's just hope that the false promises of taking back control will not be as efficient in mobilizing those who just want a change in France, as they were in previous recent instances when appeals to emotions and identities prevailed over any sound policy content. Also, the perspective from CEE is often ignored but crucial to understanding the dynamics in Europe. Great read.

2017-02-24 00:19:06 | Robert Grzeszczak

60 years ago six European governments signed the Treaty of Rome which created the EEC and Euratom. This was the forerunner of today’s European Union. After 60 years EU is in the crisis, the UK prepares to leave the EU and we witness varieties of euroscepticism in all European Union. The crisis in the European Union is a crisis of democratic legitimacy and economic policies as well as a clear erosion of the EU’s position as a global actor.. The EU crisis helps make the visions of re-nationalising specific policies seem more appealing. The EU’s ineptitude suggests that the particular states might be able to act more effectively on their own. Across Europe, populists on both sides of the political spectrum are enjoying record popularity. Therefore 2017 will become a crucial year with several key elections that could become a show-down between the political establishment and populist opportunists riding a wave of popular discontent. There are local elections in Portugal, presidential elections in Hungary and Slovenia, general elections in the Netherlands, Norway and the Czech Republic, parliamentary elections in Albania, Bulgaria, and presidential and parliamentary elections in France and in Germany. Certainly, the elections in France and Germany are the most important events to watch out for. I am waiting for election results and what will happen with the EU.

2017-02-23 21:42:31 | Renaud fabbri

Usually international observers of French politics tend to focus on the anti-immigration component of Marine Le Pen’s discourse. This article sheds a new light on another aspect of the program of the FN, its economic agenda which has become a cause of concern for many French economists, decision-makers and even regular citizens. One could argue that these concerns regarding the economic program of the FN will have a stronger impact on the outcome of the upcoming French presidential election than its stance about Islam or immigration. A very timely article!

2017-02-23 16:55:32 | Thomas Mehlhausen

This is certainly one of the best analyses I have recently read on that topic. I particularly like the implications for the policy towards Eastern Europe and the long-termed economic consequences of a Frexit (at least from the Euro). This might be of much more importance than the erratic foreign policy of the current Trump administration as it is undermining the political structure of post-war Europe. Politically, many countries would suffer under a French turn towards Russia. Economically, France will certainly dramastically lose by reintroducing the Franc. And Germany? Once again it might face the dilemma of being too big for Europe torn between self-restraint and the urgent need to keep the European Union together. Better demand more redistributive payments from Berlin for sustaining the Euro! One thing is certain: A return to nationalism is a fragile and dangerous illusion.

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