France: The people see red; The scarlet hat has become the symbol of protest against François Hollande’s tax rises

November 22, 2013 5:40 pm

France: The people see red

By Hugh Carnegy

The scarlet hat has become the symbol of protest against François Hollande’s tax rises

Red alert: farmers have been at the forefront of protests against the Hollande government

In 1675 a popular revolt exploded in Brittany, the rugged north western region of France that juts into the Atlantic Ocean. It was against taxes imposed by Louis XIV, the Sun King, to finance war against the Dutch. The red-capped protesters were known as Les Bonnets Rouges. Nearly 440 years after the uprising was bloodily suppressed, people in Brittany have donned their bonnets rouges once more. This time they are fighting a wave of taxes imposed not by a king, but by President François Hollande and his socialist government.“It is another guerre de Hollande,” exclaims Thierry Merret, a bluff Breton vegetable grower, farming union chief and a leader of the new bonnets rouges.

Their challenge has added to a tide of discontent engulfing Mr Hollande. An Ifop poll this month showed his approval rating slumping to 20 per cent, a low no previous president has plumbed in the poll’s 55-year history.

Mr Hollande’s woes have come in waves. His authority was badly damaged in October when he responded to a national rumpus over the deportation of a Roma schoolgirl and her family by offering to let her, alone, return to France, a compromise that satisfied no one. This month, Standard & Poor’s, the US rating agency, downgraded France for the second time in two years.

Now the bonnets rouges have taken to the streets to vent their anger, repeatedly attacking roadside posts set up to administer an “ecotax” on heavy vehicles, forcing the government to suspend its introduction.

They have triggered a rash of similar demonstrations across France – the latest on Thursday when a firefighter was killed in an accident as hundreds of farmers blocked roads around Paris with their tractors. The bonnet rouge has become a symbol of protest not just against taxes, but also the perceived inability of Mr Hollande to deal with a stuttering economy that has seen unemployment climb to nearly 11 per cent of the workforce.

All this has raised two critical, related questions. The first is whether Mr Hollande, elected just 18 months ago and with more than three years of his term left, remains capable of reversing a chronic competitive decline in Europe’s second-largest economy – vital to a return to prosperity in the struggling eurozone as a whole.

The second is how far disillusion with Mr Hollande and his government will feed already rising support for the far-right National Front, led by the charismatic Marine Le Pen, that threatens a breakthrough not just in municipal and European elections next year, but also in the presidential election in 2017.

“The situation is unprecedented,” says Laurent Bouvet, professor of politics at Versailles-Saint-Quentin university. “A year and a half after the election, the left is in a potentially catastrophic situation. There is no capacity for movement on the economy or other questions.”

Hostility to the government is especially telling in Brittany, where Mr Hollande won a decisive majority in 2012 in his otherwise narrow defeat of Nicolas Sarkozy, his centre-right predecessor.

“We’ve got to get rid of Hollande and the socialists,” declared Jean-Michel Chalonix, a retired businessman, as he watched a noisy demonstration in the Breton town of Quimper last weekend. “You won’t find a single business person here who would say anything else. People work day and night – for what? Hollande makes me mad.”

It is not just the business community that is expressing frustration. The bonnets rouges have brought together farmers, fishermen, traders, shopkeepers and workers.

Olivier Le Bras is the main trade union representative at Gad, a Breton abattoir soon to close with the loss of 900 jobs. He says the closure of a factory that had been a stalwart of local employment was a shock. “It was a sign to people that things are really bad.”

He said the bonnets rouges had united workers and bosses alike at demonstrations. “I was side by side with the patron of a big local business against the riot police. That’s not the way it is supposed to be in France!”

So how serious is the state of France’s economy? Not nearly as bad as its critics suggest, insists the government. “We are clearly in a phase of recovery,” says a senior official in the prime ministry.

France will this year return to pre-crisis levels of output, later than Germany but sooner than other eurozone economies, with growth expected by the EU to reach about 1 per cent next year and 1.7 per cent in 2015.

The S&P downgrade was not good news, but France’s record low borrowing costs (lower than the UK’s) have barely budged, despite its debt ratio exceeding 95 per cent of gross domestic product.

The government defends the emphasis on tax increases it imposed to close the budget deficit. Taxes have risen by about 3 per cent of GDP in the past three years, including under Mr Sarkozy, cranking up the overall tax burden to a whopping 46 per cent of national output.

But from next year, the balance in budget reduction will swing to public spending curbs, with the government promising no further rise in taxes from 2015.

The state will give back €20bn a year in tax breaks to companies by 2016 to help offset high labour costs that have been a principal cause of France’s loss of competitiveness over the past decade. It has eased some rigidities in the country’s heavily regulated labour market and taken modest steps to increase the effective age of retirement.

“This is a reformist government,” says the official. “We are convinced that what we are doing will improve the French economy.”

This cuts little ice with the government’s many critics. A report last week by the OECD said there had been “no significant improvement” in France’s diminished competitive position since the financial crisis of 2008. Over a decade, France has swung from a trade surplus to a deficit of about 2 per cent of GDP, losing global market share faster than most other eurozone countries.

The European Commission and the OECD have called on the government to take more radical steps to cut the country’s enormous public spending bill – running at almost 57 per cent of GDP – and to go much further in freeing up labour, product and service markets.

“We have far too many administrative, fiscal and social restraints on us,” says Mr Merret, the vegetable farmer. “The government has got to understand the need to liberate business so it can employ people.”

. . .

Business leaders say a lack of confidence has bred a lack of investment. A new sign of persistent weakness in the economy came yesterday when Mory Ducros, a big transport company, announced its bankruptcy, one of the biggest corporate failures in a decade that has put at least 2,000 jobs at risk.

Grégoire Sentilhes, head of NextStage, a French private equity investor, says: “There has never been a time when entrepreneurs have been so clear about the need to press for change.”

Without a more radical overhaul, says Laurence Boone, senior Europe economist at Bank of America Merrill Lynch, “the problem is a process of slow erosion”.

She sees France only limping back to trend growth of 1.2 per cent. “That is slightly higher than Italy and Germany. But that doesn’t allow you to have dynamic job creation, so you are stuck with high unemployment rates. It also means your debt level remains seriously elevated.”

But Mr Hollande is not about to make a big change. “Yes, there is anger among various groups but France is not collapsing in chaos,” an Elysée Palace insider says. “It would provoke an even more violent reaction if we cut spending harder.”

The president clearly believes he still has time to recover a winning position in 2017. “When unemployment starts to fall and the economic machine restarts, then slowly but surely the situation will improve,” the insider says.

Mr Sarkozy’s UMP party scoffs at this. “The French are already in the street because the government is a complete failure,” says Bruno Le Maire, a cabinet minister under Mr Sarkozy and one of those jostling for the party leadership.

“François Hollande is the last incarnation of a system that is failing. He thinks that if he takes a few small measures, the economic boat will be floated by the American economy. It’s not sufficient. We need a new French model that fully accepts the market economy.”

But the UMP, split by factional rivalries, is far from rallying around either a new leader or a clear policy alternative.

Into the gap has sprung Ms Le Pen and the FN, with the party’s populist mixture of anti-crime, anti-immigration, anti-EU and anti-austerity policies. A recent poll showed the FN leading both the UMP and the Socialist party in the running for the European elections. “More and more French voters believe the FN is a real alternative,” says Prof Bouvet. “They are still a minority but the numbers are growing strongly.”

Among those joining a protest in Quimper last Saturday against a big increase in value added tax for the equestrian sector was Jérôme Le Douairon, a civil servant sporting abonnet rouge, his healthcare worker wife and their three children.

They are angry at soon having to pay €100 a week extra to stable their two ponies. “But I’m here because of everything else as well,” Mr Le Douairon said. “People don’t understand why we are being taxed more and more. We don’t know where the money goes.”

Who would he vote for in the coming elections? “Marine Le Pen. We’ve got to make France pay attention!”