Options for Europe – Part 20

The title is my current working title for a book I am finalising over the next few months on the Eurozone. If all goes well (and it should) it will be published in both Italian and English by very well-known publishers. The publication date for the Italian edition is tentatively late April to early May 2014.

You can access the entire sequence of blogs in this series through the – Euro book Category.

I cannot guarantee the sequence of daily additions will make sense overall because at times I will go back and fill in bits (that I needed library access or whatever for). But you should be able to pick up the thread over time although the full edited version will only be available in the final book (obviously).

[PRIOR MATERIAL HERE FOR CHAPTER 1]

Next stop – “L’Europe se fera par la monnaie ou ne se fera pas” – the European Monetary System (EMS)

[PRIOR MATERIAL HERE FOR THIS SECTION]

Initially, he had to share power with the Gaullist Prime Minister Jacques Chirac as part of a strategy to resolve internal conflicts in the parliamentary majority. However, this proved untenable and Chirac quit in 1976 in order to rebuild the Gaullist power base in French politics and position himself for a tilt at the Presidency at the next election.

When Giscard d’Estaing appointed Raymond Barre as Chirac’s successor in 1976, he proclaimed him to be the “meilleur économiste de France” (best economist in France). Barre was also appointed as Minister of Economy and Finance, a position he held until 1978. The pair promoted a powerful anti-Gaullist position with respect to domestic economic policy, reflecting their neo-liberal views, and moved the French perspective on ‘Europe’ closer towards the German ‘economists’ viewpoint.

Raymond Barre presented the ‘Declaration of the Government’, which outlined the policy plan of the new regime to the National Assembly on October 5, 1976 (Journal Officiel de la République Française, 1976). The rhetoric and objectives were in stark contrast to the ‘Planification’ associated with Jean Monnet and French Planning Office and the ‘la tradition républicaine’ that had been reflected in the Chirac era. Gone was the former Keynesian emphasis, tinged with the “engineering tradition in economic thought in France” (Mais, 2002: 4). Barre’s linguistic content and flourish was consistent with what we now take as common place in the statements from politicians in today’s neo-liberal era. It is also worth noting that Barre was not a career politician nor a member of a political party when he took office, which again resonates with the trend during the recent crisis to appoint technocrats to take over the leadership and inflict austerity on nations at the expense of democratic choice.

The ‘Barre Plan’, introduced in 1976 and consolidated in 1977, involved a combination of tax increases on fuel, tobacco and alcohol, wage freezes to fight inflation, fiscal austerity, attacks on trade unions and industrial restructuring, particularly in the steel industry. Barre claimed that “the fight against inflation is now a prequisite for national ambitions” (“La lutte contre l’inflation est aujourd’hui un préalable à toute ambition nationale”). This was a return to orthodoxy where government became focused on ensuring the currency was strong and that domestic costs, including wages were suppressed. The policy focus shifted from regarding the fiscal balance as a reflection of the pursuit of functional ends (like a strong domestic economy with low unemployment) to one where the balance became an objective in its own right. The claim was that by imposing harsh fiscal austerity the necessary economy would emerge stronger with lower unemployment. Take the medicine now for better health in the future. The Barre Plan could have been imposed by the Troika in 2010 for all its similarities to what is going on in Europe at present. His plans were met with strong resistance, not the least because the austerity was targetted at workers, leaving those who could evade taxes and enjoyed high incomes relatively unscathed. While Margaret Thatcher is popularly known as the first Monetarist government along the lines espoused by Milton Friedman and the so-called Chicago boys, the government of Giscard d’Estaing and Barre beat the British tories to that questionable fame by a few years.

Barre’s rhetoric and policies – the so-called ‘Barrisme’ (Fuerxer, 2003) – was like Thatcher’s Monetarist purge, unpopular with the trade unions, the disadvantaged and social democrats. In his first speech to the assembly he vilified the trade unions as poster carriers (the “les porteurs de pancartes”) who wasted time staging protest marches to serve their vested interests and said that this behaviour was a strange way to serve the national interest (“Que des organisations multiplient manifestations et cortèges pour défendre des intérêts catégoriels, voilà bien une étrange manière de servir l’intérêt national!”, Journal Officiel de la République Française, 1976). He used the term “microcosme” to deride the opponents of austerity, a reference to those who were complacement and failed to see the realities confronting the nation (Le Figaro, 2007). He said the unions only “write, babble and chatter and are accompanined by a procession of complaining wits that revel in intrigue and gossip” (“les porteurs de pancartes, ceux qui scribouillent, jacassent et babillent, le chœur des pleureuses et le cortège des beaux esprits, des milieux qui ne vivent que de manœuvres, d’intrigues et de ragots”, Le Figaro, 2007). In the same way that Margaret Thatcher seemed to celebrate being unpopular, Raymond Barre told the rising pool of unemployed to start their own businesses (“es chômeurs n’ont qu’à créer leur entreprise”) and suggested that those “complaining does not make a nation” (“ce n’est pas en pleurnichant qu’on redresse un pays”, Valeurs Actuelles, 2007).

But the unpopularity extended beyond his confrontational language. Like Thatcherism, Barrisme failed to achieve its stated purpose and made worse exactly what its opponents had predicted it would make worse. Economic growth came in well under the forecasts. The unemployment rate, which in 1976, was just over 4 per cent, rose to 5.2 per cent in 1978, and, by the end of the Prime Ministership it had risen to 7.4 per cent (OECD, Economic Outlook). Further, inflation was not reduced substantially and the currency continued to depreciate. One commentator noted on the third anniversary of his Prime Ministership, that after three years of anti-inflation austerity, “Everything is more expensive, even the price of a baguette” (The Spectator, 1979). It is true that the French economy, like much of the oil-dependent world was caught up in the second oil crisis in 1979 after the demise of the Shah of Iran upset oil supplies and world financial markets overreacted by pushing prices up far higher than was warranted given the actual extent of the lower volume available. But the Barre Plan had already failed long before 1979 and the final scene with the oil crisis just sealed his political fate (along with Giscard d’Estaing) and paved the way for Chirac to return.

While Barre was imposing the first wave of neo-liberalism on France, across the border in Germany, Helmut Schmidt was ….

[AND THAT IS WHERE I AM HEADING TOMORROW – BREMEN ACCORD, COPENHAGEN IN 1978 AND THEN THE EMS in LATE 1978]

[END OF NEW MATERIAL TODAY – THE FOLLOWING TWO PARAGRAPHS ARE JUST SUSPENDED UNTIL I FILL IN THE DEVELOPMENTS THAT LED TO THEM]

On December 5, 1978, the European Council met in Brussels and agreed to set up the European Monetary System (EMS), which was to absorb what remained of the ‘snake’ and establish a European Currency Unit (ECU) (European Council, 1978). The EMS emerged out of a proposal put to the European Council meeting in Copenhagen in April 1978 by the French President Valery Giscard d’Estang and the German Chancellor Helmut Schmidt.

It won’t surprise the reader to learn that the system eventually found itself in crisis and instead of abandoning the almost impossible idea of tying these disparate European economies together into a functioning fixed-exchange rate currency zone, the European political leaders began the rocky road to Maastricht with a compromised EMS and the creation of the Delors Committee. But first, we have to tell the story.

[TO BE CONTINUED]

[WE ARE MOVING THEN TOWARDS THE DELORS REPORT IN THE LATE 1980s AND THE TREATY OF MAASTRICHT – THINGS WILL FLOW MORE QUICKLY AFTER THAT – I HOPE!]

Additional references

This list will be progressively compiled.

Fuerxer, J. (2003) Raymond Barre à la loupe: Le barrisme est-il une des facettes du libéralisme? Tome I, Editions Le Manuscrit.

Journal Officiel de La République Française (1976), Débats Parlementaires Assemblée Nationale, 5 Octobre, 1976. http://archives.assemblee-nationale.fr/5/cri/1976-1977-ordinaire1/002.pdf

Le Figaro (2007) ‘Les petites phrases de l’ancien premier ministre’, November 20, 2007.
http://www.lefigaro.fr/politique/2007/08/25/01002-20070825ARTWWW90015-les_petites_phrases_de_lancien_premier_ministre.php

The Spectator (1979) ‘The failure of Raymond Barre’, September 8, 1979.

Valeurs Actuelles (2007) ‘Raymond Barre ou le courage d’être impopulaire’, August 30, 2007.
http://valeursactuelles.com/culture/actualit%C3%A9/raymond-barre-ou-courage-d%C3%AAtre-impopulaire.20121026.html