Sarkozy: The First Year

May 9, 2008

The first time I got an insight into Sarkozy’s character was reading The Economist review of his literary biography L’Aube le soir ou la nuit by Yasmina Reza. It showed both the scale of his ambition and a fascination with the desire to outwit time:

    “These little battles seem to embody a deeper impatience with the passage of time, a perpetual desire to beat it, but for what? Ms Reza is struck by a man almost unable to live in the present, propelled by an insatiable need to move on. “I’m a stranger to my past. The only thing that interests me is this afternoon, tomorrow,” he tells her one day. She replies that he is “burning up the days that he will never know”. Yes, he says quietly.

    The solitude of this quest weighs on the man. Despite the public image of a politician in perpetual motion, Mr Sarkozy can be found in this book in quiet contemplation, staring blankly out of a window, or into the night. Ms Reza, who in the end cannot conceal her admiration and affection, struggles to interpret these moments. She visits him at the Elysée Palace, newly installed as president. He tells her that he has “at last got rid of a burden”. Is he content? “Yes, I am profoundly content,” he replies, then adds: “but I’m not joyful.”

This introduction got me interested in knowing more about Sarkozy. From the many articles covering his life, you also get the sense that he is a courageous man willing to take risks and a micro-manager who loves to get involved “to get the deal done” which makes him a natural compromiser.

In many instances those qualities have proven useful. In 1993 as mayor of Neuilly, he went alone in a nursery taken over by a psychotic man strapped with explosives. He engaged him in conversation and within 30 minutes convinced him to free the children. However, his innate desire to find a compromise might be hampering his ability to reform France.

A year ago, when Sarkozy was running for president, I explained why he was the better candidate, but could very well disappoint those hoping for transformative economic reforms in France:

    “He has no real knowledge of economics. He still seems to want to protect “poor French companies from evil foreign companies” when they try to take them over and thus perpetrates counter-productive economic nationalism. Moreover, will he have the political courage to stare down a national strike when it inevitably happens as he tries to reform the country?

    He does not have the clarity of purpose of a Margaret Thatcher or the smoothness, charm and overall public support Tony Blair had. Arguably it would be easier for a Tony Blair or Bill Clinton-type to reform France. If only for perception reasons, it’s easier to credibly speak of market driven solutions that don’t sacrifice equity when speaking from the left. But no such figure on the left has emerged or is electable. Doing it from the right is likely to be divisive and one can question if Sarkozy will stay the course given his desire to be pragmatic, especially since he does not have the unthreatening image someone like David Cameron has in the UK.”

Given this background and the high expectations he came to power with, it was going to be interesting to see how much he would be able to get done in his first year. Sarkozy’s presidency started with a bang. It was political genius to recruit a broad-based multi-ethnic cabinet. Anointing the well loved Bernard Kouchner as foreign minister and getting Dominique Strauss-Kahn appointed to head the IMF robbed the Socialist Party of its two most potent politicians. From there he moved at lightning speed to change France’s foreign policy, but has been underwhelming in his economic reforms.

Foreign Policy: A-

French foreign policy has had a full make over in a year:

  • Until Sarkozy it would have been unthinkable for a French president to spend his summer vacations in the United States (in New Hampshire).
  • Sarkozy speaks positively of the role the United States plays in the world.
  • He takes a much stronger line against Russia and Iran.
  • France has become a strong supporter of Israel.
  • France has rejoined the integrated military command of NATO.
  • France has sent extra troops to Afghanistan.
  • He secured a simplified version of the EU constitution rejected by French voters two year earlier.
  • With Bernard Kouchner as foreign minister, French foreign policy now has a humanitarian component, where it used to be purely commercial.

So much has changed for the better, that I would have actually given Sarkozy an A+ for his foreign policy were it not for his refusal to admit Turkey in the EU under any conditions. This refusal plays in the hand of extremists. France and Europe would be much better served by setting objective economic, political and human right objectives for Turkey to meet before it could enter the EU. This attitude is all the more discouraging given the fudging that had to happen to let countries such as Romania in the EU in the first place. I hope Kouchner will convince Sarkozy to change his mind!

Economic Policy: B-

Despite the fact that quality of life is actually very good in France, there is clearly a French malaise. People have a real sense of stagnation as their standard of living is not increasing as fast as it is in other countries. France’s GDP per capita which used to be 20-30% higher than that of the UK and Ireland 25 years ago now lags behind those two countries amongst others. Unemployment has been consistently higher than the European Union average and public debt grew to 66% of GDP by 2007.

Sarkozy’s talk of “rupture” from the past had given many hopes that he would fundamentally reform France. On that point, he has proven disappointing. To his credit, he has implemented more reforms in his first year as president than Chirac did in his entire twelve year tenure. However, he falls short by the standards he set for himself as every major reform has been watered down to appease vested interests.

His university reforms are a typical example. France’s universities are overcrowded and underfunded. Some 46% of all first year students drop out and the brightest students avoid them altogether by going to the grandes écoles instead. Last summer Sarkozy granted the universities freedom from central state control. This allows them to recruit the lecturers they want, at salaries they negotiate and to setup private foundations with tax breaks for donors to complement public finance. He also boosted their budget by 43% over five years and opened up enrolment to orient students to appropriate courses. However, he left untouched two elements which will make it hard to sustain financing and improve quality: the selection of students (anybody with the baccalauréat can enroll) and tuition fees (there are none). His plan originally allowed for student selection for master’s degrees, but even this was quickly shelved in face of the opposition from the student unions.

This unwillingness to take the risk to fully reform universities is disheartening. He could have easily made the case for charging fees for universities on the basis of equity. Free university tuition is a subsidy on the rich given that many more children from the upper socio-economic classes go to university. He could have implemented means tested pricing and keep education free for the lower classes.

His other reforms also reflect important compromises. The case for the abolition of the “special regimes” for public-sector pensions, which enabled 1.6 million public sector workers to retire as early as 55, could have also easily been made on the basis of equity. Sarkozy withstood a nine-day strike that led to commuter chaos and ended the special regimes. However, in exchange he boosted final salaries on which pensions are based greatly limiting the economic savings.

Likewise he has yielded to fishermen, taxi drivers, the family lobby and others. More importantly, he did not reform the rules limiting the ability to shed workers if a firm is in profit and the 35-hour working week.

He also seems prone to economic nationalism with repeated tirades against outsourcing of jobs and the need to protect French industry: “Once the factories go, everything goes.”

Conclusion:

It is too early to tell how successful Sarkozy is going to be in reforming France. His massive drop in approval ratings, probably because his tumultuous private life suggested he was more interested in his own problems than those of France, have seemingly emboldened him to push ahead with more reforms. As he announced in a televised appearance a few weeks ago, the civil service is to be trimmed and streamlined. Further university reforms are planned. Ports are to be deregulated. The rules for unemployment benefits are to be tightened. The contribution period for public pensions is to be lengthened.

However, the times have changed. France’s economy is slowing down and with his low approval ratings he might not be able to take on vested interests. On the bright side, Sarkozy seems to have realized that his behavior was impacting his ability to rule. He has made progress in appearing more presidential and less “bling bling”. Hopefully the French are merely tired with his behavior rather than his reforms.

Time will tell and I remain cautiously optimistic. I just hope he does not come to regret his lack of resolve on economic reform in his first year as president.

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