Mr. Hollande, Which Mitterand Will You Be?
On December 1, 1983 I was invited to attend Baron Guy de Rothschild's lecture at Columbia Business School reprising why he left
France in 1981 and decided to set up a new Rothschild Bank in New York. Impeccably elegant,
surrounded by his wife and an entourage, he reiterated his famous statement:
"A Jew under Petain, a pariah under Mitterrand" coined when France's
then Socialist president had dared to nationalize the venerable Banque
Rothschild.Barely a year later in 1984 Francois Mitterrand totally reversed
course and began to institute his unique brand of socialist capitalism or
capitalist socialisme.During the presidential campaign Francois Hollande
consistently evoked the name and legacy of Francois Mitterrand who governed
France from 1981 till 1995. Following the Socialist victory (although less than
a two thirds majority) in the National Assembly on June 17, he had a very
auspicious start on foreign policy, taking a stand in alliance with Italy and
beleaguered Spain, against German Chancellor Angela Merkel's draconian calls
for continued austerity. Hollande garnered credit for helping to push forward
the agenda toward a potential banking union and greater shared responsibility
among Euro members.But now reality sets in and Francois Hollande's domestic
agenda, modeled on Mitterrand 1981 is under serious scrutiny.Similar to
Mitterrand, true to his base, Hollande promised increases in public sector
jobs, expenditures, and benefits, lowering the age of retirement and sharp tax
increases on corporations, banks and high end incomes (up to 75% marginal rates
on income above 1 million euros a year). The policies also include fostering
SMEs, increase in R&D and lower tax rates for smaller enterprises.Before
presenting his budget, Hollande wisely ordered a report on the state of French
finances by the independent Cour des Comptes, but the results present a serious
challenge to his agenda. The report makes clear that France already ranks among
the highest tax rates, but more importantly, at 56 percent of GDP, one of the
highest public spending rates. It calls for curbs on public expenditures, tax
reforms rather than increases and stringent discipline to cut the budget
deficit.Yet in the last week Hollande has ramped up his rhetoric persisting
that the rich, corporations, banks should foot the bill for deficit
reduction.As history proved this may be a slippery road to take.Francois
Mitterrand came to power on May 10, 1981 as the first president from the
Socialist party since Prime Minister Leon Blum's ill fated tenure in 1936.
Tired of a decade of post-Gaullist weak and corruption laden administrations,
in the throes of a recession with 13% inflation, the French electorate was
ready for radical change and welcomed Mitterrand with a deluge of red roses. In
his first year Mitterrand increased the public sector, implemented a fifth week
of paid vacation, put the retirement age at 60, imposed tax increases on banks
and industry, nationalized 39 large and medium size banks including Paribas and
Banque Rothschild (the largest French banks, Society Generale and Credit
Lyonnais had been nationalized since 1946) and fully took over all major
industrial firms including Thomson and even France's oldest company Saint
Gobain.By 1983 the results already proved disastrous as France lost its
competitive edge in banking, commerce, media, growth stagnated, foreign
investment slumped, and the franc weakened compounded by brain drain and
capital flight.Mitterrand responded forcefully and brilliantly by making a
complete U-turn!Within one year nationalization morphed into
"denationlization" i.e. reprivitaization (although the state held the
majority shareholding, but there was a resurgence of private investment and
confidence in the strong franc policy). Following a visit in fall 1984 to the
Reagan White House, Mitterrand gave an interview to the French business
publication Expansion: "the American people are a formidable
repository of energy and initiative. Their ability to couple industry and
universities is a masterpiece of intelligence and practical sense... The lesson
I took back is that we must now organize our continent. I admire the virtues of
this nation, I want to know them and become closer to them." Strong praise
indeed from a Socialist leader in the 1980s!True to his word, in the next
decade Mitterrand would oscillate from center left to to center right, from
capitalist socialism to socialist capitalism, (including two center-right
imposed co-habitation governments led by Jacques Chirac in 1987 and Edouard
Balladur in 1993).He won re-election in 1988, justifying these reversals in the
name of French prestige and French "Colbertian" tradition which
promoted industrial and banking expansion abroad, massive surges in export
driven trade, the strong franc ("franc fort") pushing as he stated
"socialisme at the limits of liberalism." He established a solid
relationship with Reagan, Bush I and Thatcher in the full glory years of
"cowboy capitalism." He also created a unique partnership with
Chancellor Helmut Kohl, balancing the German dream of a united Europe and the
Gaullist legacy of French sovereignty.After total regulation, he espoused
greater deregulation after 1987, allowing French style privatization: state
influenced industrial policy in the name of competitiveness and economic
nationalism.In 1993 as France announced a second wave of privatizations
including BNP Renault and Air France, John Fund in the Wall Street Journal
wrote "A French Lesson for Clinton" attacking Clinton's initial tax
increases and calling on the new president to emulate Mitterrand's pragmatic
recognition of "the world wide tide toward lower tax rates and economic
freedom."In 2012 these views may all seem discredited and reduced to
historical irony, but although Hollande's challenges are different, the larger
issues are still very relevant.Implementing a popular but unrealistic set of
social measures in a recessionary environment with high unemployment, risking
capital flight and lack of investor confidence, moving toward a more
contentious relationship with Germany in the middle of the EU debt crisis may
appear as short term solutions, but they carry long term risks.To his credit
Hollande has chosen seasoned politicians from the left and center of the
Socialist Party out of the old Mitterrand team; Lauent Fabius, Mitterrand's PM
in 1983, Michel Sapin and Pierre Moscovici who served in more hard left
positions under Beregovoy and Jospin in the 1990s.He has shown a more pragmatic
stance in EU negotiations, yet never having been in a ministerial position, can
he master Mitterrand's skills to parry and counter-parry the demands of his
base, an EU in crisis and a skeptical and nervous French electorate?Mitterrand
in the mid 1980s proved his elasticity as a politician. Was he a hypocrite, a
false Socialist or did he understand the deeper currents of history as he
decried capitalism but never underestimated its power; as he defended France's
role in all international negotiations from the unification of Germany,
Maastricht and Gatt, yet never lost sight that France and Germany had to work
together toward a European resolution.Can Hollande emulate this model?
Therefore President Hollande, when you evoke Mitterrand, which Mitterrand?
Putin orders probe into Russia flood deaths
Russia's president ordered
investigators on Sunday to determine whether more could have been done to
prevent the deaths of at least 150 people in severe flooding in the Black Sea region that turned streets into
rivers, swept away bridges and inundated thousands of homes as many residents
were sleeping.Vladimir Putin, who was criticized
in past years for a delayed or seemingly indifferent response to disasters,
flew to the region in southern Russia committed to showing he was taking charge
of the situation.He ordered the head of Russia's investigative agency to
establish whether enough had been done to warn people about the floods. Federal
prosecutors also said they were investigating whether the population had been
properly protected from "natural and
technological catastrophes."Russia has seen a series of natural and
man-made disasters in recent years, many of them blamed on aging infrastructure
or lax safety rules.Torrential rains dropped up to a foot of water in less
than 24 hours, which the state meteorological service said was five times the
monthly average. The water rushed into the hard-hit town of Krymsk early Saturday with
such speed and volume that residents said they suspected that water had been
released from a reservoir in the mountains above. Local officials denied this,
saying it was not technically possible to open the sluices.Federal
investigators, however, acknowledged Sunday that water had been released from
the reservoir, but they insisted it did not cause the flooding and the dam had
not been breached.Krymsk received a total of about 221 millimeters (almost
nine inches) of rain overnight, but 50 millimeters (two inches) of that came in
less than an hour late Friday, the meteorological service said.The
heaviest rain fell in Gelendzhik, a popular seaside vacation spot about 200
kilometers (120 miles) up the coast from Sochi, where preparations are under
way for the 2014 Winter Olympics. Novorossiisk, a major Black Sea port, also
was affected.The Interior Ministry said Sunday that 150
bodies had been recovered, 139 of them in Krymsk and nine in Gelendzhik,
including five who were electrocuted after a transformer fell into the water.
The majority of the dead were elderly who were unable to escape the
sudden deluge.Residents of Krymsk described a wave of water that washed
over the hoods of cars and inundated one-story homes. Some sought refuge on
roofs and in trees.Viktor Nikolyuchiny said he and his wife were roused by
their daughter, who lives a block away."I came out and the water was
already up to my waist," he was quoted by the RIA Novosti news agency as saying Sunday. "My wife has difficulty walking, and if not for
our neighbor she would have drowned." He said they waited out the storm at
the neighbor's home, which unlike theirs has a second story.Putin arrived
Saturday evening and viewed the damage from the air. Television footage of
Krymsk shot from Putin's helicopter showed the city of 57,000 people partially
submerged in muddy water. The city stadium looked more like a lake.Across
the Krasnodar region, more than 5,000 homes were flooded.The Krasnodar region governor said
during a meeting with Krymsk residents on Sunday that the first warnings of
possible flooding came at 10 p.m. Friday, and the heaviest rainfall
was from 1 a.m. to 4 a.m. Saturday."Do you think we could have warned each of you and
that you would have gotten up and left your homes?" Gov. Alexander Tkachev asked, according to
RIA Novosti.The city set off a siren at around 4:30 a.m., but the
residents said they didn't hear it, the news agency reported.As an
indication of the lingering concern over the condition of the water reservoir,
Putin sent Emergencies Minister Vladimir Puchkov to inspect the dam.
Puchkov reported Sunday that he had flown over the dam in a helicopter and saw
no evidence of any damage.
Heat wave kills 30 in US
Americans dipped into the water,
went to the movies and rode the subway just to be in air conditioning on
Saturday for relief from unrelenting heat that has killed at least 30 people
across half the country.The heat sent temperatures soaring over 38°C in several cities, including a
record 40.5°C in Washington, St Louis 41°C, and Indianapolis 40°C, buckled
highways and derailed a Washington-area train even as another round of summer
storms threatened.The heat sent temperatures soaring
in more than 20 states.At least 30 deaths were blamed on the heat, including
nine in Maryland and 10 in Chicago, mostly among the elderly. Three elderly
people found dead in their houses in Ohio had heart disease, but died of high
temperatures in homes lacking power because of recent outages, officials said.
Heat was also cited as a factor in three deaths in Wisconsin, two in Tennessee and three in Pennsylvania. Officials said the
heat caused highways to buckle in Illinois and Wisconsin. In Maryland,
investigators said heat likely caused rails to kink and led a green line train
to partially derail in Prince George's County, Maryland, on Friday afternoon.
No one was injured, and 55 passengers were safely evacuated.Thousands of
mid-Atlantic residents remained without power more than a week after deadly summer
storms and extreme heat struck the area, including 120 000 in West Virginia and
about 8 000 in the suburbs around Baltimore and Washington, DC In the
Washington area, the utility company Pepco asked customers to conserve power,
saying the heat was stressing the system. "This is becoming a black swan
of heat waves, in the sense that it's such a long heat wave, such a severe heat
wave and encompassing such a large area," said Chris Vaccaro, spokesman
for the National Oceanic and Atmospheric Administration.
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