To lose one prime minister is considered careless. To lose two is incompetence. Three is starting to look like a crisis of leadership. Five in two years is beyond comprehension.
Such is the sad tale of French president Emmanuel Macron as Sebastien Lecornu leaves the Hotel Matignon even before he has a chance to deliver his inaugural address to the National Assembly.
The root of Macron’s evils is, of course, money. But it is further complicated by the thirst for power by France’s far left and far right and the president’s inability to communicate the necessity of living within one’s means.
France desperately needs a budget which reduces its burgeoning debt burden. The country is Europe’s biggest spender relative to its economic output. Its debt burden is just behind the financial disasters that are Greece and Italy. The markets are so concerned about instability that they are increasing the interest which only pushes the debt burden higher.
Raising taxes to make ends meet appears to be out of the question as the tax burden at 45.6 percent of GDP is the highest in Europe.
A step towards balanced books was made in 2023 when Macron pushed through the National Assembly a gradual seven year rise in the pension age from 62 to 64. This, however, looks like it might have to be at least partially sacrificed in order to push through a total budget package by the end of the year deadline.
Meanwhile, Marine Le Pen of the far-right National Rally and a coalition of left-wing parties are refusing to allow ANY budget to pass. They smell the opportunity of forcing a snap election which could result in their winning more seats and possibly forcing Macron out of the Elysee Palace before the next scheduled presidential elections in 2027.
Macron is equally determined to avoid an election. The result of the snap election he called in 2024 was a disaster for the president’s Renaissance Party. The result is that Macron has become toxic within his own party.
His approval ratings are a dismal 14 percent and two of his previous prime ministers—Edouard Phippe and Gabriel Attal—have distanced themselves from their supposed leader.
Germany’s far-right AfD party has a dilemma. It is pro-Russian. It is also anti-Ukraine and anti the war in Ukraine.
At the same time it is pro-jobs because the eastern third of the country (the former East Germany) is starved of industry. That is why it has become a political stronghold for the populist party. Desperate people turn to desperate politics.
The centre-right government of Friedrich Merz has an answer: base a large portion of the new defense industries needed to provision the Ukrainians in the AfD strongholds in the East.
One is already being established in the town of Gorlitz in Saxony on the German-Polish border. The former Alsom plan manufactured railway carriages for 178 years. But over the past ten years it has been sliding into bankruptcy and threatening to further inflate the town’s 9.8 percent unemployment level.
A major proportion of the workforce at the railway manufacturers was skilled welders. Welding is a well-paid trade and welders are needed to make tanks. The result is that the former railway carriages factory is being converted into a tank production centre and jobs are being saved.
Other defense plants are being considered elsewhere in the East in Grobenhain, Thuringia and Brandenburg.
AfD politicians are reluctantly supporting the job creations while at the same time deploring the end product of the jobs created. They must also be concerned that satisfied workers will be less inclined to support extremist political solutions.
China’s Xi Jinping is preparing for his meeting with Donald Trump later this month by tightening export controls on rare earth mineral exports.
Trump likes to compare negotiations to card hands. Well, China’s monopoly on rare earth minerals is four aces.
China produces 90 percent of the world’s rare earth minerals. These are vital to the production of such things as computer chips and solar panels. Silicon Valley and the American military-industrial complex would collapse without rare earth minerals.
That is why when Trump slapped 145 percent tariffs on Chinese goods, Xi responded by blocking the export of rare earths to the US. Trump quickly dropped the tariffs to 35 percent and despatched an invitation to talks.
To demonstrate his superior position in the coming talks, Xi this week tightened the already tight controls on the export of rare earth minerals. Chinese companies—and foreign companies operating in China—now need government approval for the export of even the smallest amount of rare earths and they have to be able to identify and explain their end use.
The controls have also been extended to lithium batteries and certain forms of graphite. Companies are also prohibited from exporting equipment to mine rare earth minerals.
“This is needed,” said Xi, “ to safeguard national security.”It also improves China’s negotiating position.
The Horn of Africa is heating up again, not that it was ever particularly cool.
Landlocked Ethiopia is busy rallying international support for access to the Red Sea. The problem is that the only access is through its former province of Eritrea.
The Eritreans have been independent of Ethiopia since 1993 which followed bitter 30-year war.
To complicate matters further there are 80 distinct ethnic groups in Ethiopia. They provide a rich and constantly shifting tapestry of alliances which are exploited by the Eritreans.
At the moment they are working with the Tigrayan People’s Liberation Front (TPLF) to encourage fighting in the Amhara Region where the Fano are opposed to the government of Ethiopian president Abiy Ahmed.
Meanwhile, the Ethiopians are united on one happy event—the opening this week of the Grand Ethiopian Renaissance Dam (GERD). The Nile Dam is expected to produce electricity for 60 percent of Ethiopia’s 134 million people.
It is hoped that it will also become a major revenue source as it exports electricity via cables to neighbouring Kenya and Djibouti. And, if it can gain access to the Red Sea, across the water to Saudi Arabia and Yemen.
GERD, however, is not popular with Egyptians who fear that the dam will substantially reduce the water flow that has kept their country afloat since the time of the Pharoahs.
* Tom Arms is foreign editor of Liberal Democrat Voice. He also contributes to “The New World” magazine and lectures on world affairs. He is the author of “America Made in Britain,” two editions of “The Encyclopaedia of the Cold War” and “The Falklands Crisis.”
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6 Comments
As is the case here in the U. K., might the size of the Fench National Debt be ( deceptively) presented and exagerated ?
Might the issuing of bonds not be a debt in the vernacular meaning of the word but a form of savings scheme to be paid over time?
As over 20% of the National Debt of France is owed to its central bank, how can that be a debt in basic economic tems as, like the B o E, the central bank is part of the government?
Might it be, as in the U. K., spending comes before taxation and does not have to equal it?
How is any money created in excess of tax inputs owed to anyone?
Inflation is what matters in reality.*
Might it give a fuller/clearer picture to inlude information that indicates that France has an infrastructure quality measured at 9.0 compared with the usual 8.6 and its infrastructure gap is rated at 0.0 compared with the usual 0.3
*P.S. Although the poor suffer most with (alleged) inflation management measures, such as increasing the bank rate, they do not cause inflation because they do not have enough money, let alone too much.
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France has the same aging problem as the UK with more people retiring on state pensions everyday than new people entering the workforce.
According to Françoise Fressoz of Le Monde newspaper, “We have all become totally addicted to public spending. It’s been the method used by every government for half a century – of left and right – to put out the fires of discontent and buy social peace.
“Everyone can sense now that this system has run its course. We’re at the end of the old welfare state. But no one wants to pay the price or face up to the reforms which need to be made.”Why France is at risk of becoming the new sick man of Europe
Central bank purchase of government bonds does not reduce public debt – it is simply the conversion of one liability (bonds) to another (money deposited with the central bank in the form of reserves).
All spending is conducted via credit i.e. spending comes first, settlement follows either concurrently or at a point in the future. That applies equally to government spending and future taxation. France uses the Euro and cannot simply inflate away its debts.
The UK can and does inflate to depreciate sterling, but seems to be already at a point where tax collections need to be increased significantly to prevent inflation spiralling out of control.
France is in a difficult, even an impossible, situation because it is required to conform to the rules of the EU regarding deficits and debts. To stay within the rules it is required to fiscally contractionary polices but these will also reduce GDP and increase levels of unemployment. These will inevitably create increased social tensions.
To make full use of the economic resources available to it, expansionary policies are needed. These are not allowable unless France gives up the euro.
Just how this mess will be resolved is anyone’s guess!
@ Steve,
“As over 20% of the National Debt of France is owed to its central bank, how can that be a debt in basic economic tems as, like the B o E, the central bank is part of the government?”
Both Joe and I have answered this question previously. Joe is right when he says that:
“Central bank purchase of government bonds does not reduce public debt – it is simply the conversion of one liability (bonds) to another (money deposited with the central bank in the form of reserves).”
The confusion arises because the former is counted as public debt but the latter is not in the mainstream narrative. Both should be counted in any rational definition of what debt actually means. In fact all government IOUs should be included.
‘Desperate people turn to desperate politics’…
Makes you wonder what the politics were in the first place to get them to that position.
Populists parties are a symptom of the progressive lefts failure.
As a/our central bank and the government are both part of the same ruling entity, might it be that any separtion is technical and/or economically and practically notional and so of little to no real benefit to the host society?
Might the article below help to illuminate the problematic and misleading presentation of the relationships between our central bank and H. M. G.?
https://www.youtube.com/watch?v=mQ_U0lfSJAg
P. S. Should there be a problem accessing the above, it can be found under the heading “Central bank independence is a neoliberal con trick” [Richard Murphy]