EU Forum

Social Europe

Saving the French social model at the expense of the EU?

18 Apr 2017 - 17:13
Source: Frédéric Bisson/flickr

The French have long prided themselves in having one of the world’s most generous welfare systems. While critics tend to point out France’s structurally high unemployment levels, the French justify their approach by stressing they have fewer poor people than many other EU countries. As early as 1994, a young CEO dubbed this the ‘French preference for unemployment’ in a famous essay. To a large extent, this remains true today: France still has one of the most generous unemployment benefits systems in Europe. Combined with a relatively rigid labour market and one of the highest minimum wages in the EU, it helps explain why unemployment rates have been stagnating between 8-10% for 30 years. It also accounts for the labour market’s strong insider-outsider characteristic, which leaves so many young French people behind.

'The mother of all battles'
Despite this implicit collective preference, French politicians have long made the fight against unemployment the mother of all battles. Election campaigns are never short of promises to fix the problem. Yet, one thing has never happened: the suggestion that the French social model should be turned upside down, for instance either transformed into a Scandinavian-type universal welfare system, or into a liberal, assistance-based model. Even for system-bashers like the Front National, ‘saving the French social model’ is an imperative. Most proposals suggest tinkering around the edges of a system combining contributory and assistance-based benefits. As a result, in France social spending is at the highest level among OECD countries (see graph below). Repeated imbalances of social security funds have largely contributed to France’s fiscal deficits since the mid-1970s. 

 

 

Graph 1: Social spending (2005-2016) in France (red), Sweden (green), Germany (lilac), the Netherlands (yellow) and the United Kingdom (blue) in % of GDP. “Social expenditure comprises cash benefits, direct in-kind provision of goods and services, and tax breaks with social purposes”. Source: OECD

Traditionally, the political debate has been between centre-right proposals to cut spending and push back the retirement age, and centre-left demand-side recipes to boost growth and, ultimately, tax revenues. The Front National defends welfare chauvinism, by which spending cuts should affect non-nationals as a matter of priority. However, the deteriorating fiscal and social reality in the aftermath of the great financial crisis and the euro debt crisis has forced politicians to come up with bolder solutions. A new dimension has emerged as a key dividing line when it comes to rescuing the French social model: Europe.

Until recently, the European dimension barely came into the equation. Both left and right shared a standard pro-European attitude. Both sides talked about ‘Social Europe’ or the need to tackle ‘social dumping’ without getting into specifics. Benoit Hamon, the Socialist candidate, is to a large extent faithful to the French vision for Social Europe by advocating European minimum-wage harmonisation and a €1,000 billion EU-wide investment plan. However, today, a greater number of people on both sides accuse the Eurozone’s fiscal rules (the Stability and Growth Pact) and reform injunctions (via, e.g., the European Semester) of impoverishing the French. The EU has become the ideal sacrificial lamb for those who claim that European integration is incompatible with a generous welfare state. 

Overcoming the 2005 trauma
To be historically correct, a first warning took place in 2005, when French voters, like their Dutch counterparts, rejected the EU’s Constitutional Treaty. If right-wing opponents resorted to classic arguments about sovereignty, left-wing ‘nonistes’ – led in particular by Jean-Luc Mélenchon – denounced the EU as a neo-liberal project which organised ruthless competition of workers. The figure of the Polish plumber emerged as the EU’s monstrous creature, facilitated by the EU’s practice of posted workers. Yet, at that time, market liberalisation rather than Eurozone arrangements was the main target.

The mainstream left and right thought they overcame the 2005 trauma by pushing the Lisbon Treaty through. However, new austerity measures and structural reforms which were rolled out under the EU’s surveillance made Europe once again a political hot potato. François Hollande was elected in 2012 on the promise that he would renegotiate the intergovernmental ‘Fiscal Treaty’. His failure to do so, along with his politics of reform and fiscal discipline, earned him a lot of anger early on. Of the five major candidates running for president today, three propose to break away from the EU’s status quo. This includes both the free market orientations enshrined in EU treaties, including free movement of services and its posted workers component, and the Eurozone rule book. 

The candidates' propositions
On the left, both Jean-Luc Mélenchon and Benoit Hamon want to fundamentally amend EU treaties in order to beef up their social dimension. Hamon wants to mutualise a share of national sovereign debts and create a ‘euro assembly’ to preside over an agenda of tax and social harmonisation. Mélenchon’s version is the most radical. The hard left candidate would seek to obtain from EU partners an end to the European Central Bank’s independence, introduce targeted protectionist measures on EU borders and rapidly advance towards social harmonisation. If this “Plan A” fails, “Plan B” consists of unilaterally walking away from the EU. This option takes Mélenchon closer to Le Pen than any other candidate. The Front National candidate proposes a return to the franc and renegotiating EU treaties to transform the EU into an intergovernmental organisation. Both Le Pen and Mélenchon propose to stop implementing the posted workers directive, while Hamon, Macron and Fillon talk about reforming it in order to limit social dumping.

The 2017 presidential election puts the French social model at the crossroads

The only presidential candidates that refuse to blame Europe for France’s woes are Emmanuel Macron and François Fillon; they stress France needs reforms regardless of what Brussels wants. However, this does not mean respecting fiscal rules to the letter.  Both candidates mention the need for social and fiscal convergence, hardly anything new in the French context. While Fillon wants to work on an intergovernmental basis and proposes an agenda of corporate tax convergence over 10 years, Macron will operate within the existing institutional set-up and mentions the Commission initiative ‘the pillar of social rights’ with a desire to include health cover, minimum wage, unemployment benefits and training rights.

The 2017 presidential election thus presents an important fork in the road for the French social model. A handful of candidates still believe it can be reformed and land on its feet within current EU governance arrangements. A Macron or Fillon presidency would likely mean bolder reform attempts while securing patient support in Brussels and Berlin. By contrast, in a Le Pen or Mélenchon scenario, a major row about the future of the EU would open up and France might have enough weight to bring the bloc crashing down. Whether it would rescue the French social model, however, is highly questionable.

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