Why it's time for France to get real

Tom Bulford looks at why demands for early pensions and a belief in the right to cheap camembert are holding back the French economy - and why he hopes Sarkozy will prove to be the French Thatcher.

When things are not going quite as well as they might here in dear old UK, what better than to pick upon the French?

So how nice that the most foolish speech of the year has been made by the President of our old enemy across the channel.

The dollar', opined Mr Sarkozy, 'cannot remain solely the problem of others. If we are not careful, monetary disarray could morph into economic war. We would all be its victims.'

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He went on: Those who admire the nation that has built the world's greatest economy and has never ceased trying to persuade the world of the advantages of free trade expect her to be the first to promote fair exchange rates.'

Foolish - and extraordinary for several reasons. The dollar is weak precisely because while there may be those who regard with admiration, the world's greatest economy,' there are plenty of others who would not attach that adjective to an economy that has been built upon unsustainable debt, and a general presumption that the rest of the world needs it more than it needs the rest of the world.

Even more extraordinary is the notion that the USA should promote fair exchange rates,' by which of course Mr Sarkozy means a stronger dollar that does not undermine the competitive position of France. In fact the USA is standing very squarely by its free market principles in allowing the market to determine the value of the dollar. And few people other than Mr Sarkozy would disagree with its verdict.

The charitable explanation of Mr Sarkozy's outburst is that it is an attempt to divert the blame for France's unfolding economic crisis onto a foreign country. If so it is an entirely unconvincing one, coming as it does at a time when the woeful economic mismanagement of successive French governments is coming home to roost in a series of strikes.

French go on strike (again)

For once it is a wonder that last week's inaugural Eurostar journey was not prevented by problems on the French side rather than the English side from reaching its destination. The French railway workers are very much in the vanguard of French militancy. Their complaint? Mr Sarkozy's proposal that they should have to work 40 years to get a full pension instead of the 37.5 years that is currently required of them. Indignant train drivers,' it is reported, say that they entered the difficult profession on the promise of early pensions.'

Get real! To his credit Mr Sarkozy is attempting to make France do just that. Apart from altering pension arrangements he wants to cut public sector jobs, make it easier for small companies to hire and sack staff, and open services such as the post to competition. In this he has the support of employers but seems to have upset just about everyone else.

Teachers and doctors say that education and health care are at risk. Students argue that university education will only be available to those that can afford it. Even judges are protesting about cost cutting. Summing it all up are the banners carried by protestors. Covering all bases, they read: Together for employment, purchasing power, workers' rights.'

Since our membership of the EU will no doubt require this country to prop up France in case these long overdue reforms fail we must hope that Mr Sarkozy, a latter day French answer to Mrs Thatcher, wins the day. What he has to overcome is the nation's mountain of totally unrealistic expectations, and a refusal to see the world as it is.

The French camembert price rises

As an illustration of this take the case of Michal-Edouard Leclerc and the Camembert cheese. Monsieur Leclerc is chairman of one of France's largest supermarket chains, and he has been complaining of the 15% rise in the price of President Camembert, the brand of this French staple that is his store's best seller. He describes the price rise as abusive' but as a spokesman for Lactalis, the firm that makes this cheese, explains Camembert is 98 per cent milk. and the price of milk has risen by 20 per cent.'

This should be simple enough for Monsieur Leclerc to understand. But his wilful refusal to look at the facts in the face, and a nonsensical belief that the traditional way of life including low prices for Camembert - can carry on irrespective of a changing world, is all too typical of French attitudes.

This is why Mr Sarkozy's harangue of the weak dollar, and the implication that the USA could alter its direction simply through a change of policy is so unhelpful. If he cannot understand economic reality what hope is there that he can educate his countrymen?

He might also reflect upon another irony of his remarks. If France was not a member of the European Currency Union, those free markets would be delivering their verdict on France's economic performance in just the same way that they are judging that of the USA. By lowering the value of the French franc and impoverishing the nation. Just what France deserves, in fact

This article is taken from Tom Bulford's free daily email Penny Sleuth'.

Tom worked as a fund manager in the City of London and in Hong Kong for over 20 years. As a director with Schroder Investment Management International he was responsible for £2 billion of foreign clients' money, and launched what became Argentina's largest mutual fund. Now working from his home in Oxfordshire, Tom Bulford helps private investors with his premium tipping newsletter, Red Hot Biotech Alert.

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