Euro Area/France/debt crisis
Paris, November 22, 2011
Since 2008 we’ve had to face three major crises: the so-called subprime crisis, then the sovereign debt crisis and today, to a certain extent, the Europe crisis.
I’ve already had occasion to say that, from my viewpoint, these three crises are one and the same and reveal a sort of crisis of civilization, and I want to say a word about that to you, the elected representatives of the nation, who hold a share of our national sovereignty in your hands.
I think 2008 to 2012 will go down in history as the years which marked the end of Western supremacy and the tipping of the balance of much of the global economy towards Asia. (…)
President Sarkozy and I have chosen our strategy. On the one hand, we need more political Europe to resolve this crisis, and on the other we must continue to modernize France and reduce her deficits.
Europe first of all. As a matter of urgency, we’re putting in place financial tools to counter speculation and respond to investors’ fears.
That’s the purpose of the European Financial Stability Facility that comes across in the debates always going on about the central role of European banks. But the European crisis has revealed something else: a serious lack of governance. And ultimately this is the crux of the problem we’re facing today, because after all, there are other indebted countries. The United States is more indebted than us.
Britain will have a deficit of 9% this year, yet it’s the Euro Area that has taken the blow. And if the Euro Area has taken the blow, it’s because investors ultimately felt there was fragility there, fragility in our political organization.
The compromises we’ve been making for years to try to reconcile different interests in Europe haven’t stood up to the violence of the situation we must face. We’ve created a common currency for ourselves, but we now need the political and financial institutions which alone can ensure that currency’s long-term survival.
Pending a profound change in the European treaties, which is necessary but will – as we all know – take time, today only a very strong intergovernmental union within the Euro Area will enable us to withstand the blows that are undermining the ties we’ve been patiently forging since the Second World War between the European powers. And you’re well aware that France and Germany lie at the heart of this close intergovernmental union. Closer Franco-German cooperation isn’t only a project in itself: it really is a starting-point for taking the whole continent towards a new frontier, a powerful Euro Area whose economies gradually converge and which then illuminates the European Union’s path in relation to the new powers.
Europe must strengthen itself, it must reinvent itself, but each state must also do its duty in this context. All the European countries have committed themselves to rigorous policies and sometimes even – we can see it around us – drastic policies. Whether they be governed by the Right or the Left, the challenge is the same: public spending must be controlled and growth must be based on sound and sustainable principles.
In France we’ve been living on credit since 1975. That’s the vicious circle we must break as a matter of the utmost urgency. To arrive at a zero deficit by 2016 – which is the commitment we’ve made – we must save more than €100 billion. I want to say it’s unthinkable to do this solely by increasing taxes. It would amount to tripling income tax or doubling VAT. So there’s no other solution than to reduce spending and modernize our structures if we want to successfully reduce our indebtedness in the long term. (…)
For our European partners, for the markets, for investors, the public finances situation is simply a fact, and we must look the truth in the face if we want to find solutions together that enable us to put our country back on its feet. The public finances situation in our country can be appreciated when you look at the budgets of the state, the local authorities and the social organizations. There’s no distinction, there’s no separation: there’s a single France that must be united in the effort.
Never has the issue of the public finances been so central to our common future. I appreciate how much this strict budgetary discipline that’s being imposed on us runs counter to our old political culture, which has often consisted in thinking that the administration will always follow our ideals. Well, I propose to you raising the issue to the moral level. To get out of debt means freeing ourselves from an oppressive system that isn’t worthy of a great nation like ours. To get out of debt means retaining control over our political, economic and social destiny. In a word, to get out of debt means guaranteeing the Republic the power to act according to its conscience and not under external pressure. To get out of debt, finally, means protecting our children from the cruellest of evils: that of paying for a mistake their parents have made. (…)./.
(1) Presidents of local authority groupings