Fiscal and Budget constraints: Macron's "Honeymoon"

General Pierre de Villiers with President Emmanuel Macron.

Image: AFP in The Daily Telegraph

France's President, Emmanuel Macron started a very public spat last week with General Pierre De Villiers, Chief of Staff of the Republic's armed forces over this body's proposed budgetary cuts. In what appears to be the first of many confrontations with a president who was elected on a mandate to rein in public spending, Gen. De Villiers resigned over what he argued was his "inability to guarantee France security" with new tight budgetary measures.

Here's the note as published by Michael Stothard in FT.  In any case, we have not heard the last word on this subject.  Nicholas Vinocur of Politico Europe wrote on the very bitter aftermath, that Christophe Castaner, Macron's presidential aide, accused the general of 'disloyal communication', particularly after publishing this Facebook post, aptly titled 'Départ', on the eve of his exit (read also his letter of resignation, in French).  There is also considerable backlash on Macron for his handling of the disagreement, prompting General Vincent Desportes, former director of France's 'École de Guerre' and academic to accuse the president of juvenile authoritarianism in this opinion piece published by Le Monde.   

But the reality is more complex than a quarrel between an old, seasoned soldier, and a political neophyte, slingshot to prominence because of the traditional political class (left and right) running out of answers regarding France's perennial problems.  It bites, and fiscal issues are difficult in handling and always a potential ticking time-bomb. If there is indeed a €9 billion hole in France's budget the question what adjustments are to be made and what public bodies will be affected might be academic - inevitable, perhaps -, which makes the following quote from the above-cited FT article that much more interesting

"The president's room for maneuver has been restricted by a warning from the state auditor last month that there was a €9bn hole in the country's finances"

Why is it interesting? Because, precisely, in observing cases of states and/or governmental entities dealing with difficult fiscal situations (particularly Greece and Puerto Rico), I formulated a research hypothesis (2013) in relation to this type of contingency; whereby,

Hypothesis: FISCAL PRECARIOUSNESS - IMPAIRS  -  SOVEREIGNTY 

Fiscal precariousness meaning, 

• Shortage, lack of ability to collect, or insufficient revenues once collected and assessed;
• Administrative and fiscal governmental spending practices that bleed funds and do not measure to the cost-benefit threshold;
• Fiscal and budgetary pressures, due to population aging, delays in renewing the workforce; 
• Unavailability of new revenue.

Impairs implies,

• Diminished, reduced capability; weakened, lessened, reduced.  

Sovereignty, in the sense of,

• Room for maneuver; flexibility in terms of what the state can (or can't) do contingent on budgetary resources. 

The hypothesis needs to be verified empirically to assess its validity and explanatory power.

Adhering to the European Union's strict budgetary rules is a feat in itself.  It has caused a number of political tensions in the past, mainly in its southern European members and Ireland.  It has also unleashed several political processes where populist or contestatory movements and organizations have entered - and stayed - in the realm of politics.  France itself survived a populist offensive led by Marine Le Pen of the far-right party Front Nationale, who contested with Macron last April for the presidency.  Issues surrounding the election touched on the very sensitive subject of France's relationship with the European Union (of which it is one of the original six founding members) and its continuing relevance in the context of the United Kingdom's exit from the bloc (Brexit).

Is France indeed at a crossroad?  The Organization for Economic Cooperation and Development seems to think so,

Source: OECD

Forecasts are cautious at best,

Source: OECD

Meaning that there is, according to economic orthodoxy, a lot of work to be done.  At least that is the recommendation of the OECD in this economic forecast, calling for controls in social expenditures. See below,

Economic Forecast Summary France Oecd Economic Outlook June 2017 by José R. Rivera on Scribd

Larry Elliott of The Guardian seems to agree with this assessment.  He adds that, compared to Germany, there is an underlying inferiority complex, that never ceases to annoy its political class, economic establishment, and collective psyche.  France would like many things from Germany, but there is a (neoliberal) consensus of what to do.  FT says that France's economy needs, "reform, not revolution".  There are indeed challenges up ahead, judging by the reaction of Macron's higher education reform, several sectors - especially France still powerful trade unions - will mount considerable resistance. 

The next chapter is about to be written. I just hope that, with all this political skepticism in the air, we can be as optimistic as Centre for European Reform Director, Charles Grant (see below). Discuss...

The Meaning of Macron by José R. Rivera on Scribd