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Macron’s European Trap

11 May

This article was originally published on the Cambridge University website.

By any account, the French presidential election that ended last Sunday was extraordinary. The run-off in the second round was between two political ‘outsiders’: Marine Le Pen and Emmanuel Macron. In the first round, the mainstream left and right candidates came fifth and third respectively, with the far left Jean-Luc Mélenchon coming in way ahead of the Socialist Party candidate, Benoît Hamon. Many voters only decided late on who they would vote for, making this one of the most volatile elections on record.

The scandals affecting the centre-right candidate, François Fillon, overshadowed the campaign and relegated debates about political programmes into second place. In the run-up to last Sunday’s second round vote, a fierce argument raged – especially on the left – about the rights and wrongs of abstaining or spoiling one’s ballot paper. Political celebrities – such as the Greek Yanis Varoufakis – weighed in, urging French doubters to vote for Macron because “he is all that stands in between France and the fascism of Marine Le Pen”.

In the end, one in four of registered voters either stayed away last Sunday or spoilt their ballot paper.  What prevailed in the second round was the logic of lesser evil – voting for a candidate that is ‘not as bad’ as another – which goes some way to explaining the sombre tone of Macron’s victory speech on Sunday night at the Louvre in Paris.

For all the novelty, Macron’s election victory points to one important continuity: France’s complicated relationship with the rest of the European Union and its place within the Eurozone. When François Hollande was campaigning for the French presidency in 2012, it was the height of the Eurozone crisis with jobless figures reaching record levels and France’s economy in deep trouble. Aware of the opposition to austerity policies within France, Hollande promised to take-on the German government. He would discuss “firmly and amicably” with Ms Merkel and impress upon her the need for a new ‘growth pact’ for the Eurozone. His growth pact included proposals for Eurobonds to finance infrastructure spending and a transactions tax to fund development programs. His efforts came to nothing and the idea of a “growth pact” disappeared without a trace.

Something similar is happening today. Last Monday, a day after the French election, German Chancellor Angela Merkel gave a speech where she insisted that Macron’s victory would not change German policy in Europe. The German position is clear: France must reform its economy first, and bring its budget deficits well within the Eurozone’s rules, before there is any discussion on Eurozone reform. Even then, it is very unlikely that anything that was contained in Macron’s programme – creation of a Eurozone parliament, a Eurozone budget and a Eurozone finance minister – will see the light of day. Such changes would require treaty reform that national governments say is out of the question. Referendums have left European governments so bruised that they are unwilling to risk putting treaty changes to the vote.

There is an irony here. Macron has been an openly pro-European candidate, regularly waving the European flag and taking the Ode to Joy – the EU’s ‘anthem’ – as his own campaign song. And yet, this very pro-Europeanism is what will most constrain a Macron presidency. Most likely as a first step is that Macron will be pushed into cutting budgets and reforming labour markets, doing so possibly by decree given the history of opposition to such measures. In exchange, he may get some mild reforms of the functioning of the Eurozone but ones that fall short of any need for ratification through referendum or by national parliaments. This outcome may be part of Macron’s strategy, where the rigidity of the Eurozone’s rules is used as a means of pushing economy reforms onto France. Either way, the bigger difficulties, to do with structural imbalances of the Eurozone, will remain untouched.

A problem Macron never has confronted is that his promises to transform France’s national growth model are made within a context where Eurozone membership which makes such a change almost impossible. Macron’s election was extraordinary in many respects but his experience of life inside the Eurozone is likely to be rather more run of the mill.

Chris Bickerton

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Macron is a symptom of France’s problems, not a solution to them

24 Apr

This post was originally published here by Prospect Magazine

Having fought a campaign around the theme of over-turning the political establishment and pitching himself as the leader of an insurgent citizen-led movement, that very same establishment greeted Emmanuel Macron’s victory in the first round of the French presidential election with a huge sigh of relief. This tells us something about the candidate who is now most likely to become the next president of France.

Macron’s success boils down to one key insight: the French Socialist party (PS) is a sinking ship and anyone tied to it will go down with it. Macron quit the government presided over by François Hollande just in time to make his image as an outsider plausible. He decided to run as an independent rather than seek the Socialist Party nomination by taking part in the open primaries. This laid the basis for his success. The relegation of the Socialist Party candidate, Benoît Hamon, to fifth place in the first round, where he secured a paltry 6.35% of the vote, is the big story of this election so far. It had a decisive result in both propelling Macron to first place in the first round and in pushing up Jean-Luc Mélenchon’s vote share to within a whisker of François Fillon. The latter got 19.94% of the vote, Mélenchon 19.62%.

The collapse of the PS made the Macron phenomenon possible and this dynamic will shape a Macron presidency, assuming he goes on to beat Marine Le Pen in the second round as many assume he will.  His En Marche! movement captured the imagination of many but this enthusiasm came from his call to break the mould of French party politics. Disillusionment with the capacity of these parties to organize and lead drew people to Macron. In this first round of voting, it was striking how often people said they were voting in order to avoid someone else getting through. This sort of negative reasoning suited Macron perfectly as he was the acceptable face of all anti-system feelings: he was a safe vote for anyone who wanted to give the political mainstream a kicking but preserve the status quo at the same time. This peculiar and contradictory desire for both change and continuity was summed up perfectly in the days before yesterday’s vote, where voting Macron became a way of avoiding a Mélenchon-Le Pen run-off.

The negative feelings behind the Macron phenomenon are not new. In 2012, François Hollande won the presidency on the back of huge anti-Sarkozy sentiment. In 2002, Jacques Chirac won in a run-off against Jean-Marie Le Pen, securing over 80% of the votes cast in an enormous wave of anti-National Front feeling. Negative sentiments rather than a positive endorsement of a distinctive programme have become central to determining who makes it to the Elysée palace, and Macron confirms this rule. Even in organisational terms, Macron and his En Marche! movement have some roots in the recent past. Back in 2007, the Socialist Party candidate Ségolène Royale tried to create her own electoral movement, Desirs d’Avenir, after she received lukewarm support from the chauvinist barons of the PS. Her movement went nowhere after she lost to Nicolas Sarkozy but it was a sign that short-lived electoral vehicles built around the personality of a presidential candidate were possible in France as alternatives to traditional party machines.

What propels Emmanuel Macron forward as he fights to win the second round is the collapse of the French party political system and specifically the disappearance of the French PS as an electoral force. These disintegrative and negative dynamics make for very weak foundations going forward and explain why abstention is likely to be very high in the second round. Those congratulating themselves after Macron’s first round victory should think a bit harder about what is exactly is happening in France. Macron is a symptom of the country’s problems, not a solution to them.

Chris Bickerton

France’s anti-system election

21 Apr

This article was originally published in Juncture, the journal published by the Institute for Public Policy Research. This article was published in the spring issue of 2017 (Volume 23, Issue 4).

 

On the 22nd January 2012, the then Socialist Party candidate for the presidential elections in France, François Hollande, delivered what many believe was his election-winning speech. Speaking from a venue in Seine St Denis, a poor urban conurbation north of Paris given an edgy chic in the late 1990s by the French rap group, Nique Ta Mère (F*#* Your Mother), Hollande lurched to the left. “My real enemy is finance” declared a politician considered generally to be on the right of the Socialist Party.

Hollande’s speech that evening cemented his journey towards the French presidency. However, in a curious book published last year under the title of A President Should Not Say That, Hollande recounts how the speech was so nearly derailed by a shoe thrown at him by one of the thousands of people crowded into the hall.[1] The shoe landed in front of him and slid towards his lectern. The television cameras missed it and the incident was not picked up by the press. Had it hit me, remarks Hollande, I would probably have lost the presidential election.

This story captures in a dramatic fashion the fragility that has come to characterize mainstream political figures in France. With their popularity always in the balance, politicians feel as if they are stepping on egg shells. This is why they hide behind empty slogans and stock phrases, derision and opprobrium never very far away. Hollande’s presidency always had a quality of the improbable about it. His victory owed more to the strength of anti-Sarkozy feeling than support for his own program. The more leftwing elements of this program – such as the proposal to tax at 75% earnings over a million Euros – were gimmicks, conjured up on the hoof by his closest advisers and quietly shelved after Hollande’s victory. Though Nicolas Sarkozy’s win in 2007 had much greater momentum than Hollande’s in 2012, a similar dynamic was at work. Sarkozy chose to celebrate at a notoriously swanky Parisian restaurant on the Champs Elysée, Le Fouquet’s, and then to holiday off the coast of Malta on a yacht owned by Vincent Bolloré, one of France’s wealthiest industrialists and close friend of the newly-elected president. Throughout his presidency, Sarkozy was never able to shake-off the impression that he was obsessed with money. The soubriquet, ‘le Président bling-bling’, stuck with him throughout his five years in office.

The weak authority of France’s political class did not develop overnight and the causes are many. One is the drifting away of parties from their traditional social base. The French Socialists, for example, pretend to stand for the country’s blue collar workers but they have long been an urban, bourgeois and middle class party. The very idea of an identifiable social base has been challenged by deindustrialization and the emergence of chronic unemployment amongst French youth. Whereas in Britain supporters of the UK Independence Party have typically been retired ex-Conservative voters, in France a core part of the National Front’s vote today comes from the young. The political divide between rural and urban voters, softened greatly by the ‘Golden Age’ of French capitalism in the 1950s and 1960s, has opened up once again with National Front supporters concentrated in rural and semi-rural areas.[2] Even for the National Front, however, there is no real core vote: since 2002 its support has undergone multiple changes including feminization, proletarianisation and secularization.

There has also been a waning of the ideologies that once underpinned the left and the right in France. Mitterrand’s embrace of the European Single Act in the mid-1980s put an end to the left’s hostility to the market but without proposing any new ideology or vision for the left. The French right has conventionally been viewed through the lens of the French Revolution and associated with three different traditions – counter-revolutionary, liberal and Bonapartist.[3] However useful that may have been to understand the likes of de Gaulle or Giscard d’Estaing, it does little to explain the appeal of Marine Le Pen whose recent electoral gains have been concentrated in communities that traditionally voted on the left. And as commentators have remarked, François Fillon’s campaign is an odd collection of all of these right-wing traditions, without capturing any in particular.[4]

The weakness of the political mainstream has become a structuring element of French political life. Without an identifiable social base or any coherent set of ideas, mainstream parties are adrift from society and fail to command much authority, At this point in a presidential election, a duel should emerge between the candidates of the left and the right: Mitterrand/Chirac, Chirac/Jospin[5], Sarkozy/Royal, Hollande/Sarkozy. In 2002, the failure of the Socialist candidate, Lionel Jospin, to get into the second round run-off was an electoral earthquake and experienced as such. No such duel is looking likely in this election. The two candidates leading in the polls are campaigning on a platform of ‘neither left nor right’ (Marine Le Pen) and ‘both left and right’ (Emmanuel Macron).

Of these two candidates, the most enigmatic is Macron. A relative newcomer to French politics, and someone who has never held elected office, Macron has become a darling of the French media. He represents the acceptable face of anti-system politics: young, progressive and pro-European. He has even been cited by those despairing about Brexit and Donald Trump as the savior of the global liberal order.

This desire for something new has been present for some time in France. In the 2007 campaign, Ségolène Royal – the Socialist Party candidate who was snubbed and maligned by the party’s chauvinist elite – established her own movement, Desirs d’Avenir. This went nowhere after Royal’s defeat but Macron is picking up where she left off. Macron’s movement – En Marche – is mainly an electoral platform but is part of the splintering and fragmentation of political organization in France seen also in its more radial cousin, the Nuit Debout movement that filled the Place de la République in Paris for a few months last year.  Macron’s main weakness is his program: after weeks of grandiose speeches but no real policies, En Marche has gone into policy overdrive, churning out endless proposals that seem disjointed and ad hoc.

If Macron is a revolutionary in search of an idea, Marine Le Pen is quite the opposite. The ideas are there and some of them have not changed much since the party was first founded by her father, Jean-Marie, in 1972. The National Front’s program is an arduous read made up of 144 propositions that cover most aspects of public life. Whilst Le Pen has been a vocal defender of ‘Frexit’ – France’s exit from the European Union – her program states that France will seek to renegotiate its place in the EU and then put the results of this renegotiation to a popular vote, much the same approach taken by former British Prime Minister David Cameron. In contrast to Macron, Le Pen is in many ways the quintessential political ‘insider’; she is, after all, running a party set up by her father. Her challenge to the system is in part ideological: she vituperates the political establishment for having given up on ‘the people’ and opposes her nationalist solutions to the ‘globalist’ policies which she believes have failed France.  Le Pen is also threatening to disrupt one of the only unifying forces of French politics that remain: the desire to keep the National Front out of power. This goal has contained the powerful disintegrative tendencies at the heart of French political life, at least until today.

Anti-system candidates are currently leading in France’s presidential campaign. There will be some who welcome Macron as a centrist and a unifier, as many did with Alexander Van der Bellen’s victory in Austria’s presidential election late last year. This misses how much of an outsider Macron is, and how unconventional and unexpected his victory would be for the politics of the Fifth Republic. Macron may yet fall into third or fourth place as his competitors pile on the pressure but at present he is neck-and-neck with François Fillon for the coveted second place in the first round ballot.

A Macron victory, just like a Le Pen victory, would represent the collapse of the political mainstream in France and its traditional system of parties. It is unlikely that French politics would revert back to its traditional patterns and rituals. François Hollande was saved in 2012 by the few meters that separated his lectern from the shoe that was thrown at him. Mainstream candidates may not be as lucky in 2017.

Chris Bickerton

[1] Gérard Davet and Fabrice Lhomme (2016) Un Président ne devrait pas dire ca… (Paris: Stock) p18.

[2] Pascal Perrineau (2014) La France Au Front (Paris: Fayard) p38.

[3] Rene Remond (1982) Les Droites en France (Paris: Aubier-Montaigne)

[4] ‘Le discours de François Fillon à la loupe’, Le Monde, 16 December 2016.

[5] For the Chirac/Jospin run off in 1995, Chirac’s place in the second round was a surprise as the candidate on the right expected to get through was Edouard Balladur. However, what was not in doubt was that there would be a left/right run off in the second round.

Will Angela Merkel Save the West?

16 Mar

TCM contributor Chris Bickerton has an essay on Merkel in the New York Times.

As Ms. Merkel prepares to meet this week with President Trump, many people may hope that she will stride into the White House and issue a robust defense of the liberal international order. Don’t count on it.

If the future of Western liberalism rests on Ms. Merkel’s shoulders, then it really is in trouble. She has often spoken in support of European and Western unity, but her actions have done little to strengthen them. Moreover, it’s not clear how deep her ideological commitment to liberalism really is — or, for that matter, whether she has any ideological commitments at all.

The full article is here.

Sturm und Draghi

23 Dec

The announcement that the ECB “unleashed a wall of money” to prop up ailing European banks has been greeted with general positive noises, and some confusion. The money is €489 billion in three-year loans, meant to inject liquidity into a tightened banking system, and to allow the banks to, among other things, buy up sovereign debt that the ECB won’t buy directly. The confusion arises from the relationship between the words and actions of Mario Draghi, the recently arrived president of the ECB. Draghi has been at pains to say that the ECB will not act as a lender of last resort, buying up sovereign debt that nobody else wants, without a major EU treaty-change that includes enforced austerity. As he said in an interview with the Financial Times “We have to act within the Treaty. In general, there must be a system where the citizens will go back to trusting each other and where governments are trusted on fiscal discipline and structural reforms.” Yet, as any number of commentators have noted, providing this wall of money seems to be a kind of end-run around the treaty problem. Though it might not work in the long-run, it is taken by the likes of Paul Krugman as the admirable ‘subtlety‘ of eurocrats, finding solutions within the legal arrangements.

There is of course something positive about the head of an unelected, somewhat secretive, yet enormously powerful institution formally stating that he must follow existing law – the EU treaty in this case. Indeed such affirmation of the treaty is especially important given that many have called on Draghi simply to ignore the treaty and backstop the sovereign debt of southern European countries, or argued that it wouldn’t really violate the treaty. But there are deeper, more widespread political problems here, not least with Draghi’s own political game. If, in fact, Draghi and the ECB were merely playing the responsible Big Bank, keeping its head down and following the rules, and leaving the politics to the politicians, then that would be…something. But it is quite evidently not what Draghi has been doing.

The two-timing – saying one thing, and coming up with new, inventive ways of doing the other – illuminate something of a power game that the ECB is playing. Publicly, Draghi is holding back the ECB backstop under conditions – namely, judicially or politically enforceable limits on fiscal policy of European states, inscribed in a new treaty. That is a straight-up political demand, backed by the power that only the ECB possesses: the economic power to bail-out the southern states and European banks. It is a political demand, moreover, made upon already hurting European publics to endure not just a period of contraction, but a major restructuring of the relationship between their states and their economies. The idea behind the rewritten treaty, in other words, is not just to impose the pain of austerity measures, nor even to dismantle the welfare states, but to inscribe the logic of constraint and lowered expectations into the new supranational and by extension national political institutions.

Draghi, of course, is not the only political agent here – Merkel has led the charge for treaty-change with austerity written in. But her actions are unabashedly and professedly political, and understood to be so.  Draghi’s statements and positions are taken to be somehow the words of an expert, nevermind the ‘subtle’ coercions of offering a continental bailout only on strict terms. Draghi’s views are supposed to be the limited advice of an economic expert, and one who in some sense a neutral actor, outside and above politics – like the institution he runs. What makes the political ploy here worse is the power that backs it. As noted, the ECB is the only one with the potential to offer a bailout, or at least commit to printing enough money to buy up debt, which might calm the bond markets and save the banking system. In certain ways, then, Draghi is not just more German than the Germans, but has a power they don’t have.

Of course, the two-timing – such as the wall of money – reflects the fact that the ECB is not all powerful. Or at least, that it is not so flush with power resources that it can wait out this game of financial chicken longer than those unwilling to make the sacrifices Draghi demands. After all, waiting too long makes backstopping a whole lot more expensive, risky and potentially less effective – no doubt one reason Draghi felt compelled to engage in this recent refinancing operation. But it has to be said that Draghi is playing a political game, one that favors certain interests over others, with potentially far-reaching consequences depending on the ultimate political and legal changes.

Of course, as mentioned, the point is not that Draghi is some all powerful financial witch-doctor, who can wave his magic wand – or not – and get the world to do his bidding. In fact, the other striking feature of the debate around ECB actions is the way in which it speaks to the restoration of a certain status quo ex ante. Although the financial crisis of 2008, and its potential sequel in Europe, produced numerous arguments that mainstream economics had been discredited, and that a “new economic paradigm” was needed, what is striking is just how little has changed. Before the crisis, the dominant view was that a period of Great Moderation had been achieved, largely thanks to the machinations of expert central bankers who fiddled with interest rates. One of the background assumptions of this view was that monetary, rather than fiscal, policy was a finer instrument of economic engineering, not least because ‘less political’ and thus less prone to the messy distortions of democratic politics. Central bankers were gods, or at least master governors, to be appreciated and listened to (despite their continued interest in things like wage suppression). Little moves with interest rates were guessed at and awaited; the public divined, parsed, and poured over statements by the likes of Greenspan a bit like Kremlinologists looking for the relevant post-Cold War obtuse institution of power. Everybody knew that their economic fate was largely out of their hands, but thankfully in trusted hands.

Now we are supposedly on the other end of that paradigm, yet caught in the Sturm und Draghi of another bewildering central bank’s enigmatic words and actions. It is hard to accept how it is that so little could change. Or worse yet, how much the old pattern in certain ways has become even more entrenched. The most significant economic decisions are placed in the hands of undemocratic figures, even when this means toppling national governments (Italy, Greece) to replace them with technocrats. And the dominant common sense is in favor of austerity, rather than rational, democratic control of the economy. The dead-weight of ideological conformity and (hopefully changing) public passivity is what stands out most strongly. At the end of the day, the power of a figure like Draghi is a back-handed reflection of the relative absence, or at least weakness, of alternatives. The truth in the conspiracies about bankers manipulating everything is so much that central bankers favor certain interests but dress up their policies as the public interest (which they certainly do). Conspiracies are a distorted registration of the weakness of the Left, a distortion dangerous because it replaces the political weakness of a potential movement with the comforting illusion that power is beyond anyone’s reach in the first place. Draghi and his ilk should be put in their place and own up to the political game that they play. But they won’t do it voluntarily, and it will take another kind of politics to expand rather than shrink the horizon of economic possibility.

The end of independence

11 Jul

The claim that the European Central Bank was independent of any political interference was always a little difficult to substantiate. Membership of its governing committee was rigidly tied to nationality even though members were expected to vote in the general European interest. Recently, French President Nicolas Sarkozy insisted that Italy retire one of its members in order to avoid there being two Italians – and no Frenchmen – within the upper echelons of the ECB. Neutral indeed. Nevertheless, the ECB’s creation was perhaps the best expression of the belief that short-termist and self-serving politicians need to keep their hands out of the monetarist policy pot. In the monetary policy jargon, this is all about ensuring that central banks can issue ‘credible commitments’ to the markets. So when they say they are going to be tough on inflation, everyone believes them.

 

Recent events have suggested that the ECB’s independence is being steadily mined by the ongoing Eurozone crisis. One reason is because of the faultlines exposed by the crisis, with the ECB being firmly located on one side of the growing gulf between creditor and debtor interests across Europe. The ECB, and particularly its out-going director, Jean-Claude Trichet, has consistently argued against anything that might look like default on the part of those countries signed up to an EU bail-out package. In so doing, the ECB has put itself forward as the leading defender of the private creditor interest in Europe. Neutral indeed. Most recently, the ECB declared its intention to raise Eurozone-wide interest rates 0.25%, from 1.25% to 1.5%. This is in order to quell inflation, the result of food and energy price-hikes, which some think will provoke higher wage claims in the Eurozone’s bigger economies. The response from Ireland, Greece and Portugal was immediate: does the ECB not realize that in raising rates it is making it even more difficult for these countries to repay their loans?

 

The second reason is more subtle but also more important. Whilst being officially a non-political body authorized to deal exclusively with Eurozone monetary policy, the ECB has been getting steadily more involved in fiscal policy, notably in providing cash-stricken Eurozone members with much needed liquidity. The ECB, like any central bank directed by political concerns, has been acting as lender of the last resort. It has for some time been keeping the Greek banking system afloat. To date, the ECB has provided about 100bn Euros in loans to Greek banks, in exchange for Greek government bonds classified as junk by the markets.

 

The official reason why Trichet declares himself so fervently against any default by Greece is that it will create “contagion” in the markets: if Greece defaults, will private investors not believe that Portugual and Ireland will also do the same? But there is another reason why a Greek default would be a problem for the ECB. It would force it explicitly out of its independence shell and into the terrain of political choice. With Greece in default, the ECB could abandon the country’s banking system by ending its loans. Or it could make its role in fiscal policy explicit, providing finance to governments shut out of international markets. This is a choice both Trichet and national governments would rather avoid as it would force them to reveal their cards about whether they support closer political union within the Eurozone. Whilst central bank heads and member states may disagree on this point, they all seem to agree that they’d rather not be forced to have a public debate about it. A Greek default would make that debate increasingly difficult to avoid.

Sarkozy and the French banking sector

29 Jun

It was announced on the 27th June, by French president Nicolas Sarkozy, that French banks had agreed to a plan to rollover a large chunk of the debt owed to them by the Greek government. Le Monde reports that this was decided upon at the weekend, with aim of bringing the French proposal to an International Institute of Finance meeting in Rome on the 27th where around 400 financial companies would be present. Without giving up on debt repayment as such, in the French plan the banks agreed to extend new loans to the Greek government as existing loans come up for repayment. These new loans would be extended over a longer time period, giving Greece more breathing room. Originating as a German idea to force private investors to share some of the burden in bailing-out Greece, France and the ECB had been firmly opposed to the idea. Now, cast as a purely voluntary affair, France has struck a deal with its big banks remarkably quickly.

Reported in the financial press as an arduous process, likely to take weeks, the French government has announced a deal within days. How was this done so quickly? Part of the answer is of course the degree of exposure of the big French banks. By some way, they are as a whole more vulnerable than banks from other European countries.

Banks Exposure (Billions of Euros)
BNP Paribas (Fr) 5
Société Générale (Fr) 2.9
Axa (Fr) 1.9
Dexia (Fr-Belgian) 3.5
Generali (It) 3
Commerzbank (German) 2.9
Royal Bank of Scotland (UK) 1.1

Source: Forbes

That said, these figures also show that exposure to Greek debt runs through the European banking sector. So how to explain the speed of the French plan? A hat tip to my colleague, Daniel Mügge, for the answer. The French government, whilst having divested itself of its share of the banking sector as with its share of public services in general in the course of the 1980s and 1990s, is still able to coordinate policy with the main banks. No longer a state-run economy, France nevertheless rests upon a set of remarkably close relationships between political, business and finance leaders. The French deal was brokered by a working group, with representatives of the French treasury, the ministry of finance and the secretary general of the Elysée palace, Xavier Musca. Three of the biggest French banks – Société Générale, BNP Paribas and Crédti Agricole – are reported to have made their proposal to the government but there was much pressure in the other direction too. In other countries, such as Germany, it is by no means clear that the government will be able to put a similar agreement together. This is not only because its banks are marginally less exposed than the French banks but also that the nature of the relations between government and the banking sector is different.

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