ARENA Working Papers
WP 98/19

French Social Democracy and the EMU

George Ross

Abstract

The role of French social democracy in the creation of Economic and Monetary Union seems straightforward. EMU, which as an idea had existed in the EU's repertory since the Werner Report in the 1970s, was "relaunched" in 1986 under a French social democratic president, François Mitterrand, then hammered into a concrete proposal by a French social democratic president of the European Commission, Jacques Delors. EMU was then ably shepherded through Maastricht by both with the aid of Helmut Kohl. Simultaneously French social democratic governments pursued a set of domestic policies designed to provide the macroeconomic policy support that EMU needed, in particular convergence with the Germans. Furthermore, EMU could easily be fitted into the grand European strategies Mitterrand designed earlier in the 1980s, after the French experiment with "social democracy in one country failed."

French Social Democracy and the EMU

What more needs to be explained? A great deal, it turns out. EMU as an explicit policy was, of course, publicly advocated by the PS. It was not created by the PS, however, nor was it in any real way "endogenized" into the concrete policy understandings of French social democracy until the mid-1990s. This seeming paradox story becomes clearer when one introduces constitutional and institutional arrangements into the equation. Well before the PS came to power in 1981 the party had been "presidentialized" by the logics of the presidential constitution of the Fifth Republic which endowed party leaders like Mitterrand with large powers because of their status as présidentiables - potential presidents. When Mitterrand actually became President he used these powers, which granted him complete control over foreign policy and the basic domestic options of governments (as long as they were socialist-led), to the fullest. In France, the personal and political character of the incumbent President thus was far more significant to the fundamental policy changes leading to EMU than "social democracy." The imported nature of EMU, indeed the entire "Europe option” of the 80s and 90s, for the French PS was intensified by the roles played by the European-level political system. In all the French socialist party, qua party, was a "taker" rather than a "giver" of the basic policy choices which led to EMU.

Nothing is as important to the future of European social democracy as Economic and Monetary Union (EMU). In the worst case, EMU could undercut social democracy's major historical accomplishments, elements of the ”European Model of Society” like the welfare state and civilized industrial relations systems. Even gentle scenarios will involve social democrats in very difficult distributional choices. When national competitiveness declines in relative terms, wages and/or social protection will have to be cut. Yet it was French Socialist leaders François Mitterrand and Jacques Delors who were the central actors in making EMU happen. Was EMU, therefore, a social democratic creation? No, in fact. French social democracy as a party gave very little thought to EMU until it had already been decided. This is a huge paradox. Accounting for it is the purpose of this essay.

Since the particularities of French social democracy are part of the explanation, we must first explore them. Next, in part II, we must pay careful attention to the role French institutions played in the gestation of EMU. Finally we need to discuss the “endogenization” of EMU into French domestic politics; a process, which began well after EMU, was on track under the leadership of French socialists.

1. Prehistories

Post-World War II French social democracy had only the vaguest of relationships with its Northern European third cousins. It was weak, both because it shared political space on France's Left with the Communists and because it had few links with the labor movement. The matrix of incentives into which these characteristics played provides the first important element in the prehistory of French social democratic involvement and EMU. The coming of a new constitution in 1958 dramatically changed the system of incentives which it faced, contributing the second decisive element. Both sets of changes made the new Parti Socialiste even more different from its Northern social democratic comrades than it had been. In a broader sense it was the cumulation of these two elements, which conditioned the PS' approach to European integration.

1.1 Setting No. 1 - Towards Opportunism and Europe

French social democracy has never been more than a distant relative of the powerful and coherent social democratic parties of Northern Europe. ^[1] The Section Française de l'Internationale Ouvrière (SFIO, the name of the French Socialists until 1971) failed altogether at gathering together the multiple forces of the French Left. The creation of the Parti Communiste Français after World War I and the setting of competitive pluralism between it and the SFIO institutionalized this failure. Competitive pluralism, in which relative advantage was often more important than more general political success, had negative effects on the Left's capacities to govern and mobilize. Quite as important, the SFIO never built the kind of organic ties with trade unions that one finds elsewhere. ^[2] The SFIO's major, but meager, source of mobilizational resources was electoral, cobbled together from municipal socialist machines in certain of France's larger urban areas - Lille, Marseilles, parts of Paris and its working class suburbs plus clientelistic power in rural regions, many of which had leaned to the Left since the French Revolution.

The SFIO was chronically resource-poor. Thus when it became a plausible party of government, it sought additional resources through coalitional maneuvering, a tactic that became a chronic habit from the Popular Front until the end of the Fourth Republic in 1958. This quest was contingent upon two facts of French life, the divisiveness of the French Center and Right plus the persistent desire to keep the PCF away from government. Excepting very brief moments when the anticommunist taboo was overridden, the SFIO could play upon its pivotal position for the formation of governments. The disadvantages of this strategy were great, however. Coalition mongering with liberals and conservatives involved betraying Left commitments. Thus after allying briefly with Communists and Centrists in the Popular Front, the Socialists turned to governing with forces to the Right, pursuing an orthodox economic policy and following the British lead towards appeasing the Nazis and war. After the Resistance and Liberation period, in which alliance with the Communists was reconstituted, the Cold War made the SFIO the key to most governmental coalitions until 1958. The price this time was support for labor-exclusionary economic policies and leadership in colonial warfare. Prolonged coalition manipulating - more than two decades, in fact - nourished cynical attitudes among Socialist leaders, whose main goal became to knit together backroom deals to stay in power. The result was that the SFIO lost credibility as a genuine Left party, even if, for purposes of internal governance, it continued to “talk” Left.

For our purposes one of the most important consequences of the Fourth Republic (1945-1958) was that Socialist leaders became committed “Europeans.” ^[3] Their original hopes were that some form of European unity would provide the backbone for a European “third way” between Soviet Communism and American liberalism and underlie lasting peace on the continent. These hopes, contingent upon cooperation among Western European Social Democratic parties, were dashed in the 1940s by the commitment of British Labour to Empire and the disinterest of the German SPD. The Schuman Plan for the European Coal and Steel Community preempted the political initiative and initiated the “small Europe” of six, which would turn out to be the EU's launching pad. ^[4] The Pleven Plan for a European Defense Community (EDC), introduced in 1950, fulfilled the SFIO's desiderata for German rearmament but divided the party. ^[5]

The SFIO did end up supporting and participating in the negotiations between Messina (1955) and Rome (1977) which founded the EU. ^[6] The distance between the party's 1940s rhetoric about a “Third Way Socialist Europe” and the results of Rome underlined how flexible the SFIO's leaders had become. However one assesses the historic role of European integration - whether or not it has promoted European peace, or economic competitiveness, or other noble goals - its underlying logic ran almost directly counter to the dirigiste policies that social democrats were attempting to pursue at the time. ^[7]

1.2 Setting 2: France's New Institutions and the PS

The coming of the Fifth Republic in 1958 ended the SFIO's pivotal coalitional role and cast it into opposition in a discredited, weakened state (its electoral strength dropped from 23.4% at Liberation to 12.6% in 1962). The new Republic brought a new constitution, designed to General de Gaulle's specifications, in which everything revolved around a very strong Presidency. Quickly the Presidency became the epicenter of France's political life. Plausible Presidents became the most important political leaders, while becoming a présidentiable was the route to power for any politician. The new system was explicitly designed to downplay parties. In addition, the 1958 law governing elections to the -weakened- Parliament was designed to promote Left-Right polarization and create solid majorities.

These changes were decisive for French social democracy. The new parliamentary electoral law clearly implied a basic choice of strategies. The Socialists could try to forge new alliances with Centrists towards a Left-Center alliance. Or they could find ways to ally with the Communists. Quite as important, they had to make this choice in ways, which would line them up behind a plausible présidentiable. The SFIO leadership's inability to forge a Left-Center coalition for the presidential election in 1965 resolved both issues. When negotiations broke down with the Christian Democrats to support the candidacy of Gaston Defferre, Socialist mayor of Marseilles, François Mitterrand, widely considered as a has-been from the Fourth Republic, jumped into the fray with a proposal to open towards the Communists. When Mitterrand did unexpectedly well he became the Left's leading présidentiable and his strategy of “Left Unity” with the Communists was tentatively consecrated. ^[8] The catastrophe of other pretenders in the 1969 presidential election reinforced this logic. The socialist candidate, Defferre, received barely 5% while the Communist candidate won 21.5% in the first round. Two lessons were clarified. First the Socialists were doomed if they did not change. Next, the Left was doomed unless the Socialists dealt with the Communists.

Events moved rapidly from this point. Through shrewd backroom politics and coalitional maneuvering François Mitterrand reconstituted a number of Left of Center different groups, including the ex-SFIO, into a new Parti Socialiste in 1971. The PS was a federation of cliques and clans, some with high ideological justification; others built around a particular leader's ambition. The new party was built on the logic of the Fifth Republic as vehicle to point a leader toward presidential success. Its founding therefore was most definitely not a step towards making French social democracy a mass party of the Left “like the others.” Rather it involved insightful recognition that salvation would come more and more from the politics of personality and charisma than mass mobilization. But whose salvation? Mitterrand, far in the lead as présidentiable at this point, structured the party so that it would be a congeries of feuding courants which he could divide and remix to maintain his own position. The party which resulted was internally quite undemocratic and an arena for constant plots and counter-plots.

Mitterrand's strategy of Left unity also won the day. Official negotiations were quickly opened with the Communists to write a “Common Program of Left Government.” ^[9] In doing this Mitterrand was gambling on a “Presidential effect” to diminish Communist power (which was already threatened by social change). He reasoned that any plausible Left Presidential candidate would appeal to Centrist voters to win and that, in consequence, any additional support the Left would gain from unity in Presidential elections would go disproportionately to the party of this Presidential hopeful, i.e. himself. In short, he sought to instrumentalize the PCF for his own purposes. The Common Program, signed in 1972, was unusually radical for any European left of that era, proposing to “break with capitalism” through nationalizations, redistributing power in the workplace, planning and strong Keynesianism. The Common Program was also significant for European policies. It was premised on the assumption that fundamental social change could be worked within France's national boundaries – “social democracy in one country.” For this reason alone if fully enacted it would have made it almost impossible to deepen European integration. Beyond this the PCF had an unremittingly hostile position on the EU, regarding it as an anti-Soviet Cold War excrescence and a capitalist plot. This made it difficult for the Common Program to assume a pro-European position. Because Communists and Socialists disagreed most about foreign policy matters including Europe, the new program was at its foggiest when they were addressed. ^[10]

Realists, of whom there were all too few in 1970s France, understood that Mitterrand cared less about the program than about using the Left alliance to become President. But it was clear that Mitterrand would have to carry out most of the Common Program's commitments if he did succeed. French political life remained highly ideologized in the 1970s. A cynical approach to programmatic pledges would lead to political difficulties, especially since the Left had been out of power since 1958. Moreover, from the viewpoint of the 1970s, it looked as if Mitterrand would need Communist support to do much of anything, since the PCF continued to hold 20% of the votes and there were important clans in the PS itself which stood strongly behind the program.

All of this meant clearly that the movement of the French Left toward power was unlikely to lead to any renewal of European integration, despite Mitterrand's own deep pro-European reflexes. There was a much stronger possibility that the French left in power would push towards a semi-fortress France, which would be inimical to the continuing vitality of the EU as it stood, weakened, in the 1970s. The departure of General de Gaulle in 1969 had renewed energy for European integration in the EU Council of Ministers. The Werner Report proposing EMU was one indicator. There was also an Action Plan and Program on Social Policy, a new regional development policy package and, in 1973, the admission of the UK, Ireland and Portugal increasing the 6 to 9. The first oil shock and the collapse of Bretton Woods quickly stopped momentum, however. The major response to the new emerging economic situation was the rapid divergence of member state economic policies. This disorderly response made it very difficult for EU member states to cooperate. The movement of the French Left towards power promised more of the same.

1.3 Mitterrand Changes Course: From “Social Democracy in One Country” to Europe

After dense and complex politics in the 1970s François Mitterrand won the French Presidency in May 1981. In the ensuing parliamentary elections the PS won an absolute majority of seats, minimizing Mitterrand's dependence upon the Communists and consecrating the success of his alliance policy. Mitterrand's campaign promises were structured around the 1972 Common Program, however, and the beginnings of the Mitterrand era brought strong efforts to implement his proposals. In rapid succession there were extensive nationalizations, efforts to coordinate the public sector in a dirigiste way through industrial policy and planning (on the premise was that France would thereby become more competitive internationally), industrial relations reforms granting more power to unions and workers at firm level, a devolution of certain powers from center to regional level, redistributive shifts in social protection programs and a Keynesian stimulation of the economy including extensive public sector job creation.

The “Mitterrand experiment” ran quickly into economic difficulties, however. The new President did not devalue the franc immediately, a dangerous choice since French inflation levels were much higher than those of European competitors. The mild Keynesianism of the first few months fueled inflation further. France reflated at exactly the moment when the Americans and the British both induced deep recession to wring inflation out of their economies, coinciding with longer standing German devotion to price-stability. A first devaluation occurred in the autumn of 1981, but it was not enough. By spring 1982 the government, prodded by Finance Minister Jacques Delors, turned to budgetary and financial austerity, in particular through de-indexing wage levels from France's consumer price index. Hope that the Americans would help out by changes in their own policies turned out to be illusory.

Things had worsened by winter 1982-83 and it became clear that a choice between exiting the EMS to continue implementing the 1981 program in relative autarky or staying in at the price of major policy changes had to be faced. Mitterrand, following his habitual decision procedures, hesitated between the two approaches, which were advocated by groups in the government and his entourage. Ultimately, however, he decided for the “Europeans” and sent Delors to negotiate terms with the Germans to stay in EMS. This was the single most important decision point of the Mitterrand Presidency, the turning point that would eventually lead to EMU.

Already the narrative indicates a pattern that will structure most of the EMU story. Mitterrand, perhaps better than most French politicians, understood the implications of the Fifth Republic Presidency. ^[11] The Socialist Party was essentially a group of clans around ambitious politicians looking towards the Presidency. When Mitterrand became President jockeying for precedence within the PS was bound to intensify because Mitterrand would some day be succeeded. The quest henceforth depended upon a governmental career and Mitterrand, given the vast powers of the Presidency, could determine this. Whatever they really thought, therefore, potential Socialist présidentiables had to distinguish themselves in a general political context that Mitterrand controlled and would have to espouse the general lines that Mitterrand promoted, even if they had played no rule in deciding them.

These remarks are institutional, of course, connected with the profound changes in the incentives that French politicians faced worked by the 1958 Constitution. But there are also personal considerations. The Presidency created such wide latitude for its incumbent, particularly in foreign policy matters, that his personal characteristics mattered a great deal. Mitterrand had come to political maturity in the Fourth Republic when shrewdness (not to say Machiavellianism) was rewarded by success and he had developed a Florentine approach to politics. On top of the new setting, he set about exploiting it by playing upon the ambitions of different groups, setting them in competition with one another, creating an aura of uncertainty about his own intentions, allowing the groups to stake out positions and then waiting until the logic of events obliged him to choose a particular course.

2. Mitterand’s Europe Option

After 1982-1983 begins the most important, and in evidentiary terms, murkiest part of the story. ^[12] Read backwards from the present, EMU looks like the culmination of a series of interconnected policy initiatives. In this mid-1980s period we also witness a shift in macroeconomic policy towards persistent austerity, budgetary constraint and a strong franc (later called the franc fort policy) designed to wring out inflation and make the franc as strong as the DM. This policy turned out to be congruent with the pursuit of EMU, and EMU would have been politicaly unfeasible without it. Thirdly, and perhaps most importantly, President Mitterrand was the creator of the Europe option and his major aide was Roland Dumas, his Foreign Minister after 1984 (who was the President's lawyer, close friend and neighbor in Paris). The PS was obliged to follow what they devised. In short, the train of events that led to EMU was composed of policies of powerful individuals in an institutional position, which endowed them with enough power to constrain the Socialist party to accept them. ^[13]

The sequence of events merits review. Domestically, firm austerity and tough monetarism were imposed, unemployment was allowed to rise, the government ceased using the public sector to maintain employment and there was a tornado of talk about rediscovering the firm, the market, the utility of good managers, best practices, technological change, Silicon Valleys and so on. The stock market was reformed, leading to the greatest boom anyone had seen. The relative share of wages and capital income in GDP began to shift against wages for the first time in two decades. Inflation dropped rapidly. ^[14]

In foreign policy, Mitterrand's exclusive prerogative, movement was slower but eventually quite as decisive. ^[15] The first flurry of European events began in the French Presidency of the EU in the first half of 1984 with the success of Mitterrand's diplomatic efforts to resolve the major issues underlying “Europessimism,” the “British check” problem and Spanish and Portuguese accession to the Union. ^[16] The other major initiative was the appointment of Jacques Delors to the Presidency of the European Commission effective January 1985.

By 1985 Mitterrand's medium term strategies had become clearer. The “social democracy in one country” programs which Mitterrand and the Left rode to power were not matters of deep commitment to Mitterrand himself. If they worked, so much the better. If they did not work, then Mitterrand had to replace them. The moment was propitious. The convergence of economic policies between major EU member states following the French shift of 1983 meant that they were no longer working at cross-purposes. The British, Germans and French all agreed that controlling inflation was central. This made it possible, once certain lingering EU problems could be resolved, to think of renewing European integration. For Mitterrand, a convinced European since the EU's foundation, renewing European integration looked like a reasonable bet as a replacement strategy. The French possessed unique assets to profit from Europe. They could assume political leadership because the British were too ambivalent about Europe and the Germans, despite their economic power, could not do so given their history. The capacity of the French administration, good at producing quick results and overcoming opposition, was another asset, particularly on the Brussels side of the equation. ^[17] Finally, the French possessed nuclear weapons and were on the fringes of NATO, giving them some credibility - as long as the Cold War continued - as Europe moved slowly towards pooling foreign and defense policy matters. The domestic side of this was the hope that making European integration the centerpiece of Mitterrandist policy could ensure the longevity of the Mitterrand presidency (what counted most to the Mitterrand), provide a credible platform for reorienting domestic coalitions (away from the Communists and towards the pro-European Centrists, thereby isolating the Right) and winning elections into the future. Finally, success on the Euro-level front might help promote a return of economic growth and, quite as important, give France greater leverage over German monetary policy (the germ of EMU, of course).

Enter Jacques Delors, a central autonomous player in EU renewal, including EMU, and a statesman of great ambitions and capacities. ^[18] Delors had to cultivate Mitterrand, of course, but it was also in his interest to be independent of him, and we know from Delors' repeated success at persuading the European Council to embark on particular courses that he was quite capable of doing both with great skill. Delors and his Commission put together the “1992" program to complete the single market, the most important step of all in renewing European integration. The Commission then played a central role in the Intergovernmental Conference leading to the Single European Act (SEA) which considerably expanded Community prerogatives and changed its decision rules. Immediately upon the ratification of the Single Act the Commission proceeded (prodded by Delors and his staff) to reform EU budgeting and linked it to a significant increase in EU federalism in the reform of regional policy. Movement toward Economic and Monetary Union began at the Hanover European Council in June, 1988 where Delors persuaded the European Council to allow himself to chair a top-level Committee to discuss and bring forth concrete proposals for EMU. ^[19] He also shrewdly insisted that this committee should include central bankers (who he had been cultivating for years) and experts, but not Ministers of Finance. ^[20]

As with most of Europe's great leaps forward in the 1980s, EMU had been proposed much earlier, in 1971, but never implemented. ^[21] The magnitude, and riskiness, of movement to EMU was such that the impetus had to have come from heads of state and government even if without the Commission's strategically intelligent activities from 1985 on it would have been inconceivable. Edouard Balladur, the Finance Minister of Jacques Chirac's “cohabitation” government from 1986-1988, first publicly broached the idea. Since the Germans were lukewarm and the British wanted none of it, this indicates that the initial push came from the French side. ^[22] Balladur was unlikely to have been acting alone, however, but rather in his capacity as the French delegate to ECOFIN, the Council of Ministers of Finance and Economics. This means that the idea was Mitterrand's in origin, since European affairs were the most significant part of the President's domain.

Mitterrand's 1988 re-election campaign made a great deal of Europe as the core of France's future, but little on EMU. ^[23] The most interesting thing about his “letter to the French” (his main pamphlet) and the masterful campaign itself, was that Mitterrand sought to position himself squarely in the center of gravity of “all the French,” above parties and only peripherally connected to the PS. EMU, more generally, was a presidential policy and a Brussels policy, but not a French social democratic policy. The French Socialist Party and its base itself had little to do with this hugely important initiative. European issues were of very low salience in French domestic and partisan politics, whatever the personal positions of party leaders might have been. The deep importance of the “1992" initiative was only beginning to be realized, but only by insiders. The Socialists had been committed by Mitterrand to a domestic economic policy approach which would work in the interests of making EMU happen, but they were but vaguely aware of this.

What did Mitterrand, Delors and other key French players expect from EMU? There is a list of obvious broad objectives. Given the dangers to the Single Market that might flow from serious monetary policy divergence, EMU and its single currency made sense. A single monetary regime would also reduce transaction costs, prod the restructuring of European financial industries and make intra-European production factor and other costs much more transparent. Wages would then reflect the genuine facts of national productivity and national budgetary and fiscal policies would better “fit” member state's real economic fundamentals. EMU's single currency should, in time, become a solid reserve currency in world trade to rival the dollar. Since the US, after the collapse of the Bretton Woods system, used its reserve currency centrality time and again to shore up its domestic economy at the expense of others, in particular the Europeans, this would be positive. EMU, finally, could be a giant step in promoting new European integration. But the bottom line lay elsewhere. They wanted to use it to take a piece of control over European monetary policy from the German Bundesbank. It is not hard to recognize the Gaullist ancestry, transposed French to European grandeur, of the French approach to EMU.

The Delors Report on Economic and Monetary Union came to the European Council at Madrid in June 1989 where everyone but the UK approved of going forward. The report set out the basic outlines of the EMU that would eventually emerge - an independent Eurofed embedded in a European System of Central Banks, a three stage gradual approach to final EMU and the need for careful approaches to real convergence. The “economic” side of proposed EMU was less clearly spelled out than the “monetary” side, implying the danger of a “bankers” EMU more than a “peoples'” EMU constrained by political guidance. Helmut Kohl was initially reluctant to agree to an Intergovernmental Conference to modify the EU Treaties for EMU, but ultimately supported Mitterrand. The business of taking the Delors report further towards a working document for such an IGC was confided to a Committee headed by Elisabeth Guigou, the French Socialist Minister of European Affairs (and yet another proche of Mitterrand who had apprenticed on the Elysée staff).

2.1 As The World Turns

Mitterrand appointed Michel Rocard as Prime Minister in 1988. Because the moment was one of economic upturn Rocard could pursue similar austerity policies to those of his predecessors with less unpleasant consequences for the French. Despite the quite significant turn being taken toward EMU, the specifics of European integration barely appeared on the screen of French politics at this point. Indeed there had been no thorough debate of the implications of the “new Europe” in general. The PS was no exception to this. What preoccupied the party more than anything, since Mitterrand was obviously not going to run for a third term, was jockeying for position among clans led by potential présidentiables. ^[24] The infamous Socialist Congress at Rennes in 1989 was the high point, a noisy clash of ambitious “elephants” over precedence, clearly understood by everyone as such. At this point, French Socialist politics was not about issues, European issues among others, but about power. These issues, in the meantime, were being defined behind the scenes.

The Cold War ended abruptly in 1989. Delors, much more than Mitterrand (or Thatcher) sensed the immensity of the change and worked very hard to get the EU quickly involved in dealings with the CEECS (at the 1989 Paris G7) and, more important politically, aligned behind Helmut Kohl's determination to bring German unification as rapidly as possible. This played a role in sustaining Kohl's openness to hold an EMU IGC, needed because the Bundesbank fought tooth and nail against Kohl's currency exchange plan for unification. Bundesbank hostility to Kohl's key initiative, however, moved it into opposition to EMU and put it on red alert, quite correctly, for the economic problems which unification would create. ^[25]

In the yearlong Maastricht talks on EMU the two outstanding non-German problems were disposed of quickly. ^[26] The Germans posed larger problems. ^[27] The first involved “convergence criteria.” for EMU membership. Such criteria were part of the Delors report and were supported, in principle, by the French. But their final harshness came from the Germans during the Maastricht dealing. ^[28] The Bundesbank wanted to make sure that budgetarily profligate EU member states - Italy in the first instance - would be kept out until their houses were put in order. The second concerned timing. The Delors' Committee had suggested a 3-stage progression to EMU. The first stage began with the 1990 elimination of capital controls in the Single Market, and mainly involved “mutual surveillance” of member state economic policies by ECOFIN to coordinate convergence. Stage 2, in the Delors Report to begin after the ratification of a new treaty, was to involve the actual creation of the European Central Bank (ECB) which, with continuing mutual surveillance, would “apprentice” for its roles in final EMU. The date of final EMU was tentatively set for 1997, depending upon how many member states were eligible, but no obligatory final date was prescribed in the event an insufficient number passed the test. The Germans rejected this timetable. They were willing to allow a Stage 2 in 1994, but not in the forms proposed. This was because the Germans knew that they would not be over unification shocks as quickly as this. Stage 2 was thus watered down to a European Monetary Institute that would prepare for the preparation of the final stage and “monitor” convergence. The timing of a redefined Stage 3 (when the ECB would be established to prepare the single currency within a specified time period) was left vague until the very last minute. The penultimate proposals would have made the process contingent on a critical mass of eligible member states and might have postponed EMU forever in the absence of such a group. The final compromise, originating with the French, set a first date, January 1997, when a majority of member states would have to be eligible to go forward, but then set a fixed date, January 1999, when EMU would happen, no matter how many were eligible. This was the lone French victory on critical EMU matters at Maastricht, but it was a very large one. ^[29]

3. Towards “Endogenizing” EMU

On the French side EMU was thus the product of President Mitterrand, pursuing his “Europe option” with advisers and intimates, plus the Delors' Commission. Mitterrand, using his presidential prerogatives to the fullest, could define Europe as “foreign affairs” which, almost ritually, were excluded from detailed domestic discussion. Jacques Delors, the other key francophone, worked with his Cabinet and the Brussels Commission in his own ways, but without any deep public connection with French domestic politics (even though Delors and his closest aides kept in close touch with the PS, since Delors himself was a potential présidentiable). The PS thus continued to govern while keeping high European matters on the periphery of its political discourse.

Significant change began in the mid-1990s, however, eventuating in the “endogenization” of EMU in French domestic politics. In the 1980s the PS had been committed to EMU “from outside” by the actions of the French President and key French actors in Brussels diplomatic arenas. More recently, however, the Party has had to integrate EMU into its domestic political strategies and policies. EMU thus became an acknowledged constraint on what the PS could do and this, in turn, obliged the PS to develop new politics and political discourses to fit.

3.1 Displaying and Reburying the European Body

The beginnings of endogenization can again be traced to the action of François Mitterrand. The Danes constitutionally enjoined to hold a referendum on the treaty changes, voted “no” in June, 1992. Mitterrand had a choice about how to ratify the Treaty in France between stringent parliamentary procedures - a three-fifths majority of both houses of Parliament meeting together - and a referendum. The former method would have produced easy and quiet ratification, but the President had other things in mind. The Center-Right opposition was divided about Europe. ^[30] Moreover, the Left, badly beaten in regional elections in early 1992, could expect similar results in 1993 parliamentary elections unless something changed. The 1993 elections were doubly significant, moreover, since they would establish the balance of power for a brief new cohabitation between Mitterrand and the Right. How this went, in turn, could well determine the outcome of Presidential elections in 1995. In the meantime, a sense of fin de règne had turned the Socialist government into a flock of lame ducks. In this context, Mitterrand called a referendum for September 1992. A French “yes” might reestablish momentum for European integration diminished by the Danish vote. More important to Mitterrand, the referendum campaign might further divide the Center-Right and help the left in 1993.

The risk was in allowing differences over European integration to take center stage in French politics, something which all leading French politicians had tried to avoid for decades because European politics internally divided both Left and Right coalitions. Mitterrand initially minimized this, since early polls gave over 60% for “yes.” ^[31] Over the summer, however, the electorate mobilized strongly against Maastricht. The mobilization was spurred forward by splits on Left and Right. The Communists and the National Front (plus a small “Republican” faction within the PS itself) mobilized around a “non” to exploit the vulnerability of the more “legitimate” parties of Left and Right. The Gaullist RPR, divided, abstained from instructions, but several leaders did not hesitate to make strong anti-Maastricht cases. ^[32] Mitterrand's tactic thus backfired. Elite consensus to keep quiet about European integration was broken, leading to an outpouring of anti-European sentiment. ^[33]The campaign deepened divisions on the Center-Right, as Mitterrand had foreseen. But it also divided the Left. The de facto Center-Left coalition, which emerged to save the day for Maastricht, neutralized Mitterrand's domestic political hopes. ^[34] The “petit oui”- 51% - allowed the Treaty to go forward, but did little to reestablish European momentum. It also did nothing to rekindle the Left's electoral fortunes and the Center-Right headed towards huge victory in the 1993 legislative elections. ^[35]

The referendum indicated that bringing Europe into the daily life of French politics rather than burying it, as had earlier been the case, would be necessary sooner rather than later. In the short run, however, once the Maastricht referendum was over, new efforts were made to put the body back into the ground. This was because leading politicians of both Right and Left needed to do whatever they could to prevent divisions in their coalitions in the runup to the 1995 Presidential elections. After the 1993 parliamentary ballot RPR leader Jacques Chirac, seeking to remain above day-to-day politics, made his “friend” Edouard Balladur Prime Minister. Chirac's choice tempted Balladur to become a presidential hopeful himself, thus doubling the incentives for Balladur to avoid initiatives which might lose votes for the Center-Right in 1995, whoever its candidate might turn out to be. ^[36] This meant that action to fulfil the Maastricht convergence criteria, in particular the 3% budget deficit criterion, was postponed until after the 1995 poll and that, more broadly, the European issue was removed from discussion as much as possible. ^[37]

The spring 1995 presidential election campaign came at a critical moment. Jacques Chirac faced his last chance to win the job he had sought most of his adult life. The scandals and bungled policies of the last years of Mitterrand guaranteed that the Socialists would lose, but nothing guaranteed that Chirac would win after Balladur shot up in the opinion polls. Still, Balladur's guarded, dull and dignified version of what his Socialist predecessors had done left France with 12% unemployed and growing problems of ghettoization and social exclusion. Chirac's anti-Balladur strategy thus centered on populist themes pledging to heal France's “social fracture” through job creation and economic growth. In order not to spoil the effect Chirac was carefully vague about France's fundamental commitment to European integration, in particular EMU. ^[38] This was tactically necessary to give Chirac an electoral market niche, particularly since important segments of the French electorate had understood that more than a decade of austerity and monetarism (the franc fort policy) were connected to making EMU happen. ^[39] On a deeper plane, however, Chirac's campaign pledges had dramatic implications. For France to fulfil the convergence criteria austerity would have to be intensified and Chirac's pledges about job creation and growth could not be honored. On the other hand, if a Chirac Presidency acted on the campaign's populist pledges, France would not meet the criteria and there could be no EMU at all.

3.2 Approach-Avoidance and EMU- From Chirac to Jospin

Chirac decided to spend his first months in Gaullist strutting upon the world stage. The new Prime Minister, Alain Juppé, stayed home to mind the store. For several months Juppé made few moves to redeem Chirac's campaign pledges. ^[40] Then, at the end of October 1995 came the Plan Juppé for reform of the Social Security system. Its biggest item was the introduction of a .5% addition to income tax for 13 years to pay off the accumulated deficit (which the government estimated at $60 billion). The Plan also aimed to reduce France's budget deficits and longer-term debt for EMU. It proposed more controversial changes; however, in public sector pension arrangements to eliminate special privileges long held by civil servants. Finally, long-standing “paritary” procedures for workers to elect administrators to social security administrative caisses would be replaced by direct appointments by “social partners” (unions and other representative organizations). Parliament, rather than the paritary Social Security bodies themselves, would final say on levels of social security spending. ^[41]

The plan was remarkable, if in contradictory ways. Financially, it was a well-crafted set of proposals, which would simultaneously help France approach the 3% deficit criterion and begin long needed reform of the French social protection system. On another plane it was extraordinarily ill conceived, upsetting a wide range of groups which ordinarily disagreed and coaxing them towards protest, a seduction made more effective by Juppé's arrogant political style. ^[42] French unions, often inept and always divided, thus got governmental assistance in welding a coalition of angry workers and feuding union organizations into one of the most significant strikes in recent French history. ^[43] It took five weeks and the Christmas holidays to get things back in order. The Economist was perhaps most pertinent about the conflict “...strikers by the millions, riots in the street; the évènements in France...make the country look like a banana republic in which an isolated government is battling to impose IMF austerity on a hostile population...” ^[44]

From the EMU point of view the Chirac administration did little in its first months than to make the situation worse than it had been. ^[45] Unemployment rose to unprecedented levels - 12.8% by early 1997. Economic growth turned out even slower than projected (0.9% as opposed to 2.2% in the first quarter of 1996, partly because of the strikes). In these circumstances the budget deficit had to be reduced from 5% of GDP in 1995 to 3% by the end of 1997 or else EMU would be jeopardized. At this point it was evident that growth and job creation would have to be throttled to reach the Maastricht goal and that the countercyclical policies that Chirac had advertised in his campaign were out of the question. Chirac's populist campaign promises - like his pledge “to create 700,000 new jobs by the end of 1996" - were thus exposed. Juppé had demonstrated that he was politically clueless. Both paid dearly. Chirac's and particularly Juppé's opinion poll ratings dropped precipitously - by the end of 1996 the Prime Minister was the most unpopular in the history of modern opinion polls. ^[46]

Chirac's emergence from the demagogy of his campaign to embrace EMU initially came as a pleasant surprise for other EU member states, in particular the Germans, but this did not last. At the December, 1996 Dublin European Council the French proposed an “economic government,” rather transparently to gain influence over German monetary policy. The Germans had other ideas, however, and wanted to lock EMU members into restrictive monetary policies reflecting German goals (which would amount, in effect, to a German dominated “economic government”), proposing a new “growth and stability pact” which would include automatic financial sanctions on EMU members failing to keep budget deficits below 3%^{. [47]} The pact would dictate austerity to the French and others for years to come. Very tough unfriendly negotiations at Dublin reached a deal, which was not quite as hard-nosed as the Germans had wanted, but more demanding than anyone else desired.

Chirac's maneuvering caused the Europe issue to rise from the grave of French politics. Henceforth it would be an enveloping day-to-day constraint on France. The French had to be persuaded that they could live with EMU and that their politicians could deal with it. Chirac himself was caught, however. The year before the EMU decision point in 1998 involved brutal budgetary compression, but it was also a year which Chirac needed to prepare for the parliamentary elections which had to be held by springtime 1998. ^[48] With an unpopular government, which could look forward to becoming even less popular, the outlook was bleak. Barring miracles, the 1998 elections would eliminate most, if not all, of the huge Center-Right majority won in 1993. This was so obvious that parts of Chirac's majority began to behave in the unruly ways which politicians adopt when their seats are threatened, second-guessing and criticizing the government from all directions..

Chirac's strategy of calling new parliamentary elections in April 1997, a year before they were necessary, proved a disaster. The electorate was in a foul mood and interpreted that snap election call as more cynicism. Moreover, it understood Chirac's announcement that he needed a new mandate for “reform” as early warning that even greater austerity was on the way. The polls quickly settled into a dead heat between Right and Left. EMU was central in what followed. Socialist leader Lionel Jospin understood the depth of frustration, in particular about Europe, much better than Chirac and knew that voters had to be given some reassurance. It made tactical sense for him then to advocate a “softening” of the approach to EMU to give France more budgetary space. This might allow job-creation (700,000 new jobs, almost exactly what Chirac had promised in 1995). Jospin also pledged to reduce the workweek to 35 hours and to stop privatization, promises, which made it easier to consolidate working relationships with the Communists and the Greens with whom the PS struck electoral alliances. They also quite shrewdly provided some incentives for National Front voters to vote Left in the second round.

The election results were shocking. In the first round the Presidential Right lost over 2 million votes from 1993, down to 36.1% of those voting (from 44.1% in 1993) its worst numbers in the history of the Fifth Republic. ^[49] But if the Socialists did much better in the first round than in 1993 - 25.7% vs. 19%, they did nowhere near as well as they had done in the 1980s. The Front National won 14.9%, its best score ever in a legislative election. ^[50] What the electorate did was to send the Chirac team and majority packing without giving a majority to the Socialists. Lionel Jospin became the first Socialist Prime Minister of cohabitation through a “Left pluralist” alliance with the Communists and the Greens. ^[51]

4. EMU and a French “third way”

Europe posed by far the biggest challenge to Jospin, as it had to Chirac and Juppé. EMU was closing in. The new Prime Minister could reflect upon a variety of past approaches. Europe's forward movement in the 1980s had been kept distant from domestic French politics by the play of coalitions and institutions. For a decade Mitterrand had proceeded by stealth, in the process stoking fires of anxiety, which he himself had allowed to burn fiercely, hot in 1992. Balladur had returned to stealth after 1993 to prepare Presidential elections. Chirac had tried to finesse the issue while Juppé had mis-communicated it. By 1997, however, if there was to be an EMU there seemed no way around convincing the French to accept it. This meant a strategy, which would let EMU happen and convince the French that it would not turn out to their detriment, a tall order. Long-standing cleavages on Europe, which ran at right angles to usual coalition lines, made this complicated. Parts of public opinion on both Right and Left favored Europe while others, again distributed within the Right-Left divide, feared its consequences.

Chirac and Juppé had left Jospin an unhappy context. “Change the Future,” the Socialist election program, put “Changing Europe” high on its list of priorities.

A Euro, yes, but for what? The answer to this question will determine the future of Europe and France....Faithful to all of the history of building Europe, we are opposed to its liberal deviation. We want a political and not a technical vision for Europe. We want a dynamic approach to Europe, not one of accounting...For Socialists, making the Euro succeed involves building a Europe which is turned towards growth, employment and democracy (Parti Socialiste 1997, part III, author's translation)

In campaigning, Jospin used strong rhetoric about working toward an EMU that would serve the interests of “people rather than bankers.” Simple renunciation, which parts of the Left desired, was unrealistic, and not only, or even mainly, because French Socialists had been the major architects of EMU. Without EMU France's situation would become even worse. Shorter-term perturbations on financial markets could hurt already hurting EU economies, the French included. More important, EU morale would collapse, setting back the entire project of European integration for years. Renunciation of EMU could trigger a set of disasters and even the smallest could be more costly than going ahead with EMU. ^[52]

Jospin, under severe pressure after only two weeks in power, was obliged to accept the EMU timetable at the Amsterdam EU summit in June 1997. The choice did not come without strongly critical words, however. France wanted an “economic government” to give economic policy guidelines to the new Central Bank in its monetary policy duties. It also wanted revision of the Dublin “stability and growth pact” to allow explicit EMU commitments to growth and employment and creation of a “European growth fund,” following the recommendations of a European Commission White Paper from 1993 (EU 1993). This particular summit was a bad moment to force a showdown, however. EU members were desperately trying to conclude a difficult Intergovernmental Conference (leading to the Amsterdam Treaty) and what Jospin and Dominique Strauss-Kahn, his Finance Minister, said that they wanted to do would have caused serious trouble for agreement on treaty changes. Moreover, the complexities of cohabitation reared their head. President Chirac was not as helpful as Jospin could have hoped.

Jospin thus “changed his Europe” by accepting arrangements for EMU that he had castigated in his campaign. ^[53] But at the same time he was also able to get a significant quid pro quo to take home. ^[54] The new government's agitation ensured that the Amsterdam Treaty contained a new clause on employment policy. ^[55] Employment thus became a new “priority” to accompany EMU. ^[56] In a paragraph of the treaty preamble following directly that on EMU, the Union committed itself to “promote economic and social progress and a high level of employment...” ^[57] A new Article 109 then added that member states and the Community should work towards a “common strategy for employment and particularly for promoting a skilled, trained and adaptable workforce and labour markets responsive to economic change...” and that they should regard promoting employment “as a matter of common concern and shall coordinate their action” ^[58] The new clauses also allowed “measures to incite” employment and established an official “Committee for Employment” modeled on the EU “Monetary Committee.”

These changes to Treaty were more than symbolic - even after watering down by the Germans and discounting for their relative lack of compulsion. In the short run they gave new notice to citizens, particularly French, that the EU might not be a completely neo-liberal affair. In the words of another amendment, the Union should be “determined to promote economic and social progress...and to implement policies ensuring that advances in economic integration are accompanied by parallel progress in other fields.” ^[59]. The medium-term consequences were more difficult to predict, given the powerful liberal valence of EMU, but the presence of words in the EU treaty on employment could lead to more serious emphasis on employment policy. The Amsterdam summit decreed that the new Employment Clauses would be considered effective even before the Treaty was itself ratified and promised an extraordinary European Council in November 1997 to discuss employment policy. ^[60]

The Luxembourg “Jobs Summit” did not produce miracles, but it did send signals that the EU recognized the employment problem in more pressing ways than it had earlier. The policies which it generally fostered were designed to promote the “employability” of workers rather more than the creation of new jobs (even though the latter were not absent) through training programs. There was also great emphasis upon reconfiguring labor market policies from “passive” to “active” methods which would allegedly prevent the unemployed from falling into poverty and other traps. ^[61] There was very little “neo-Keynesianism,” in other words. Still, behind this was a deeper message. The EU might be changing its mind about the desirability of a serious “social Europe.” ^[62]

From the point of view of endogenizing EMU into French politics Jospin's first diplomatic effort were thus stood as a work in progress. Politically, the Prime Minister's goal was to communicate that EMU was an interactive process, rather than a fixed object, that could be influenced by resolute French action ^[63] More important, the message was that there was not only a French position, but also a Left position, to be defended at European level within EMU. A central bankers' EMU without considerable further political work on employment and social protection could easily lead to a setting in which the costs of changes in relative competitiveness inside the EU's new single currency zone will have to be born by wage-earners and the welfare state. Jospin's initial wisdom was to recognize that in such a context important matters will have to be genuinely negotiable, or at least seen to be so, by citizens.

Jospin's diplomatic choices on Europe and EMU placed the domestic policies of his government under the same constraints, which had limited its predecessors, however. The biggest problem was the Maastricht 3% budget deficit target.³⁶ The Juppé government had reached only 3.7-3.8% when it left, leaving Jospin with the job of squeezing more. Most of the French were tired of being squeezed, however, and had concluded that austerity, unemployment and Europe were connected. In short, they had caught on to Mitterrand's astute trick of “exogenizing” reforms to a European level that elites believed that the French needed but would obviously refuse. Jospin's initial problem, therefore, was how to reduce the deficit without betraying his promises. The larger challenge was how to do domestic politics within EMU so that the French would understand what was happening and why it might make sense.

The government's first steps involved pledges for job creation. The PS had pledged to create 700,000 jobs over five years, particularly for young people under 26 (one in four being unemployed). Acting on this pledge began very quickly, in late summer 1997, with Employment Minister Martine Aubry's youth employment plan. While there have been repeated youth job creation plans in France over the years due to a very high youth unemployment rate (upwards of 30% at points) Aubry's was different in proposing targeted hiring for “jobs of a third type” to “facilitate the progressive emergence of a new model of growth and development.” These jobs, subsidized to 80% of cost by the budget, employ younger people at minimum wage to accomplish tasks which, according to the program's line, were socially needed but which were not ordinarily performed by neither the private or public sectors (for example, youth “animators” in troubled urban areas and schools, aids for the elderly and the handicapped - -"meals on wheels” and the like -- conflict mediators in cities and public transportation systems, tour leaders for randonnées and workers to help rehabilitate France's “national cultural heritage,” in particular treasured old buildings). Hiring can only be done by local government and non-profit associations, not by private sector employers or the national government. Finally, those hired got five-year non-renewable contracts.

The government's insistence upon targeted and decentralized hiring procedures was meant, in part, to stimulate the reflection, capacity and flexibility of local government and non-profit associations. One additional purpose was to nourish the development of “civil society,” in response both to an obvious need for more substance in decentralization and to repeated claims by parts of the Left about France's insufficient local solidarities and democratization. ^[64] The five-year limited contracts fit well into contemporary ideas about “employability” and the struggle against “social exclusion.” The hope was that five years would be enough to socialize young people to labor force participation and enable them to find new work when five years are up. Mme. Aubry's proposals were somewhat experimental, therefore, but underlying them was some tough logic. The government knew that in the shorter run, even were French growth to increase more than anyone expected, there would not be enough new employment to make much difference for young people. The Aubry Plan was thus sending another and deeper message. Something might be done about a chronic problem like youth unemployment, despite Europe, if only collective commitments to do so were made.

The next initiative, also associated with Martine Aubry, was the October 1997 national conference on work-sharing (officially on “employment and wages”). The government's goal was to persuade France's “social partners” to agree to reduce the legal working week from 39 to 35 hours by the year 2000 and to transform this shorter work week into more jobs. Unions, it hoped, would express willingness to bargain on work-time “flexibilization” (in particular on an “annualization” of hours). Employers might then accept the shorter work week and pledge to create new jobs.³⁸ The “partners” would together be prodded toward such goals by government good will, negotiating tenacity and incentives like tax breaks, job-creation subsidies, increased taxation on overtime and a loi cadre fixing a date for concluding branch and firm negotiation. ^[65] Once again the government hoped to stimulate as much decentralized negotiation as possible, even though it started with a splashy national event and insisted, in good old French statist ways, that there would have to be national legal compulsion to promote the bargaining.

The October 1997 meeting was difficult. Getting labor and its market adversaries to behave like “social partners” - the vocabulary was itself interesting - had often been a pious, but rarely answered, hope. French employers and French unions are weakly organized and divided. Whether French unions would behave intelligently was another question mark. ^[66] At the October event the unions turned out not to be the problem, despite considerable preliminary jockeying among them for position, instead it was the employers who did not want to play.⁴⁰ French employers have had the upper hand in recent times, like others, and their strategy has been to shed labor to increase productivity without new hiring. Other things being equal, cutting four hours off the workweek was likely to be used in the same way if the government were unable to bind the bosses otherwise. This would be particularly true were pay not reduced more or less commensurate with the reduction in hours. The government's proposal caused divisions in the CNPF (Conseil National du Patronat Français) to explode. Its president, who was a friend and former boss of Martine Aubry, tried and failed to bargain employer cooperation in exchange for government rejection of a loi cadre and time limits.⁴¹ When he then resigned, he left the door open, as he himself noted, to “the killers.”

The 35-hour story is far from over. Whether the union front will hold in negotiating at branch and firm level about adjusting salaries downward, if only briefly, in exchange for shortening the workweek, is uncertain. ^[67] Many employers may also simply refuse to cooperate. The new President of the CNPF, Ernest Seillière, announced that he intended to use the 35-hour issue to “destabilize” the government, although this turned out subsequently to be a ploy to regenerate CNPF ties to the government. Jacques Chirac himself, coming out of post-electoral shellshock, quickly denounced the plan. Finally, and perhaps most importantly, no one knows whether moving to 35 hours will create jobs at all, although skepticism is in order.

Having backed away from diplomatic confrontation over EMU, Jospin's biggest policy problem became the 3% deficit criterion. Here again he opted for a “Left” strategy within EMU constraints. The first decision was that roughly two-thirds of the total projected deficit reduction for EMU in 1997 and 1998 would come from raising taxes (with the other third from budget cuts, much from the defense budget). Raising taxes is still possible in France, by what distinguished Jospin's raises was that their brunt fell on business. Corporate tax rates were “temporarily” boosted by 5%, with the biggest hits taken by the biggest companies. This came at a moment when corporate profits were quite high and in an international setting where French companies were slightly less taxed than many companies. This set a pattern: the first new budget would be strongly redistributive. Finance Minister Strauss-Kahn described its philosophy as a quest for “new equilibria.” The first involved a shift in taxation burdens away from wage-earners to capital income - the better off should assume more of the EMU burdens - 50% of new revenue - than those less well off. The second was between indirect and direct taxation, involving shifting the bulk of health care contributions tied to employment (payroll taxes amounting to 5.5% of gross wages) onto the Contribution Sociale Géneralisée (CSG) which everyone paid at tax time. ^[68] The principle was that in the interests of competitiveness labor should be cheaper to employ and the taxpayer should help out in making this so. Another, shorter term, goal in both shifts was to stimulate consumption by putting more take-home pay into wage-earners' hands. The budget also went out of its way to shut down tax loopholes for the better off. ^[69] The 1999 budget proposals were similar, but milder.

Jospin's “left” efforts to endogenize European constraints merit contextualization in a larger political discourse, if only to contrast them with other “Third Way” lines. The guiding concept was redistributional - “solidarity.” Despite constraints from the market, different interests and groups in France had responsibilities to and for one another. Those with steady work should contribute to providing work and resources to those without it. Wage earners and employers should contribute to greater flexibility for the general success of the French economy. The better off should assume more of the fiscal burden than the less well off. Taxpayers in general should contribute to maintain universal social services to give wage earners more take-home pay and lower the cost of employing labor.

Despite some nostalgia, to be expected from a Left which only very recently ceased citing Marx in public, “nationalize and plan,” “breaking with capitalism,” and “changing life” along with most of the rest of the old Left package, including pledges to create full employment, are gone. The concept of solidarity is not based upon the idea of “class,” which has disappeared altogether from the vocabulary. “Social partners” should be “responsabilized” by state incitation. French “civil society” should be animated in decentralized ways. Citizens, through associations and local networks, should take more responsibility for the decisions, which count most to them. “Solidarity” refers to a national moral community composed of individuals belonging to different groups. Group interests vary and often conflict. Despite this, groups can and should sort out such differences in the broader interests of the community. In all this France's problem of group affiliation is recognized. The “space” between public and private, which one might call civil society or community, is insufficiently occupied in France, partly because Jacobin political culture has discouraged it. Thus Left governments must make special efforts to nourish it. In this Jospinist vision the market is acknowledged as one important way of making distributive decisions, among others.

This does not lead to liberal anti-statism, however. Jospin pledged to promote different relationships between state and market. This announced acceptance of the market, of course.  But what kind of role for the state? There remained significant public sphere where the state's role is important (and in practice the Jospin government has been a centralized as most others). Some of what the state must do is classical - providing “public services,” security, order and social services. The state's job was also to nourish and stimulate the creation of the different types of solidarity that would allow France to function in its new surroundings, particularly those of the new Europe. In general the state should not decree, but stimulate, organize and convene others to sustain the national moral community. ^[70]

5. Conclusions

It is too early to tell how permanent this ideological and policy context will become for the French Left. Given that the pluralist contentiousness of the French Left contains a veritable museum of Left ideas whose origins range from the 15th to the 21st century one can never know for sure what will emerge. There have already been numerous tensions in the ranks around significant issues since May 1997 - the movement of the unemployed in early 1988, for example, protests about the government's relatively hard line on illegal immigration, problems around privatizations, disputes about the environment, all of which saw different groups in the government's “pluralist majority” stand up to be counted. Nothing has as yet disrupted the majority or seriously challenged the course Jospin has set out, however. But if the Jospin experiment turns out to be more than a brief interlude, and its success to this point indicates that this is a possibility, the old ideas will be replaced by a redistributive and technocratic communitarianism. Far from being archaic or a retreat from contemporary realities the new ideas are in fact a very French version of the “third way” rhetoric that one hears from most European social democratic parties.

What is distinctive, both in method and substance, is the degree to which this French ideological shift has been tied to the unfolding of European integration. The story is full of paradoxes, as we have argued. The renewal of European integration leading to EMU was, in significant ways, the product of the energetic work of politicians who belonged to the French Parti Socialiste. However, French social democracy, in its modern PS variant, was a “taker” and not a maker of this politics of European integration. The “1992" program and EMU were not, strictly speaking, social democratic policies. Instead they were policies which, consecrated elsewhere, became programs which the PS was eventually obliged to defend. Moreover, the PS did not really begin to defend them in concrete terms until very late in the game, at which point the defense was less principled argument than “third way” programmatic proposals which sought to “endogenize” EMU by staking out Left-Center approaches to coping with its consequences.

Behind most of these paradoxes lay economic realities, of course, but, perhaps to an equal degree, institutions and uncommonly important political choices by a very select group of actors. What has been our chain of reasoning? Its premise was the “Latinate” particularities of French social democracy which could not dominate the entire space of the Left and which failed to build strong ties with the union movement. This type of social democracy, in the immediate post-war period and deep Cold War years, had to respond to a set of constraints, which left it little choice to accumulate resources than coalitional opportunism. Coalitional opportunism, in its turn, led SFIO leaders to embrace a liberal design for the construction of the EU. French social democracy came very close to complete eclipse as a result of such opportunism. It was only able to survive through a reconstitution in the later 1960s which inevitably reflected the Fifth Republic's Presidentialization of French politics and made the new PS even less like Northern European social democracy than it had earlier been. Fifth Republic presidentialization endowed the PS' founding leader - a potential President - with a huge amount of personal power and reconfigured the life of the party itself into an arena in which potential new leaders sought to establish présidentiable standing for themselves.

When François Mitterrand was actually elected President in 1981 the effective definition of basic policy directions passed to the Presidency, thereby removing the modicum of control the PS had previously had over its programmatic direction. The President constitutionally had huge powers in the foreign policy realm and, given the diplomatic nature of such powers (which allowed policy initiatives to take place largely outside the arenas of domestic political debate and scrutiny), Mitterrand acquired unusually large freedom for making policy choices that his own party, and the French more broadly, would be under great constraint to accept a posteriori. Both the institution of the Presidency and the political proclivities of its incumbent became centrally important.

What then happened? The programmatic platform for “social democracy in one country” upon which Mitterrand ran in 1981, and over which the PS and other fractions of the French Left had had considerable influence, collapsed very quickly. Mitterrand took personal charge of the development of a new political approach, the “Europe option.” The PS accepted the implications of these decisions with very little debate, even though they involved a dramatic redefinition of program, strategy and purpose for the party. Thus French social democracy's “third way” line, to use current terminology, became explicitly European and renounced most of the programmatic possibilities and capacities necessary to pursue the nationally controlled developmental courses which had been its earlier stock in political trade.

EMU was thus not a French Socialist project in any partisan terms. It was rather the product of the maneuverings of a French Socialist President, working in the realm of high diplomatic politics with the aid of a French Socialist President of the European Commission working in the same realms. French Socialist politicians, in the domestic realm, were constrained to pursue domestic policies, which conformed to a medium-term strategic scenario for EMU by the products of these choices. This meant that the French Socialists, as a party, did not really confront the realities of EMU in domestic politics until the mid-1990s, at which point EMU was a fait accompli. When the confrontation occurred it was less about the desirability of EMU and more about developing a “left” domestic policy package within the constraints of EMU, what we have called the “endogenization” of EMU.

The Jospinist “third way” thus not only accepts the limits on national policy of the transnationalization of capital and markets, it also accepts those of EMU. On the other hand, it also posits that EMU will be a highly negotiable process as it unfolds. In theory, this should mean that the French socialists, whose late leader initiated the EMU process in part as a means for containing and influencing German monetary predominance and largely failed at these tasks, will continue to struggle for the same goals. Whatever one makes of the story of the PS' past history with EMU, its future is worth monitoring, if only because there may be no other party in EU prepared to mount such a struggle.

Footnotes

^[1]. On the PS and French social democracy see Hugues Portelli, Le socialisme français tel qu'il est (Paris: PUF, 1980); Yves Roucaute, Histoires Socialistes de la Commune de Paris à nos jours... (Paris: Ledrappier, 1987); Roger Quilliot, La SFIO et l'exercice du pouvoir (Paris: Fayard, 1972).

^[2]. In part this was because the French union movement was built on anarcho-syndicalist principles which refused formal affiliation with parties. More important, the Communists proved much more skillful in union organization and ended up after World War II in control of the CGT, France's largest union, having succeeded in organizing the semi-skilled workers in France's growing Fordist industrial heart.

^[3]. François Mitterrand was not a Socialist at this point, rather the leader of a small Center-Left group which specialized in selling itself to the highest bidders in government formations. He was deeply committed to Europe nonetheless.

^[4]. On this period see Wilfried Loch, “The French Socialist Party, 1947-1954" in Richard T. Griffiths ed. Socialist Parties and the Question of Europe in the 1950's (Brill: Leiden, 1993).

^[5]. The party split profoundly on the final vote which torpedoed EDC in 1954 See Denis Lefebvre, “The French Socialist Party 1954-1957,” in Griffiths ed. Socialist Parties.

^[6]. See the interview with Christian Pineau, the Socialist Foreign Minister who helped negotiate Rome, in Chapter 4, Griffiths ed. Socialist Parties. Pineau claims to have been “the major political architect” of the Treaty. Guy Mollet, SFIO leader, was also a staunch supporter. Jean Monnet, ECSC architect, was not in favor of the EEC, who, Pineau notes, “thought that a comprehensive Economic Community was incompatible with France's industrial position.” (Pineau interview, p. 60).

^[7]. For a useful, if brief, review of general French involvement in these processes, see Alain Guyomarch, Howard Machin and Ella Richie, France in the European Union (New York: St. Martin's, 1998), Introduction.

^[8]. The path through the later 1960s was rather difficult, however. Progress in cementing electoral deals between socialists and communists (plus a few other small odds and ends) around Mitterrand's idea of a “Federation” of the Left moved slowly forward before it crashed in the May-June 1968 events.

^[9].This was what the Communists wanted, revealing that they were among the last political groupings anywhere who believed that a complex platform for governing would be enough to keep a Socialist party honest

^[10]. The Common Program contained a very vague commitment to some kind of “Europe” which would allow nation states to be dirigiste, consistent with the programs domestic policy proposals. It also criticized the existing EU's insufficient democracy.

^[11]. Even though he had opposed it for years prior his own ascension, most notably in a collection of writings entitled title Le Coup d'état permanent FM CEP (Paris: Plon )

^[12]. For the best informed commentary on this mystery, see Hubert Védrine, Les mondes de François Mitterrand (Paris: Fayard, 1996), Chapter VIII. The author was foreign policy advisor to Mitterrand. Also Favier and Martin-Rolan, Décennie, volume 2, Part 2, Chapter 2.

^[13]. In Vedrine's (1996, p. 294) words “At the beginning of 1984, François Mitterrand took, therefore, the major shift of his Presidency. And he took it alone. Neither Pierre Mauroy [Prime Minister], nor Jacque Delors [then Minister of Finances], nor Laurent Fabius [Mitterrand's young acolyte, who became Prime Minister in 1985], nor Pierre Bérégovoy [Mitterrand's chief of staff and later the architect of the “strong franc” policy] nor Claude Cheysson [Foreign Minister] ...went so far as to counsel him to re-center and relaunch all of his policies around the reawakening of Europe...This is why he would rely very much in coming years on his “close friends” (translation ours)

^[14]. Much in this was connected to Mitterrand's electoral strategy. The Socialists began to take a severe beating in opinion polls and local election in 1982. Mitterrand judged that it was necessary to make the most severe policy changes in 1983-84 in order then to limit the electoral damages in the 1986 elections, which the Socialists would almost certainly lose (they did). Limiting the damage - i.e. limiting the size of the Socialists' loss - was essential to Mitterrand because after 1986 he would have to “cohabit” with a Right majority in Parliament and he had every intention of running for reelection in 1988. He thus had to be in the best position possible to maneuver and, if possible, discredit, the Right government after 1986. This was the context, in 1985, which led Mitterrand to force a change in electoral laws towards a form of proportional representation, one of the blackest moves of his 14 years as President. PR meant that the multiplier effect of the earlier electoral law was lost to the Right and that the Socialists would do better. Alas, it also meant that the Front National would be given an entree into national politics which it continues to build upon today.

^[15]. Mitterrand had been very careful to cultivate the German government even before the 1983 shift, and this may be an indicator of deeper European strategy. His relationship with Kohl would be pivotal for the rest of the story.

^[16]. Since the French Presidency had to be prepared in advance of its January 1984 beginning date, Mitterrand had obviously thought through his approaches in 1983, indicating that there was a close connection between the 1983 economic policy shift, the construction of a new “Europe option,” and precise goals in European policy.

^[17]. The EU administration had been tenuously hegemonized by the French, in part through the work of long-time EU secretary-general Emile Noel, who was French, and supported by the Belgians, whose administrative approaches meshed well with the French. Thus much Commission work, for example, was conducted primarily in French, granting the French a tremendous asset. On this see George Ross, Jacques Delors and European Integration (Cambridge/New York: Oxford UP/Polity, 1995).

^[18].Moreover, European Commissioners are sworn to maintain European, and not national commitments (even though this is not always what they do) and being President of a Commission whose decision-making processes are based on collegiality and consensus all militate to the same conclusion

^[19]. Hanover occurred almost immediately on the heels the final, and difficult, approval of what came to be called the “Delors budgetary package.”

^[20]. If we take his judgment that the Ministers of Finance would have been major, and perhaps fatal, barriers to EMU success (and Delors knew these Ministers and their modi operandi better than anyone) then we have a very strong case for his own centrality in the EMU process. Delors also knew full well that unless the Bundesbank was persuaded about EMU there would probably be no EMU, hence the inclusion of central bankers was a vital way to engage Hans-Otto Pöhl, Bundesbank Chair, in the process. The positions of Pöhl are stated in his contribution to the Delors Committee, see K.O. Pöhl, “The further development of the European Monetary System,” in Committee for the Study of Economic and Monetary Union, Report on economic and monetary union in the European Community (Luxembourg: EU, 1989), hereafter referred to as Delors Report.

^[21]. See Gunter Baer and Tommaso Padoa-Schioppa, “The Werner Report revisited” in Delors Report.

^[22]. German reticence was not universal, however. In February 1988, before Hanover, Foreign Minister Genscher himself published a memo call for a “European monetary space and a European Central Bank” adding, significantly, that “all the member states of EMS have an interest in reducing their dependence on the dollar.” Védrine, p. 400.

^[23]. The election was prior to the Hanover summit so the silence was not too surprising. On the other hand it provides another piece of key evidence about the Presidentialization of initiatives. Mitterrand's “Lettre aux francais” published in major newspapers and as a pamphlet in April 1988 was 79 pages long. Its major thrust was that Mitterrand represented “la France profonde” and “la France Unie” symbolized by the picture of a country church on posters. It contained 7 pages about the primacy of the Presidency in foreign policy, 8 on Europe ("Construire l'Europe”). One phrase announced the impending initiative on EMU.

^[24]. Mitterrand's appointment of Rocard as Prime Minister was part of this jockeying, since Mitterrand's clear intention was to “use up” Rocard as Prime Minister and destroy his chances - the relations between the two men being far from amicable. Rocard, quite aware of this, did everything to avoid falling into the trap, which meant avoiding almost all risk as Prime Minister.

^[25]. German unification, however, did lead to the convening of a parallel IGC on political union at German request.

^[26]. The Spanish vowed to hold everything up if poorer EU members were not specially compensated for EMU and the costs of EU environmental policies. They were bought off by a “Cohesion Fund.” British obstinacy was a problem until a formula was found allowing them to opt out but not to prevent anyone else from joining.

^[27]. We are avoiding discussion of the second “political union” IGC here, although it was also a “German problem,” since it was part of the trade-off between Mitterrand and Kohl in 1999 around unification. Mitterrand softened opposition to unification in exchange for the convening of the EMU talks while both pushed for “political union” talks for quite different reasons. Mitterrand, pursuing an important element of his “Europe option” want to negotiate a “Common Foreign and Security Policy,” another Gaullist initiative designed to cash in on French military assets and the confusion around the future of NATO to create momentum towards an autonomous European security position. Kohl wanted greater “political legitimacy,” fearing quite logically that a powerful ECB in EMU would need some kind of counterweight in terms of increased democratic credibility for Euro-level institutions.

^[28]. Gabriel Milési, a French economic journalist, claims that the French invented the criteria, but without any documentary support. See Le Roman de l'Euro (Paris: Hachette, 1998).

^[29]. The Commission won the Social Protocol, with the help of the French, who had been advocating some commitment to Eurolevel social policy since the earlier 1980s.

^[30]. In the Gaullist camp, Jacques Chirac, concerned about his Presidential future, had to be for Maastricht, but Charles Pasqua and Philippe Séguin, who had both recently rebelled against Chirac's RPR leadership, were opposed. Opposition also appeared in the UDF, the other Center-Right partner, in particular from Philippe deVilliers, an aristocratic neo-liberal.

^[31]. David Cameron's excellent article on these matters (“National Interest, the Dilemmas of European Integration, and Malaise,” in John T.S. Keeler and Martin Schain, eds. Chirac's Challenge (New York: St. Martin's, 1996) reviews the evolution of the polls from the referendum call to the actual vote in Table 13.5 pp. 358-359), placing it in the broader context of the nosedive in public support for the EU as a whole in the post-Maastricht period.

^[32]. Séguin and Pasqua spoke their anti-Maastricht pieces strongly. Philippe de Villiers also campaigned for “non,” arguing that his position would prevent Le Pen from making major new inroads.

^[33]. Former Right Center Prime Minister Raymond Barre, former President Giscard d'Estaing (who had become a leading Euro-parliamentarian) and other Center-Right leaders joined prominent Socialists barnstorming the country for “yes” votes. Even Jacques Chirac, RPR leader, worried about his Presidential future, came out personally for a “oui,” despite the free vote he allowed RPR supporters

^[34]. The ways in which the electorate divided over the referendum were striking. Farmers, workers, small businessmen and white-collar employees tended to oppose Maastricht. “Educated” France favored it. “Cosmopolitans” wanted European integration and “locals” did not.

^[35]. The RPR and the UDF won 82% of the seats, 474 of 577. The reason was the collapse of the Left. Right- Left voting differences soared to 60-40%. The Socialist vote in the first round dropped from 34.8% in 1988 to 17.4% in 1993 and the PCF dropped from 11.3% to 9.1%. The National Front had also begun to make serious inroads among workers.

^[36]. The 1994 elections to the European Parliament ran true to earlier form. Europe, the pretext for the elections, disappeared in favor of the substance of domestic French politics. The elections were less a sequel to the 1992 referendum than a prelude to the 1995 presidential campaign. There were important results, to be sure. Michel Rocard's prospects for the presidency were destroyed and there was growing protest voting.

^[37]. Balladur thus did nothing that would eventually hurt France's EMU prospects, but neither did he do much to signal the compressions that would be necessary after 1995 to make EMU happen. The only European crisis, which impinged upon French domestic politics during his watch, was the confrontational conclusion of the GATT Uruguay Round. The central issue was the liberalization of European agriculture, which French farmers had little desire to do. There were demonstrations and a lot of ill will, but controversy over the European Commission's astute reform of the CAP (Common Agricultural Policies) prior to the GATT flashpoint took away the edge (Ross 1995, pp. Chapter 7). Moreover, the negotiators' final choice to agree to disagree over audiovisual trade provided French nationalists with a substitute feeling of having “stood up to the Americans.”

^[38]. At one point Chirac actually pledged to hold a national referendum on EMU before French entrance. This was forgotten quickly, however.

^[39]. Cameron's Table 13.3 in Keeler and Schain, Chirac's Challenge (p. 354) presents the correlates of the franc fort policy in interest rate, growth, employment and balance of trade.

^[40]. It is very difficult to understand what Chirac was up to. He obviously knew that it would not do to turn immediately to new austerity after promising the exact opposite. He may even have believed that they could avoid major new cuts. The Germans would be the ones to call the shots as EMU approached, and it was conceivable, given German eagerness to promote further European integration, that they might be willing to soften the Maastricht criteria to make things easier for the French. Any such thoughts were dashed completely after Chirac met Helmut Kohl at Baden-Baden for the semi-annual Franco-German summit at the end of October 1995. Kohl, with the Bundesbank and his own grumpy electorate to worry about, was firm. France was not to sabotage movement to EMU through policy laxness

^[41].Next, taxes would be imposed on family allowances, with exceptions for the worst off. There would be changes, and a certain broadening, in the “generalized social contribution” (CSG), a general tax to cut social security deficits introduced by the Socialists in 1991. Also proposed were cost-controlling changes to existing health care programs, increased user fees and a recentralization to Paris in the running of hospitals, indicating that regional hospitals would be shut down.

^[42]. The Prime Minister suffered from the chronic professional deformation of France's elite technocrats, believing that he was wise enough to judge what was best for the French and that they themselves should recognize this.

^[43]. On the strike see Sophie Béraud and René Mouriaux eds. Le Souffle de Décembre (Paris: Editions Syllepse, 1997).

^[44]. The Economist, December 9, 1995, page 11.

^[45]. Juppé had projected reducing the social security deficit from $13 billion to $ 3.2 billion in 1996 and eliminating it altogether in 1997. The 1996 deficit turned out to be about $10 billion, with projections of $7 billion for 1997.

^[46]. Just prior to the 1997 elections 27% were satisfied with Juppé, 61% unhappy. Chirac's numbers were 31% and 56%. Le Gall 1997. There were others reasons for the Chirac team to worry. European integration was forcing deregulation and greater competition in France's unusually large public sector. Europe also obliged France to deregulate and perhaps even privatize public utilities like telecommunications, even electricity and gas and the post office, raising hackles among defenders of the services publiques. The EU was not the only external agent at work. The end of the Cold War had left France with a bloated defense sector. In the new security setting, where arm sales depended more on competitiveness than upon financial backing from governments, France had to act urgently, in particular because the Americans were ahead in reconfiguring their own defense sector. French arsenals had to be rationalized very quickly, for example, putting lots more jobs on the block. Big French nationalized defense contractors, like Thomson, had to be privatized, again with jobs in question.

^[47]. Once a government went above 3% it would have to put money “on deposit”. It would forfeit this money if high deficits continued. Fines were to be calculated at .2% of GDP plus .1% for every percentage point of deficit above 3%. The German logic was that strong credibility would be needed to discourage speculators. German resolve was strengthened by the prospect of Spanish, and particularly Italian, EMU membership.

^[48]. Public spending levels were frozen at 1995 levels, an actual 1% budget cut. Jobs in the civil service and public sector would be lost. Creative accounting found some money hidden in the social security system, and the government also charged off a one-time windfall of $8 billion from the state takeover of some of the pension funds of France Télécom, which was to be privatized, another triumph of creative accounting which lowered the deficit by .5%. Juppé also pledged to continue social security reform, announcing that certain benefits would henceforth be taxable, in particular subsidies for employment. The final item was a promise to lower taxes in 1997, which would have made the budget deficit problems worse.

^[49]. If one compares the 1995 Presidential results with 1997, Chirac lost more than 4 million votes.

^[50]. Indeed, the ratio of RPR-UDF votes (i.e. excluding independent and non-affiliated candidates of the Center-Right) to those of the FN was 51%, by far the highest ever. The FN's vote demonstrated its growing ability to attract across the political spectrum, including from the Left (Le Gall 1997, p. 20).

^[51]. Gérard Le Gall, “Succès de la gauche quatre ans après sa déroute de 1993,” Revue Politique et Parlementaire, Septembre 1997, pp. 6-25; Robert Ponceyri “L'étrange défaite de la droite,” pp.26-49

^[52]. Sam Aaronovitch and John Grahl make this argument persuasively in “Building on Maastricht,” in Peter Gowan and Perry Anderson, The Question of Europe (London: Verso, 1997).

^[53]. Laurent Mauduit, “M. Jospin a changé d'Europe,” Le Monde, 21 November, p. 1.(Mauduit 1997)

^[54]. Jospin's willingness to retreat had another motive. Acceptance of the growth and stability pact meant that the “Club Med” countries would be engaged to continue good financial and budgetary behavior into the future. Jospin had campaigned on the need to include these countries, particularly Italy, in EMU and allowing the famous “pact” to go forward would reassure the Germans about their presence in EMU. In the medium term, the presence of Italy and Spain in EMU would provide the French with needed allies in the struggle against German purposes.

^[55]. A number of member states (mainly small ones like Belgium, Austria, Denmark and Sweden) had, along with France, put employment policy papers on the table during the IGC discussions, but little would have come of them were it not for the elections in the UK and France and the Jospin demonstrations just prior to the Amsterdam European Council.. On the Amsterdam Treaty more generally see Franklin Dehousse, Les résultats de la Conférence intergouvernementale (Brussels: CRISP, Courrier Hebdomadaire, No. 1565-1566, 1997).

^[56]. A number of member states (mainly small ones like Belgium, Austria, Denmark and Sweden) had, along with France, put employment policy papers on the table during the IGC discussions, but little would have come of them were it not for the elections in the UK and France and the Jospin demonstrations just prior to the Amsterdam European Council.

^[57]. European Union, Treaty of Amsterdam (Luxembourg: EU, 1997), p 7.

^[58]. Ibid. Page 33.

^[59]. European Union, Treaty of Amsterdam (Luxembourg: EU, 1997), p 7.

^[60]. It decided that the Treaty's new “employment guideline” procedure should go into effect immediately, even before ratification of Amsterdam. It also recognized the need for a “coordinated macro-economic policy” (a soft bow to the French desire for “economic government”) plus a more systematic harnessing of various Community instruments to help employment growth. Moreover, the summit approved the use of a new 10 billion ecus of European Investment Bank borrowing to promote targeted job creation, something that the European Council had systematically refused earlier. See EC Commission, Growth, Employment and Competitiveness (Luxembourg: EC, 1993) and European Council, Presidency Conclusions, Extraordinary European Council Meeting on Employment, Luxembourg, 20 and 21 November 1997 (Brussels: EU Council, 24 November, 1997)

^[61]. This was a central concern of the Director-General of the Commission's DG-V, Allan Larsson, whose ideas were very important in the approach that Luxembourg sketched out. Larsson particularly wanted to shorten the time which unemployed workers received unemployment benefits without obligation to engage in training and job search programs.

^[62]. There was a strategy beneath the surface, particularly on the part of the Commission. Each member state was obliged to produce a “national action plan” on employment, following the Commission's general guidelines. The Commission then hoped to “coordinate” these “NAPs” into a broader European-wide `race to the top' in job creation.

^[63]. The insertion of a new but vague text in the final stages of Amsterdam to give special treatment for “public services” provided another example beyond employment policy. (EU 97a, p. 26).

^[64]. See Martin Aubry, Il est grand temps... (Paris: Albin Michel, 1997). . The ideas have been culled from the “second Left” of the 60s and 70s, in particular its Christian components, as tempered by recognition of difficult economic constraints and the importance of Europe in the Mitterrand years. The approaches of Jacques Delors loom particularly large, indeed Delors forecast much in the new government's approach in an important article even before the election victory was clear, Réflections et propositions pour un nouveau modèle de développement (Paris: mimeo, Fondation “Notre Europe”, 1997).

^[65]. The law will apply first to all employers of over 14 workers, who will be required to comply by reducing hours to 35 by 2000. Smaller businesses will have two additional years. The government will provide financial subsidies to employers until the final date to facilitate transition. It also decided that overtime beyond 35 hours up to 39 would have to be remunerated at 125%.

^[66]. France has the lowest level of union membership of any major capitalist society. Despite this, each Confederation continued to behave as if its most important job was to steal an advantage over the others, even if they all suffered in consequence. See Dominique Labbé, Syndicats et Syndiqués en France (Paris: l'Harmattan, 1996).

^[67]. Initial union discussion of the conference indicated that these pathologies were alive and well. The CGT wanted higher wages plus the 35-hour week with no cut in salaries. FO wanted the same and, in addition, was dead set against negotiating hours annualization (and, presumably, other forms of labor market flexibility). The CFTC said that it would cooperate as long as lower and middle-level wages are not reduced. The CFDT, in contrast, denounced “39 hours pay for 35 hours work” in advance. To Nicole Notat, this position sought a “fake working class victory” which would not create jobs. To her the problem was to bring the “excluded” into the labor force. The CFDT was open-minded about negotiating new “flexibility” and accepting pro-rated wage reductions for lower hours. When actual negotiations began, however, union reactions were more decentralized and unpredictable.

^[68]. The CSG had been created by the Rocard government as a way of fiscalizing new social protection costs to avoid raising payroll taxes. It was a fixed percentage of salaried income.

^[69]. Underlying many of these changes was the early outline of a tax reform to confront the post-EMU setting. Payroll taxes penalized job creation because they provided a disincentive to employers for hiring new workers and raised the cost of employment. Shifting the burden towards general taxation would redistribute the costs of social services away from the employment contract. (Strauss-Kahn 1997) It will be interesting to watch over time how this burden shifting plays out in the broader politics of social protection. With health care expenses taken up by general revenues the issue of their cost will become central in discussions of the level of taxation. Moreover, because of administrative changes carried over from the Juppé Plan, decisions about this level will be made by Parliament, with paritary deliberations cut out. In the medium term this could cause more trouble for the French welfare state.

^[70]. These ideas have been culled from the “second Left” of the 60s and 70s, in particular its Christian components, as tempered by recognition of difficult economic constraints and the importance of Europe in the Mitterrand years.

[Date of publication in the ARENA Working Paper series: 15.10.1998]