Sunday, October 27, 2013

Why the hostile reactions to my Telegraph article highlight France's deep divisions

Left-wing commentators are wrong to criticise my article in the Telegraph about the exodus of French entrepreneurial talent, says Anne-Elisabeth Moutet

Criticised: Anne-Elisabeth Moutet was told: 'Stories like yours are nothing but a massive swindle’ Photo: Lucas Schifres

Since last week, when my Sunday Telegraph report outraged France (“British propaganda!” was a recurring theme) by suggesting that my demoralised compatriots were leaving in droves, fleeing an economy overburdened by regulations and levies, François Hollande’s government has added three new taxes to the 84 that had been created in the past two years.

Not only will capital gains on a series of popular savings plans be now subject to a 15.5 per cent flat tax, but also the measure is retroactive all the way to 1997 – coincidentally (perhaps) the last time France elected a Socialist government before this one.

It would be unfair to say that the irony went unremarked. The dozens of reactions I heard – as well as the thousands of internet comments and Twitter and Facebook shares of my story – mirrored the state of deep division in which France finds itself.

Entrepreneurs are “really hunted away from the country”, wrote one correspondent, and specifically targeted by “many stupid decisions. One example: I created a business seven years ago; if I sell it now, I will have to pay 60 per cent of the value I’ve created. Unfair and discouraging.”

Another correspondent wrote: “Would not change a word: we are now in decline, and may never be able to regain the place of fourth-largest economy in the world.”
“The people who really drive the French economy and keep the country afloat are those in managerial roles or the professions, who know little or no job security or social protection, working in those highly competitive parts of the economy comparable to Britain or the United States,” said another commenter. “But they are tiring of supporting the unproductive masses.”

Last week, the ministry of finance, prompted by opposition MPs, released official emigration figures for 2011 (they assure you nothing more recent is available) showing that departures had doubled from the previous year to nearly 40,000. Professor Jacques Régniez of the Sorbonne, himself a statistician, predicts that these should have climbed to 60,000 by the time we get this year’s figures.

In the November-December issue of the foreign-policy journal The National Interest, the US economist Milton Ezrati published a damning, comprehensive study of the downfall of the French economy. “Whereas 10 years ago it rivalled Germany’s,” he wrote, “today, France produces only half the value added. France’s share of global exports has fallen from 7 per cent in 1999 to only 3 per cent today. During this time, its share of the eurozone’s exports has fallen from 17 per cent to merely 12 per cent.” France, Ezrati explains, is now outperformed even by Italy.

Like others, Ezrati blamed over-regulation: there are now so many complex and protective labour laws, the Code du travail (labour code) exceeds 3,200 pages. He also quoted a recent authoritative OECD study that identified “French failings in almost every major category: economic regulation, product regulation, impositions by local policies, state control of the details of business operations and barriers to entrepreneurship”.

The only area in which France didn’t blatantly underperform was, unsurprisingly, red tape: French bureaucracy barely reaches the OECD efficiency median.

You would think something of this would filter up to Hollande in his Elysée bunker – he might disagree on the diagnosis, yet worry on the souring of the public mood. You would be wrong: “Perception is reality”, the mantra of spin doctors around the Western world, leaves the President cold. Increasingly, his entourage reports that Hollande, despite hiring a communications team headed by a popular former France 2 prime-time news presenter, Claude Sérillon, believes he knows best how to speak to the French. “This may have worked for de Gaulle,” says Philippe Moreau-Chevrolet, a political communications expert. “Not for Hollande.”

The beleaguered president, whose unpopularity figures scale new heights seemingly every week, still enjoys a vocal, if ever-diminishing, constituency, who, when they do oppose Hollande, reproach him for not being tougher on “the rich”.

Many of these work in the media, and as I defended my story on various radio and TV panels all week, I encountered an interesting assortment of them. (I have become something of a rent-a-reactionary in the French media, where a “balanced” panel means three Left-wingers et moi.)

There was the France Inter (think Radio 4) hour-long programme in which Sibylle Vincendon, a senior editor of the newspaper Libération, called all critics of the economic and political situation “grumpies”. (She has a book out on this theme, Pour en finir avec les grincheux. By the third page of the introduction, the despicable “Anglo-Saxons” and their “free-trade” model have been introduced. Vincendon believes that anyone, especially an economist forecasting France’s decline, is evidencing a deep schadenfreude and dark motives. The French, she says, need to “share more, not less”.)
Anne-Elisabeth Moutet's reply to her critics in Sunday's Telegraph

There was the debate on Arte, the French-German cultural public channel, in which the right (by which I mean Left) kind of economist, Prof Benjamin Coriat, explained that instead of the 75 per cent supertax hitting “only” a few privileged citizens, national income tax should be raised well above the current 45 per cent marginal rate, so that “everyone will pay”. Prof Coriat is shocked that some people dare to oppose new taxes. “They’ll justify anything not to cough up!” he thundered. He deplores the kind of movements now emerging, such as Les Pigeons (a group of young entrepreneurs who oppose over-taxation of start-ups), and the fact that some politicians listen to these “bad citizens”.

Elsewhere, I was told that French emigration to Britain was “a myth”, the figures “too low to even consider”. In an online chat, I was asked why I wrote in English, implying that I was some sort of traitor. (“Because it’s more fun?” didn’t seem to cut it as an answer.)
Many went on the attack: “Stories like yours are nothing but a massive swindle,” a Le Monde Diplomatique editor told me. “For people leaving France, how many come back after experiencing the lack of public services in Britain, the inefficient Tube, the expensive, slow and badly maintained trains, the threadbare NHS? It’s France that is bearing up best in the crisis, not Britain: why do you think the richer of the English come to French doctors and hospitals for proper treatment when they’re ill? Britain has no industrial base to speak of: it only exists because of tax-rate dumping, the City of London, and those nice, honest financiers operating there. Britain is a terrible place to live except for the super-rich.”

France has remained in a thrall to Marxism to a degree that is rarely matched elsewhere in Europe. While Germany, Italy and, in Britain, New Labour, swore off it, Hollande’s Socialist Party never officially renounced it, in good part not to offend its Leftist frenemies, of which there are many, who still Believe.

In addition to the rump of its once-powerful Communist Party, France has three Trotskyite mini-parties, a Green nebula, and one upstart radicalised splinter from the Socialists, led by a charismatic philosophy teacher, Jean-Luc Mélenchon, who ran for president against Hollande in the first 2012 round, and scored a very respectable 11 per cent, coming fourth behind Hollande, Sarkozy and Marine Le Pen.

Because, for years, any Socialist candidate has needed all of the extreme Left votes to win, the language of economic realism has never gained traction on the Left in France. In private, the prime minister, Jean-Marc Ayrault, will describe himself as a social democrat. Ask him to repeat it on the record and you are faced with a stony glare, lest you create a political crisis for him and his boss. As a result, the political tone on the Left has remained frozen in a kind of Seventies radical aspic, a hoary kind of time travel in which every capitalist, every entrepreneur, every high-net-worth individual is guilty of starving the downtrodden masses.

“I left because I was tired of being considered little better than a criminal,” says a French banker who is now happily ensconced in a Soho loft with his family. “At a pinch, I could have paid the silly taxes; but it was the constant sniping, the feeling that I had to apologise for everything I achieved, the jealousy, the unremitting gloom, the guilt heaped upon you at every turn; and the idea that my children would have to grow up in a country where, at best, they could hope to become top civil servants, and duplicate the system with no deviation from the norm.

“This president has no idea that there is a wide world outside France; he has hardly travelled abroad; he speaks no other language; and he has no curiosity. Eventually, you get tired of waiting for our rulers to wake up.”

© Telegraph Media Group & Anne-Elisabeth Moutet, 2013

Sunday, October 20, 2013

Down and out: the French flee a nation in despair

The failing economy and harsh taxes of François Hollande's beleaguered nation are sending thousands packing - to Britain's friendlier shores, says Anne-Elisabeth Moutet
Le brain drain: high-net-worth French families are heading to the UK
By 2014, France's public expenditure will become the world's highest, at 57 per cent of GDP Photo: Howard McWilliam
A poll on the front page of last Tuesday’s Le Monde, that bible of the French Left-leaning Establishment (think a simultaneously boring and hectoring Guardian), translated into stark figures the winter of François Hollande’s discontent.

More than 70 per cent of the French feel taxes are “excessive”, and 80 per cent believe the president’s economic policy is “misguided” and “inefficient”. This goes far beyond the tax exiles such as Gérard Depardieu, members of the Peugeot family or Chanel’s owners. 

Worse, after decades of living in one of the most redistributive systems in western Europe, 54 per cent of the French believe that taxes – of which there have been 84 new ones in the past two years, rising from 42 per cent of GDP in 2009 to 46.3 per cent this year – now widen social inequalities instead of reducing them.

This is a noteworthy departure, in a country where the much-vaunted value of “equality” has historically been tinged with envy and resentment of the more fortunate. Less than two years ago, the most toxic accusation levied at Nicolas Sarkozy was of being “le président des riches”, favouring his yacht-sailing CEO buddies with tax breaks and sweet deals. By contrast, Hollande, the bling-free candidate, was elected on a platform of increasing state spending by promising to create 60,000 teachers’ jobs, as well as 150,000 subsidised entry-level public-service jobs for the long-time unemployed and the young – without providing for significant savings elsewhere.

By 2014, France’s public expenditure will overtake Denmark’s to become the world’s highest: 57 per cent of GDP. In effect, just to keep in the same place, like a hamster on a wheel, and ensure that the European Central Bank in Frankfurt isn’t too unhappy with us, Hollande now needs cash. Technocrats, MPs and ministers have been instructed to find every euro they can rake in – in deferred benefits, cancelled tax credits, extra levies. As they ignore the notion of making some serious cuts (mooted at regular intervals by the IMF, the OECD and even France’s own Cour des Comptes), the result can be messy.

On the one hand, the lacklustre economy and finance minister Pierre Moscovici recently admitted that he “understood” the French’s “exasperation” with their heavy tax burden. This earned him a sharp rap on the fingers from the president and his beleaguered PM, Jean-Marc Ayrault. On the other, new taxes keep being announced, in chaotic fashion, nearly every week. “Announced” doesn’t mean “implemented”: the Hollande crowd have developed a unique Wile E Coyote-style of leaks, technical glitches, last-minute tweaks and horse-market bargaining whereby almost nobody knows, at any given time, who will be targeted by the taxman, and how. Unsurprisingly, this is liked by no one except us reptiles of the press, eager to report on the longest series of own goals in the history of government communications.

Take last year’s famous 75 per cent supertax, on individuals earning over one million euros a month. This has still not been implemented. First, it got struck down by France’s Constitutional Council on a technicality. Leaks suggested the rate would fall to 66 per cent. They were confirmed, then denied. Hollande eventually vowed that the tax would be paid by the targeted individuals’ employers, for daring to offer such “obscenely” high salaries. This has just been approved by the National Assembly, and must still pass the Senate. So far, it is only supposed to apply to 2013 and 2014 income, but no one knows if the bill will be prolonged, killed or transformed.

What we do know is that this non-existent (so far) tax has been the clincher that sent hundreds, possibly thousands of French citizens abroad: not just “the rich”, whom Hollande, during his victorious campaign, said he personally “disliked”, and who now are pushing up house prices in South Kensington and fighting bitterly over the Lycée Charles de Gaulle’s 1,200 new places; but also the ambitious young, who feel that their own country will turn on them the minute they achieve any measure of personal success.

In the heart of Paris’s Right Bank, where I live, only foreigners seem to buy flats, at prices entirely disconnected from reality. In my street, I have spotted three new Maseratis. Even before seeing their Qatari plates, I knew they couldn’t belong to local owners: they’re an ostentatious admission of wealth no one wants to make in Hollande’s France. (A luxury car is one of the “outward signs of wealth” your tax inspector has been specifically trained to query. The lesson has been learnt: last year, Rolls-Royce sold no cars in France.) On the Left Bank, elegant Americans buy bijoux apartments on place de Furstenberg, at 30,000 euros per square metre, and venture into the fine Café de Flore for elevenses.

“It’s not only that people don’t like to be treated like criminals just because they’re successful,” says a French banker friend who has recently moved to London. “But this uncertainty in every aspect of the tax system means it is impossible to do business: you don’t know what your future costs are, or your customer’s. You can’t buy, you can’t sell, you can’t hire, you can’t fire.”

While I’m still happy in Paris, I envy him his surroundings, the vibrancy of London, the feeling that anything is possible, the sense of fun I remember from the years I lived there in the Eighties and Nineties, and that I gladly find again every time I zoom in on the Eurostar. Paris, my city of birth, is an elegant museum – where any new idea, in any context, seems to be fated to be shot down by a combination of old, structural conformism and blasé disenchantment.

Today, one out of four French university graduates wants to emigrate, “and this rises to 80 per cent or 90 per cent in the case of marketable degrees”, says economics professor Jacques Régniez, who teaches at both the Sorbonne and the University of New York in Prague. “In one of my finance seminars, every single French student intends to go abroad.”

“The French workforce is now two-speed,” explains a headhunter who shuttles between Paris and London. “Among the young, perhaps a third speak English, are willing to relocate, and want to work. For one thing, their dream employers are the more prosperous of the large French multinationals, almost all those in the CAC40 index, who make over half of their profits abroad, sometimes over 90 per cent – companies like, say, L’Oréal, Schneider or Danone. This is why French universities have shocked the Académie française and now teach many courses in English.

“But I’ve also seen determined young people take jobs in places like Vietnam, with local contracts and nothing like the level of protection afforded by French labour law, in order to gain a proper first experience of business in a competitive environment. And then you have a large group whose ambition is simply to stay outside the economy.”

This means a trade-off with which anyone in France is familiar: young people, and many of their parents, dream of getting any kind of state or local administration post, usually badly paid, very often frustrating, but which ensures complete job security, unrelated to the economic situation, the market, or their own performance.

More than a quarter of the French workforce is employed by some public body or other: schools, hospitals, local and regional councils, the police, the civil service proper – or those new subsidised public-service jobs the Hollande government is so keen on.

While the young French generations were aspiring to cocoon themselves away from the realities of the world, our nearest neighbours were following the opposite trend. In 2000, under a socialist chancellor, Gerhard Schroeder, German businesses paid an astonishing 51.6 per cent company tax – largely to pay for the previous decade’s reunification. Today, this is down to 29.8 per cent, when the French equivalent, the highest in Europe, is 38 per cent. By 2003, Schroeder had embarked on a widespread reform programme, lowering taxes and drastically slashing benefits, curtailing the influence of the unions, and eventually reducing German unemployment from 10 per cent to 7 per cent (it’s 11 per cent in France).

There are many reasons why this wouldn’t work in France, not least because the French Socialists happen to have noticed that Schroeder and his party reformed themselves out of a job. Another is that French unions represent very little: less than 8 per cent of the French workforce overall is unionised, a figure that falls to between 3 per cent and 5 per cent in the private sector. Unions do, however, play a mandated part in a number of negotiation and welfare net structures, the unemployment benefits system, retraining schemes and the national health and pensions co-administration. This, not members’ contributions, keeps them afloat. The law also provides for legal labour dispute fines to be paid to the unions.

French unions see as their main goal the preservation of the status quo: from overprotective labour laws that make it so hard to fire employees that French bosses will do almost anything to avoid hiring new staff (who cost them a whopping 70 per cent in payroll taxes), to perpetuating antiquated regulations dating back to Vichy France, banning Sunday trading and evening shifts.

Recent union legal actions have forced businesses to close on evenings and Sundays, from the cosmetics chain Sephora – where employees protested that they wanted to keep working their late hours – to the British-owned DIY chain Castorama, which belongs to Kingfisher: no wonder Ian Cheshire, Kingfisher’s chief executive, complained last Friday that this harmed the French economy as well as his stores. “The president has said that recovery is in sight: I’m not sure where he’s looking at the moment. The mood is improving in the UK, not in France.”

It wasn’t fated to happen. “By 2000,” says Jacques Régniez, “French multinationals had achieved a very high level of competitiveness. Having committed to the strong franc, in the run-up to the euro they were forced to become lean and efficient. They rationalised production, and French workers became some of the most productive in the world.” French utilities, insurers, aerospace makers and luxury-goods conglomerates were up there with the best. If you wanted the best nuclear plant, crocodile handbag, commercial aircraft, high-speed train, you bought French.

What went wrong, says Régniez, was a bill passed by the then socialist Lionel Jospin government reducing the working week to 35 hours. “Where our competitors, especially the Germans, saw the need to keep prices and costs down, France spent money she couldn’t afford.” The entire system, he explains, tilted fatally to the side of salary hikes, perks and a lowering of retirement age, in the face of every observable demographic trend. Investment slowed down in the private sector, and almost stopped in the public one. “Each year, France has missed out on four GDP points of capital investment. By now, after a decade-and-a-half, we are not only lagging behind, it’s not certain we can make up for it. It would cost a 4.5 per cent hike in VAT, and other significant hikes in payroll taxes. That, quite simply, is not realistic.”

Even France’s vaunted infrastructures – those trains, roads, telecoms cables, the once ultra-performing electrical grid, the nuclear plants, the delayed 4G network – have taken a severe hit.

A French businessman who moved to London last year and asked not to be quoted by name, “because my tax audit would be even more retaliatory than what I’m currently being subjected to”, compares July’s Brétigny train crash, France’s worst rail disaster in a quarter of a century that killed six and injured 100, to the Paddington and Potters Bar derailments. “The rolling stock is ageing, the tracks are in a constant state of disrepair, even the TGVs now have regular delays because of catenary failure.”

Despite disputing allegations of negligence, SNCF have said they will reinforce maintenance “without waiting for the conclusions of the inquiry”. Criticisms have also been made that vast sums went on salaries, benefits and pensions.

But most analysts share the blame between Left- and Right-wing French governments in the past two decades. An investment banker, who has also moved to London recently, dates the wrong choices from the first Jacques Chirac presidency, in 1995. Chirac and his PM Alain Juppé, both Gaullists, decided to reform the huge French public sector’s pension system, to align civil servants’ pay-as-you-go pensions, which were (and still are) much more favourable, with those of the private sector.

There followed three weeks of hard strikes, shutting down the entire country, from schools to public transport to utilities and the post office. Juppé was ready to stick it out, but Chirac blinked. The reform was shelved, and for the next 12 years he stayed in office, Chirac never, ever tried to clash with vested interests again.

Sarkozy had great plans after his 2007 election. He believed in business, and good pay for hard work, and was devastatingly frank about it. It might – perhaps – have passed in prosperous times: one year on, the financial crisis hit, and his brusque style and love of bling clashed with both the times and age-old French preferences. (France is an old Catholic country that, for over a century, was influenced by unapologetic Marxism. It is atavistically hostile to money.) The reforms Sarko managed to pass, much milder than necessary, still ensured his unpopularity. He bet on French realism, and lost.

Realism – actual, real-life realism – is not an accusation you can levy at Hollande. Like Chirac – who supported him both because of a deep personal dislike for Sarkozy, and because they are in many ways very similar – France’s unlikely seventh president of the Fifth Republic is a professional politician, a graduate of the top government school ENA, and has never held a job in the private sector. Both Chirac and Hollande come from Corrèze, in central France, a region that has regularly provided French politics with a certain type of wily opportunist. Both appear easy-going and friendly, and both are complete cynics, with very little in the way of ideals, and an infinite capacity to scheme in order to stay in power.

Chirac, like Hollande, knew how to cultivate an array of political allies: in the case of Hollande, this means keeping the Left of his party as well as his Green allies happy with a number of symbolic measures, from the supertax to the recent anti-fracking bill.

Uninterested in the impact of morale and image on politics and the economy, Hollande believes that the economic cycle is bound to turn (he has said several times already that the recession is behind us), and that all he’s got to do is stay in power until things get better – thanks to the Chinese, the Americans, it hardly matters which. He doesn’t even worry about Marine Le Pen’s inroads in local elections: a junior aide in the Mitterrand Élysée 25 years ago, he believes the National Front, conjured up by his old boss, is a convenient accessory designed to split the Right and help him win a second term in 2017.

Professor Régniez believes this is very dangerous. “Sarkozy narrowly lost in 2012 for personal reasons – his style annoyed voters who could have agreed on his policies, but who wanted to punish him: 18 per cent of them voted for Marine Le Pen, against only 5 per cent for her father in 2007.

“This should be a warning to other countries, like Britain – it’s all very well punishing a conservative politician you’re dissatisfied with by voting for a maverick, Le Pen here, Farage there. But it gets the likes of Hollande elected. Think well: is ours the kind of future you want for your country?”

© Telegraph Media Group & Anne-Elisabeth Moutet, 2013

Monday, October 14, 2013

A corner of Paris that will remain forever seedy

A native Parisienne, Anne-Elisabeth Moutet laments the loss of charm of her old quartier 

Jacques Chirac can be blamed for the 1994 'beautification' of the Champs, when he blew a fortune on widening pavements, buying designer benches and allowing the cafés to expand
Jacques Chirac can be blamed for the 1994 'beautification' of the Champs, when he blew a fortune on widening pavements, buying designer benches and allowing the cafés to expand Photo: Bloomberg
With its garish shops, escort-girl bars, uncouth and drunk visitors, it is crowded, stressful, overpriced – and shunned by the French themselves. No, this isn’t the description of a nastier corner of a banlieue, but rather Hugh Schofield on Paris’s best-known avenue, the Champs-Élysées. And the French are already furious. 

As a native Parisienne, born exactly 160 yards from the Champs-Élysées, who still lives round the corner, I have mixed feelings about the place. I know the crowds, because I hear their drunken arguments under my windows late at night. And it’s true that the avenue has little more to offer today than chain stores – H&M, Zara, Adidas, Nike – a few cinemas, and overpriced cafés where no Parisian would ever set foot.

True to the BBC’s default position, its Paris correspondent blames Jacques Chirac’s long tenure as mayor for the change; but he’s wrong. What changed everything was the opening of the RER train station at the Arc de Triomphe in 1973, four years before Chirac’s election. Today between 300,000 and half a million people descend every weekend.

True, Chirac can be blamed for the 1994 “beautification” of the Champs, when he blew a fortune on widening pavements, buying designer benches and allowing the cafés to expand. This brought even more people to the area, drove the rents sky-high, and completed the end of an era.

This used to be my quartier, a strange ecosystem of elegance and old-style seediness which had its own charm. I remember, aged 10 and on my way to the dentist, catching a glimpse of Marlene Dietrich walking along in full make-up, couture, gloves, and a little hat with a veil, not far from the Travellers Club (which is still there, barely, in the old palazzo built for the great Second Empire cocotte, La Païva). Metres away, the side street, Rue de Ponthieu, so offensive today, was then a row of louche bars with girls and hoodlums: indeed, several Jean Gabin and Alain Delon movies are set there.
In the post-war years, the Champs-Élysées were pure movieland. Darryl Zanuck was ensconced in the Hotel George V with his lover Juliette Gréco, from where he produced films such as The Longest Day, thanks to the Marshall Plan subsidies for European-American co-productions. Every major studio had an office on the Champs (Paramount was at No 33), and the French and American film crowd met at Le Fouquet’s long before the man who redefined it in 2007 with his infamous election party – Nicolas Sarkozy – was even born. But in 1975 the Marshall Plan ended, and everyone left, along with the money and the incentive.

Today, there’s a McDonald’s where the art bookshop used to be. The bullet holes from the August 1944 fighting have been filled in on the walls. The Hôtel de Crillon, recently bought by the Saudi royal family, was the last to sport its marks proudly, like duelling scars. It is now being refurbished.

As a child, I rode the Shetland ponies and went to the Guignol puppet show in the gardens near the Rond-Point des Champs-Élysées; shopped for records at Sinfonia at No 68 and went to see old movie revivals at the Cinéac Élysées, where you can now find only a row of garish clothes shops with pop music blaring out on to the street.

Sadly, I bear some responsibility for the destruction. Back in 1932, my great-uncle Léonard started the rot when he had the first commercial building ever built on the Champs-Élysées, at No 116. It was a daring piece of Cubist architecture by an associate of Le Corbusier, the facade zig-zagging at straight angles: it created a scandal in its time, and for generations was a matter of pride in the family. No longer.

© Telegraph Media Group & Anne-Elisabeth Moutet, 2013