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France Thanks to Europe

Editor : Fondation Robert Schuman
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"What will France do to change, to adapt itself and innovate without Europe in a world that has new obligations, new demands in terms of quality and security, as well as all its new opportunities?" This is the question put by Jean-Paul BETBEZE and that he answers with supporting arguments. In "France thanks to Europe", the title of the 18th Note by the Robert Schuman Foundation, Jean-Paul BETBEZE makes a claim: in his eyes, Europe is THE means to change France whilst reducing the risks this entails to a minimum.

In the first part of his work the author describes the difficulties of the economic situation world-wide that are at the root of a very weak growth rate: 0,5% in Europe in 2003. The world, that is effected within is this context, is experiencing difficulties in making a recovery. It remains under the influence of the USA, a country where there has been a threefold trauma; in terms of its transferable securities, its military prestige and finally its moral values.

American transferable securities were especially effected by the financial crash and this has particularly influenced consumption and investment as well as company's capital equities. Europe can draw several lessons from this: firstly if it had invested more in its own innovations it would (at least) have been able to finance its own excesses; consequently as the situation stands today it has not been able to make its voice heard. Europe will also have to strengthen its own means of financial analysis and the management of its assets. France, that has the one of the biggest asset management systems in the world is in a position to assert its opinions and expertise in this field.

After 11th September 2001, the rise of Islamic fundamentalism, and the Iraq war American military presitge has been sorely tested. Europe has demonstrated that it had a decisive role to play in world peace both on the diplomatic and operational levels. France is justified in pushing towards "a powerful Europe".

American accounting authority was terribly effected by the Enron affair and those that followed but the USA is re-establishing confidence and ensuring the recovery of the stock market. In the face of this come back Europe will again suffer for having lagged behind. France that quite rightly defends a less financial approach to accounting deserves to be listened to by her partners.

Jean-Paul BETBEZE believes there are two economic approaches to constructing Europe: on the one hand there is monetary construction and the BCE, and on the other budgetary construction with the Stability and Growth Pact that is the central axis of European construction.

The discrepancy in situation and level of activity between the American and European economies is significant.

In the second part of the paper, Jean-Paul BETBEZE addresses the issue of Europe's delay in undertaking structural reform. He lays down a list of major problems that are blocking the opportunities for growth, for both Europe and France:

- labour markets that are far too inflexible,

- public services that diverge from their vocation and do not serve the public enough due to an intrinsic state of monopoly,

- enlargement, a source of problems or doubts at the least,

- the ageing population and the related problem of pensions,

- the high protection level of its markets adopted by Europe and the consequences this has on employment.

The price to pay for this delay is double. Firstly Europe and France first and foremost, are endangering their future by spoiling their potential and abilities. Growth is effected as a consequence. (1% of growth lost in France).

This is why Europe and France must undertake a dual action directed at growth and stabilisation. With this aim in mind it would appear appropriate to target development and method. But since there can be no growth without stabilisation more must simultaneously be provided in terms of local policies, whether they are national or regional, since regional differences are greater at present than the national ones.

In the face of the upheaval involved in enlargement and the economic situation André Sapir (July 2003) delivered a report to Romano Prodi, the President of the Commission, in which he suggests a total re-organisation of the Union budgetary system. He believes that three funds should be created (a growth fund, a convergence fund and a restructuring fund).

His idea is a dual one :

- rethink how the budget is organised from a regional to a national level, and simultaneously reduce the agricultural budget;

- provide more budgetary power to Europe with the objective of growth in mind.

Jean-Paul BETBEZE indicates that the report by André Sapir does not say that fiscal competition between countries should be managed. He believes that it is particularly important to develop taxation as quickly as possible on a European base of companies, extending this to 7000 European quoted companies that might opt for the status of being a European company. This logic would prevent fiscal dumping and would, on the contrary, moderate company fiscal resources and implies that all States would have to modernise.

In parallel to this the constraint of the relative size of the budget must be reviewed and increased.

This dynamic push by Europe includes several major stakes but also tension and fear that can both be explained and that is legitimate. Even though some in France give Europe bad press this is not useful either for the Community nor for our country that has to continue its reforms both private and public within and via Europe.
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Jean-Paul Betbeze :
Economist, member of the Robert Schuman Foundation's Scientific Committee

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