Philadelphia Inquirer, PA
May 27 2005

France set for crucial EU decision

By Ken Dilanian

Inquirer Staff Writer

PARIS – A few days ago, software engineer Julien Benoit found out
that he would be among the latest victims of outsourcing. His
company, Internet portal Lycos, is closing its Paris office and
moving the development work to Yerevan, Armenia, where his
counterparts will earn about $400 per month.

For his part, Benoit, 28, is not worried. Under France’s generous
social insurance law, he will be paid 80 percent of his $50,000
annual salary for up to a year while he looks for work. He doesn’t
see what more his government could have done to protect him from the
unforgiving logic of the global economy. And he certainly doesn’t
blame the European Union in Brussels, Belgium.

But Benoit is in the minority in France, where, according to the
latest opinion polls, voters Sunday may reject the proposed EU
constitution, in part because they think it will be bad for the
economy.

If they do, they will deal a potentially crippling blow to the
50-year process of European integration. Unless all 25 member-nations
approve the document, it’s back to the drawing board.

Here in the very country where the European project was conceived,
debate over the 349-page constitution has strayed far from the text
itself, which few have read. Instead, the impending vote has sparked
a long-overdue argument about the fundamental nature of the EU.

Large numbers of French people, it turns out, have come to associate
the union with a brand of free-market capitalism that threatens their
jobs, wages, and the network of social protections they hold dear.

“Obviously, what happened to us has nothing to do with the
constitution,” Benoit said of himself and his colleagues.
“Outsourcing and relocation is a worldwide economic phenomenon. But
people are saying, ‘This is exactly why I will not vote for it.'”

In essence, Sunday’s vote has become a referendum on globalization –
and in France, that’s a losing proposition.

“Globalization means what? To the French, it means danger,” said
economist Bernard Spitz, who runs the consulting company BS Conseil
and teaches at the Sorbonne. “A large proportion of the people
believe that they are going to lose in this process, so they prefer
to protect themselves.”

While there is a continentwide crisis of doubt over the European
constitution, not all of it is related to economic issues. In the
Netherlands, where a referendum Wednesday also is expected to produce
a “no” vote, hostility to immigration and the EU’s Brussels
bureaucracy is driving what is known as Euroskepticism. The same is
true in Britain.

And in France, some intend to vote no to send a message to their
deeply unpopular leaders, or because they fear a loss of French
prominence in the newly enlarged union, or simply because they don’t
want to give up more power to what they see as undemocratic
institutions in Brussels.

But at the heart of the debate in France is a mind-set that the
country can somehow opt out of the global economy – a notion that
also infects Germany, Italy, and other parts of Europe.

Although the constitution wouldn’t change the basic nature of the EU,
this is the first time since the 1992 vote on the euro that the
French public has had a chance to weigh in on the union, and years of
pent-up concerns are boiling over.

One of the buzzwords in the debate is what Europeans call liberalism
– in the 19th-century sense of the term, which is the opposite of how
Americans use it. On this side of the Atlantic, liberals believe that
to be competitive in a world where capital and labor flow unimpeded
across borders, Europe must reduce government interference in free
trade and free markets.

Even among French supporters of the EU constitution, liberal has
become a dirty word. President Jacques Chirac – who made a dramatic
TV appeal for ratification of the document yesterday and who
supposedly represents the center-right of French politics – said
recently that “ultraliberalism is the communism of our age.” (Similar
language has been used in Germany, where leaders didn’t dare submit
the EU constitution to a vote, and instead had parliament ratify it.)

France finds liberalism threatening because over the last three
decades, it, like the rest of Europe, has built an extensive
social-welfare system that includes long vacations, universal health
care, huge disability and unemployment subsidies, and generous
early-retirement plans – all paid for with the high taxes and big
government that such liberalism disdains.

But although the so-called European social model shares some basic
features, countries have different approaches, and some are doing
better than others. In lower-tax Britain and Ireland, for example,
growth has been high and unemployment low. Ditto in high-tax Sweden
and Denmark, where powerful labor unions have cooperated with
industry.

But the countries that make up the core of “old Europe” – France,
Germany and Italy – have suffered from economic stagnation, in part
because of a poor rate of what economists call “labor flexibility” –
the ability of companies to hire and fire easily, and for workers to
quickly change jobs. In those countries, employers face enormous
legal burdens and high costs if they try to lay off workers, and must
deal with hostile unions and Byzantine labor-law requirements. All of
that makes them reluctant to hire.

In recent years, liberal voices in the EU have been pushing those
countries to reform – not to do away with such basics as free health
insurance, but to make their labor markets more flexible, change
welfare benefits so people have more incentive to work, and do away
with subsidies that protect sluggish state monopolies such as Italy’s
Alitalia airline.

In France, where the government controls 55 percent of the economy,
this message simply hasn’t taken hold. It became an even harder sell
last year when the EU admitted 10 former Communist-bloc countries,
where wages and taxes are much lower than in the core 15.

Now, every time a French factory closes and moves to Eastern Europe,
where labor costs are lower, people blame the EU. The irony that the
companies may well be leaving because of the very social benefits the
French cherish so much, such as the mandatory 35-hour workweek, gets
lost.

“I don’t understand why we should lower our level of social
protections,” said Christophe Beaudouin, 32, a lawyer and spokesman
for one of the anti-ratification groups. “I thought politics was
about making people’s lives better.”

Economists argue that free trade does that by distributing resources
efficiently and making everyone richer. Wealthier Poles, for example,
will buy more French products.

“But it is very hard to explain that trade is a two-way street, that
foreign direct investment creates wealth, when each night on TV,
people are seeing dramatic images of people losing their jobs,” said
Elie Cohen, an economist at Sciences Po, a prestigious French
university.

Moreover, he said, few in France are trying.

“This is the specific problem for France. Since World War II, we
haven’t had any true liberal rightist party that sells the liberal
agenda.”

Even if the French do the unexpected and approve the constitution,
that problem isn’t going away.

Access the EU and the proposed constitution via

From: Emil Lazarian | Ararat NewsPress