Reflections on France

July 7, 2015

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Having lived in France (where I was OECD’s Director for Financial and Enterprise Affairs in Paris) for some 28 years, I try to touch base there once a year. I have recently returned from three weeks visiting Paris and the regions of Provence and Normandy. I am pleased to be able to report that the positive attributes of the country that make it such an attractive travel destination remain largely unchanged. Hotels, restaurants, museums and other tourist sites appear to be thriving, boosted no doubt by the weaker euro. The Luberon region of Provence was particularly lovely as the lavender fields were in full bloom, and the cherry and melon harvest was underway.

With the two exceptions noted below, spirits in Paris appeared to be good, with the annual Fête de Musique bringing music and street dancing in squares and parks throughout the city late into the evening. The Paris Air Show was generating business, and preparations were underway for the July 14 celebrations, the Tour de France bicycle race, and the summer creation of a recreational beach alongside the Seine River in the center of town.

Towards the end of our stay, however, the mood changed as several events related to the negative side of current life in France unfolded. The first was a massive daylong strike by the organization of taxi drivers, which snarled traffic in Paris and other major cities. The protest was against the competition coming from Uber, which has rapidly become very successful in France, with more than one million customers signed up. Using modern technology, Uber’s business model is much more efficient and attractive to clients than that of the taxis. The fares are significantly lower. Reportedly the vehicles are cleaner and the drivers more courteous. And drivers for the UberPop service, the largest of several Uber services in France, do not have a taxi license, which can cost as much as 240,000 euros.

Taxi drivers claim their business is down 30 percent because of “illegal competition” from Uber, and their anger boiled over in the protest, with violent attacks on some Uber vehicles. Unfortunately we got caught up in the mess when we delivered friends to Charles de Gaulle Airport in the middle of the protest there. Parked taxis blocked all the access roads. Buses dropped off passengers, who then had to trek uphill with their baggage. We finally were able to find a way to the terminal but then were stuck in our car another hour while the strikers argued with drivers they thought might be working for Uber. This was also the scene at the railroad stations and other critical traffic spots, with some cars being set on fire or beaten with metal bats.

The next day President Hollande said he was shocked by the violence but then gave the taxi union protesters what they wanted, declaring Uber, an American company, illegal. He said it must stop operations. Several days later, senior Uber directives in Paris were arrested for “conspiring to organize illegal work.” This was another example in France of government action being taken only after protestors take to the streets and violence breaks out. Here, a highly inefficient government-regulated monopoly and a trade union were protected against competition from modern technology and a business model clearly favored by the public. The situation with Uber is symbolic of the headwinds France faces when it seeks to compete in the global economy.

One day after the strike another problem raised its ugly head in a southern city, with a violent attack that had elements of both a murder for personal reasons (a man brutally killed his employer) and a Muslim extremist terrorist attack on a US-owned gas plant, which, thankfully, failed. The same day there was the bloody terrorist attack on a tourist hotel in Tunisia. These events took over the front pages in the French press, reminding the French public of the continuing terrorist threat in France. Security was stepped up, but the feeling of vulnerability to further attacks was palpable in our discussions with French friends.

The Jewish community in Paris understandably continues to feel this danger following the attacks earlier this year. Last Saturday shoppers crowded the boutiques of the historical Jewish quarter in the Marais section of Paris, together with young folks returning from the Gay Pride Parade, in which thousands participated. It was a happy crowd but one that was being carefully watched by heavily armed French solders along the road, a sobering sight. And one building that once was a school displayed a chilling reminder of the dark past of this area, a marble plaque with the following inscription (my translation): “To the memory of the Director, the personnel, and the students of this school who were arrested in 1943 and 1944 by the police of Vichy and the Gestapo, then deported and exterminated at Auschwitz because they were Jews.”

France clearly has its problems. Its President, François Hollande, has a low approval rating only halfway through his term and has not proved to be effective in achieving the kind of economic reforms that are sorely needed, such as liberalizing the rigid labor market and reducing the heavy administrative burdens for enterprises. One positive step, however, should be noted – a reduction in payroll taxes.

France’s high indebtedness is a persistent problem. Government debt as a percent of GDP, which was 57.8 percent in 2000, reached 94.9 percent last year and is headed over 100 percent. Yet France is not Greece by any measure. The French economy is the fifth-largest in the world in US$ terms, while the Greek economy is miniscule, relatively speaking. France’s economy is expected to advance by 1.5 percent this year and close to 2 percent in 2016, whereas Greece is in a severe recession that is likely to worsen.

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