FRANCE NOW
(French news in
English)
November 1998, Monthly, Issue No. 19
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European Fiscal
Federalism
Of the ECU 90 billion (FF 594 billion)
expenses of the EU, about 17.6% is financed by France ( ECU
16 billion or FF 105 billion). Most of this budget is spent
on the Common Agricultural policy (ECU 43 billion) and
Structural Operations (ECU 33 billion). Till 1995, the UK
and France were the major net contributors to the system,
Germany was a marginal contributor and the others were
mainly recipients. Since then, however, the Dutch and the
Germans also have become major contributors. France is a
recipient under the Common Agricultural Policy. Some French
zones also receive aid under the Structural operations
criteria. Of course, the gains from the subsidies do not get
evenly distributed to all the farmers. It is estimated that
20% of the farmers manage to obtain 80% of the European
subsidies. But this is another subject.
All this was done to ensure adhesion to the Common Market.
Because a few industrialists, mainly large ones, would get
access to a larger market. Because federal laws would be
voted which would level the playing field for many
industries across erstwhile national borders. Because the
risk of doing business with unknown laws of other countries
would disappear. For it is not only the customs tariff wall
which impedes the flow of goods and capital into a country -
it is also the inability to master a second legal system
which is not structured to the advantage of those invading
with their goods or their machines to conquer new markets
for themselves.
Now the Dutch and the Germans would like to stop paying
so much. Why is there a threat that the payments might be
stopped? If the payments to France, for example,
are being stopped, does it mean that the French market is no
longer important or does it mean that the French market is
already conquered? A little bit of both and a little of
something else.
First, while the absolute importance of the French market
remains the same (with such a low population growth), the
relative importance is lessening because there are three new
members and more willing to join. So, losing the French
market (if France secedes from the Union) will be less
important.
Second, the market is to some extent conquered because
the risk of France leaving the Union has diminished. With
countries less competitive than France joining the Union,
there will be opportunities for competitive French
industries (telecommunications, armaments, nuclear) to
exploit new markets if France remains in the Union. And the
cost of losing out on this larger internal market will be
more for France.
Third, the Dutch and the Germans have to pay for the new
members and for inciting others to join. They do not want to
increase their total payments. So, they would like to
redistribute from the ones they are sure to retain (like
France) to ones they have just acquired or want to acquire.
Hence all the noise.
European Investment Bank - the monetary glue
During 1997, France received Ecu 2.7 billion (about FF 18
billion) of loans from The European Investment Bank (EIB).
This makes it the fourth recipient, after the UK, Germany
and Italy. Of this, FF 11 billion were for projects situated
in regions requiring industrial conversion. Most of the
loans were to big enterprises, but 7,400 small and medium
enterprises did obtain FF 2.7 billion. This gives an average
of FF 350,000 per small or medium French enterprise.
The EIB was created in 1958 to sustain a balanced
development and the economic cohesion of the member-States.
In addition to the fiscal glue, this is a financial glue
ensuring that all regions prosper from the Union. This bank
collects borrowings (or deposits) of Ecu 25 billion (about
FF 160 billion) per year.
Over the last five years, about Ecu 64 billion have
helped finance investments of Ecu 160 billion in less
developed regions of the European union. Most of this has
been given to large public and private enterprises. But Ecu
10.7 billion has been distributed to 47,000 small and medium
enterprises through 130 European banks. This gives an
average of Ecu 225,000 (about FF 1.5 million) per small or
medium European enterprise, considerably more than that
obtained by average French counterparts. It also gives an
average of Ecu 82 million (about FF 535 million) distributed
through each bank.
During this period, about Ecu 46 billion of financing is
directed towards infrastructure financing: Scandinavian
straits, TGV trains, aviation control, electricity and gas
inter-connections, etc.). Another reclassification indicates
that environmental projects (water treatment, air, waste
treatment, urban reorganisation) have received Ecu 28
billion.
The EIB also lends to the third world to promote European
influence. The aid is directed, in order of priority, to the
African-Caribbean-Pacific regions, the Mediterranean
countries, Eastern Europe and, finally, Asia and Latin
America.
European federalism and the COB
The Commission des Opérations de Bourse (COB) ensures the
protection of small investors, adapts regulations for
issuing capital to the evolution of the market, improves the
quality of information available to the market, ensures fair
market practices, and co-operates with European and
international agencies regulating savings and investments.
In 1997, it oversaw 288 portfolio management agencies who
managed more than 1500 SICAV and other mutual investment
funds. It also supervised another thousand organisations
managing investments on behalf of their clients. On receipt
of 733 complaints, it opened 82 enquiries. Of these, it
transmitted 24 to the civil courts and 10 to its own
administration. It pronounced penalties in two cases.
At the European level, there is now a Forum of European
Securities Commissions (FESCO). For this forum, the COB co-operates
with other regulators of the European Union and furnishes
information requested.
The future of the COB is likely to be as dynamic as the
market. With European federalism as well as globalisation,
companies are able to choose the place where they want to
issue shares. Among other things, they look at the Stock
Exchange with the minimum of regulations. To compete in such
an environment, the COB needs to speed and simplify its
approval systems. The flip side is that protection of
investors may then suffer. Of course, investors may prefer
to invest with companies issuing shares in Exchanges where
the police function is strong. A delicate compromise has
therefore to be made. Big Brother will let you get on with
it but he is watching you very closely.
The Politics of Illusions: The
Students' Movement
A hundred thousand high school students demonstrated. They
are being trained to participate in the national dance: in
October, November and December, someone has to demonstrate.
The truck drivers last year, the unemployed in the beginning
of this year. The students are not the only ones this year.
The suburban train drivers want a police escort because
adolescents come and bash them up. The retired demonstrated
because their pensions are inadequate. But the reasons for
the students' demonstrations are particularly illusory.
National Budget for 1999 compared with 1998
|
1998 |
1999 |
Manpower |
Total government personnel |
241249 |
2207970 |
School Education |
941249 |
941249 |
Higher Education |
126766 |
127381 |
Research & Technology |
312 |
312 |
Total Budget
Expenses in FF millions |
Total government expenses |
1586669 |
1669205 |
School Education |
285934 |
297744 |
Higher Education |
48459 |
51114 |
Research & Technology |
39613 |
40008 |
Expense per
employee in Francs |
Total government expenses |
707940 |
755991 |
School Education |
303781 |
316329 |
Higher Education |
382271 |
401269 |
Research & Technology |
126964744 |
128230769 |
From the above table it is clear that half the public
sector manpower is in education. However, education
represents only 21% to 23% of the government budget
depending on whether we include the budget of R& D or
not. In fact, the graphs alongside indicate that government
employment is reducing since its peak in 1990. However,
employment in the educational sector is still not matching
this reduction.
All this education to understand why they will be
unemployed, that machines may replace men. All this money
being spent so that teachers have the pleasure of having
students to teach. Teachers who are unable or unwilling to
set up their own private schools: little asharams
in forgotten parts of the country. And if machines are
replacing men in production of goods and services, why is
education still required? Do we need to pay such high taxes
to educate our kids to learn things which they do not always
enjoy learning? This is perhaps the main reason for students
to want to live a better life with reduced academic hours.
Twenty-six instead of thirty hours a week. It is also a good
reason for businesses to demand that education levels be
reduced so that taxes flatten out. Besides which, less
educated workers may ask less stimulating questions. And
this may also solve the problem of the thirty-five hour week
for the teachers. If the rest of the country is working
thirty-five hours instead of thirty-nine, the teachers would
also like to reduce from eighteen to sixteen. And this
requires either more teachers for students or less education
for the students. It is evident that the students are told
to ask for lighter burdens. This seems the only plausible
explanation for the strike.
While the Assembly voted in his budget, the following
interim measures are proposed by Claude Allègre as sops to
the students:
1. 3000 Supervisors, 1000 on call and 10000 youth jobs
will be appointed.
2. A four billion Franc fund is created for giving loans
at zero interest rate to regions for improving school
facilities.
3. Reducing the work-load of the students and reducing
the number of hours of studies per week.
4. Ensuring that from next fall no high-school class has
more than 35 students.
5. Creation of a School Council in which students are
represented, support for their press and ensuring that
students' rights are clearly published in a Charter in every
High School.
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