France: Bankrupt without Africa or Germany?

Subsidies at home, support from the Germans, and reaping the benefits of historic foreign escapades. Is France broke?

Commentators have waxed lyrical of late about China's lead in its dealings with Sub-Saharan Africa, as it digs for the continent's mineral wealth. Turkey, India, Brazil and others are in hot pursuit. US Secretary of State Hillary Clinton has warned African nations against Chinese neo-colonialism, saying “We saw that during colonial times, it is easy to come in, take out natural resources, pay off leaders and leave” reported Bloomberg last July. Chinese influence has gown exponentially, for sure, as Clinton acknowledged. Much to the irritation of America, no doubt. But what of France?

Another gleaming TGV train slips out of the Gare du Lyon in Paris packed with travellers comfortable in luxury seating and benefitting from expansive windows providing excellent views of the city and the countryside beyond. Meanwhile, tourists shoot holiday snaps as the stroll contentedly along an expensively lined and pristinely manicured Avenue de Champs-Élysées towards the iconic Arc de Triomphe. And yet French Prime Minister François Fillon declared after his appointment by President Nicolas Sarkozy in 2007 that "France is bankrupt and can no longer afford to pay its workers generous salaries and subsidies" reported the Telegraph.

So how does France survive? 

Clinton was not accurate in her remarks as they relate to the actions of France. In the 1960s, before France agreed to the independence aspirations of African colonies, it co-erced the Africans to agree to "compulsory solidarity". This involved the depositing of 65% of their foreign currency reserves into the French Treasury, plus another 20% for financial liabilities, claims This is Africa quoting an article by Mamadou Koulibaly in New African. The article stressed indignantly that these "countries only ever have access to 15% of their own money! If they need more they have to borrow their own money from the French at commercial rates!" 

The Colonial Pact involved the creation of a CFA Franc zone in the fourteen ex-colonies and permissions for the French to station troops in all those which were originally French (Guinea Bissau being previously Portuguese and Equatorial Guinea being formerly Spanish). The CFA was pegged to the French Franc, but now to the Euro.

France also bound these countries to agree to offer contracts to French corporations in preference to competition. Allegedly, when former president of Côte d'Ivoire Laurent Gbabo put out to tender a bridge construction project, a Chinese group offered to construct at roughly half the French price (and, to boot, agreed to be barter-paid in cocoa beans rather than currency), yet the French vetoed the process and demanded the contract be awarded to them. It must be presumed that this kind of scenario persists in all of these countries to this day.

No wonder the French were so keen to ensure Alasane Ouattara was the presidential victor in Côte d'Ivoire.

An exchange rate crisis erupted during the era of the European Exchange Rate Mechanism (ERM) when all major, and some minor, currencies were tied to the Deutsche Mark. On 'Black Wednesday' in September 1992 the cards collapsed as the Pound was hit by rapid selling by currency traders. The Bundesbank, the German Federal reserve, refused to support the British currency and the Pound left the ERM. Later the French Franc came under attack  This did not devalue and remained in the ERM because the Bundesbank had supported it. The defence of the French Franc "cost the Bundesbank and Banque de France tens of billions of deutsche marks but "it cost the Bundesbank its reputation for objectivity, at least in London, because the British complained that their currency had not been supported" while the French Franc "had been" asserts

On 8 January 1993, The Independent reported the "Bundesbank threw a lifeline to the beleaguered French franc yesterday by unexpectedly nudging down German money market interest rates".

The Guardian reported in 2000 that "the late French president, François Mitterrand, personally sanctioned a covert £10m payment to former chancellor Helmut Kohl's Christian Democrats to help them win the 1994 general election." It was pay-back time.

The French Franc was effectively subsumed into the Deutsche Mark to create the Euro between 1998 and 2002.

Had France not been fuelled by a persistent stream of money from Africa or supported by the Germans in the propping up of their over-subsidised, protectionist and uncompetitive country, it might indeed be as "bankrupt" as Fillon proclaimed.

As Germany re-assesses its position within Europe as it supports ailing peripheral Eurozone economies, it has stuck by France despite these French weaknesses. 

Chancellor Angela Merkel and President Sarkozy cosied up for the cameras at another photo-op after talks on the present sovereign and corporate debt crisis. But it will be the result of discussions between finance ministers and central bankers at the G20 at appropriately-selected Paris this month which will determine the fate of the Euro. 

They must be hoping beyond hope it doesn't go the way of the French Franc.

It's true to say that there are world-beating French corporations operating internationally, like:
  • LVMH, a luxury goods conglomerate
  • Total, an oil business
  • Carrefour, a supermarket chain
  • AXA, a financial services group 
  • GDP Suez, a public utilities group
  • EDF, an electricity generator
  • Veolia, a public utilities group
  • Sanofi, a pharmaceutical multinational.
It is not my intention to detract from the achievements of these. Nor from the unrivalled quality of French culture, cuisine and wine, the size and scope of France's tourist industry, and the considerable promise of its up-and-coming tech wizards

Economic nationalism has been employed to protect certain French businesses, deemed to be companies operating in industries of strategic importance. But yoghurt? A bid by the American firm PepsiCo for Danone was thwarted by this. 

And there have been others, like Mittal of India's attempt to acquire Arcelor, a steel producer, and Enel of Italy's bid for Suez, a ultities group.

Is it not of concern to the French that their elite have yet to figure out how France's domestic economy can survive in this competitive world without recourse to protective measures, assistance from Germany, or reliance on unjust deals struck at key historic moments with former colonies?

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