The opportunity was apparently too tempting for French budget minister François Baroin. While the French National Institute of Statistics and Economic Studies (INSEE) had planned to publish the October issue of its economic review, 'Conjuncture in France'1, on the evening of the last day in September, on the morning of that same Baroin broke the embargo by revealing one of its key points: INSEE had revised upwards its growth forecast for 2010 to 1.6% - compared to a forecast of 1.4% it previously made last spring.
The minister was wrong to do this, for two reasons. Firstly, he blatantly violated European rules for publication of statistics. But most of all, he tried to give credence to the idea that the French economy is faring better, although a swathe of recent studies suggest precisely the opposite. According to these studies, France is suffering from increasingly deep social and economic divisions and social frustration is reaching its limits.
To a lay person, Baroin's first breach would appear unimportant. However, it is a very serious one. Major European countries have adopted a code of practice to guarantee the independence of statistical institutes and prevent them from being subjected to pressure or manipulation, which calls for rigorous procedures for the publication of economic and social indicators.
When, in 2004, Nicolas Sarkozy was finance minister [he was elected as president in May, 2007] he frequently broke those rules. Since 2007, the current finance minister, Christine Lagarde, has followed suit - and now Baroin continues to manifest the same disdain for INSEE's independence.
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1: INSEE publishes its economic review 'Conjuncture in France' quarterly, but the spring and autumn editions are a more limited update of the previous review. All direct quotes from the October issue are taken from the institute's own English version published on its website.
Fears of an economic relapse
The budget minister's reason for twisting reality to such a degree was to try and convince public opinion that France is recovering from the economic crisis, even though the country is actually on the verge of what could be described as a collective nervous collapse. In fact, his reference to an acceleration in growth represents only an infinitesimal extract from INSEE's October review.
The figure Baroin revealed appears in the report on page 4 of the English version and page 7 in the French document (see below). With a growth rate of 0.4% in Gross Domestic Product (GDP) in the third and fourth quarters of this year, the French economy should indeed show growth of 1.6% for the full year 2010. This is 0.2 point more than INSEE had forecast in its Conjuncture in France report in June, and 0.1 point above the hypothesis used by the government for its new finance bill.
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But a variation of 0.1 or 0.2 point is no more than a hair's breadth. This figure says little about the underlying trends affecting the French economy. And with the current year nearly over, the real debate now one which is currently dividing economists concerns a slightly longer-term horizon: is there a risk that France will suffer an economic relapse in 2011?
Numerous factors lend support to such a pessimistic forecast. Firstly, it is now clear that following the very steep recession of 2009, when the economy shrank by 2.5%, there was some respite for purely technical reasons, in particular caused by companies rebuilding stocks. These are inevitably temporary effects, and which will no longer play a role in 2011.
But worse than that, the finance bill for 2011, which the government has just unveiled, puts in place an austerity policy with a swathe of tax increases and reductions in public spending. This highly restrictive policy is bound to weigh on growth and may even choke it off. This is precisely what a large number of economists fear, including Joseph Stiglitz, the former chief economist of the World Bank and winner of the Nobel Prize for economics in 2001, as he explained in a recent interview with Mediapart.
The risk is increased by the fact that the American economy is currently slowing. Because of this, US demand for goods from Europe in general, and France in particular, is likely to take a dive. So there are no grounds for euphoria. Whatever the government says, the outlook is rather worrying, and - at least in part - because of its policies.
INSEE does not say this in so many words. In its habitual formal language, the institute's publication of figures is a careful exercise that does not judge government policy. In addition, the report simply adjusts economic forecasts for 2010, and does not aim to give forecasts for 2011. Nevertheless, one can read between the lines. In French the report was enigmatically entitled The West Wind, but its English title, Clouds Gathering in the West, is somewhat clearer in presaging difficult times to come.
There is a simple reason behind this. INSEE's experts also conclude that: "the global recovery is fragile and is currently showing signs of flagging." In particular, it says: "in the United States, the economic slowdown is marked." The inevitable consequence of this is that "By the end of the year, the euro zone will likely be affected by the American slowdown, via export outlets." The message may be subliminal but it is no less clear: the underlying trends for 2011 are worrying.
INSEE is not the only body to issue such a warning. All the major forecasting institutes are also issuing warnings, to varying degrees: contrary to what the government claims, the French economy is not in a phase of accelerating recovery. After estimating 2010 growth at 1.5%, the government is banking on 2% for 2011, although the consensus of private forecasting institutes for 2011 is only 1.5%. Of these, Natixis and Euler-Hermès forecast only 1.1% growth, while L'Expansion foresees 1%. It is evident that these growth forecasts are too weak to reduce unemployment, revitalise employment and absorb all the various public deficits. It amounts to an ominous bulletin.
A constant rise in unemployment
This depressed environment, together with a highly restrictive economic policy, leaves little room for hope of improvement. Unemployment is set to remain at record levels. INSEE predicts that the unemployment rate, which was 9.7% of the economically active population in the second quarter, "should be virtually stable, reaching 9.6% at the end of the year."
This factor, the cause of the biggest and most serious social divide, is therefore not about to ease up at all. It is important to remember that this figure is far from a full reflection of the social suffering endured by large numbers of people. The unemployment rate means that nearly 2.7 million people are seeking jobs. However, if job seekers who have been in temporary employment are included, the figure rises immediately to over 4.2 million people out of work, as the government's own statistics show in a report dated August, 2010 by the French national employment agency, Pôle Emploi.
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The underlying trend is even more alarming. Despite the minimal growth seen in 2010, these statistics show that the overall number of job seekers in all categories surged by 7.3% for the year to end-August. That figure alone deserves this verdict: France may have come out of recession in 2009, but unemployment has exploded.
Increasing insecurity in employment
If employment surged so strongly, it follows that employment has hardly grown. INSEE gave an indication of this in its October 'Conjuncture in France' review: "Job creations should come to 50,000 in the non-agricultural market sector in H2 2010 after +60,000 in H1."
This figure is worrying for two reasons. Firstly because, as we have seen, it is not enough to reduce the number of job seekers, but most of all, because the jobs created are overwhelmingly the most insecure, those involving limited-term contracts, temporary work, part-time work and the like.
Figures from the Ministry of Labour1(see below) show that of the 60,000 jobs created in the first half of 2010, and which INSEE enumerated in its review, almost all were temporary jobs. Temporary jobs in fact increased by 56,700 in the first half.
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These figures illustrate the existence of another major social divide. France may suffer from mass unemployment, but employment itself is becoming increasingly flexible. This is the outcome of labour market deregulation: companies hardly ever hire, and when they do, they mostly use only the most insecure forms of employment. No need for redundancy rights any more, companies can constantly adjust their personnel to fit their order books.
Another recent INSEE study (see below) looking at changes in employment over the past 50 years2 gives an even more impressive gauge of the insecurity that salaried employees increasingly find themselves up against, in a world where they were once protected by employment contracts with no time limit.
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It says that from 1990 to 2007, "the share of temporary jobs as a proportion of all salaried jobs rose from 10% to 15%." This is a quite astonishing development. In another example from the same period, it says that "the proportion of employees working part time has risen from 12% to 18%".
Part of the anger felt by working people, which is now so tangible in France, is partly founded in this: employment no longer offers the protection it once did.
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1: 'Temporary Employment in the Second Half of 2010' published by the Ministry of Labour in September 2010.
2: This INSEE report, '50 Years of Changes in Employment', dated September 2010, is currently only available in French on INSEE's website.
Poverty wages
To say that poverty-level wages exist in France could be seen as being overly bleak. Certainly a quick look at INSEE's statistics would tend to confirm that view. In its October 'Conjuncture in France' report, the institute makes a forecast that could create this illusion: "All in all, household purchasing power should grow at a rate of around 0.5% per quarter over H2 2010."
An initial reaction could be to say that 0.5% is not much but it is better than nothing, particularly regarding the fact that, for the whole of 2010, it would bring the rise in purchasing power to 1.3%. Nevertheless, these figures are deceptive, because this measure of purchasing power uses gross available income and is affected by the increase in the economically active population. It does not, therefore, reflect the real purchasing power as experienced by households.
The only way to elucidate true purchasing power would be to look at the two other indices INSEE uses: purchasing power by unit of consumption; and purchasing power per household. INSEE has not yet calculated these: they will only be available in its year-end review. But we already know that these figures would be far lower, probably around 0.4% for the first and around zero for the second. This means that in France, people are currently experiencing near-stagnation of their purchasing power.
But again, such figures, which are based on variations as opposed to absolute values, only give a very partial impression of the social suffering that many people currently endure. This is set out in another INSEE report1 that contains some alarming figures.
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Firstly it shows that, in 2008, there was 13% of the French population that lived below the poverty line. But it also contains another, even more spectacular figure: the median annual income in France was 18,990 euros [about $26,000 or £16,440]. This implies that half the population lives on less than 1,582 [around $2,170 or £1,370] per month. Here is a truer picture of the other divide that is sapping French society. France is a wealthy country that panders to its richest citizens but mistreats its salaried workers.
The governments social and economic plans should be seen in the light of all these figures, whether it be the austerity measures of the 2011 finance bill or the raising of the retirement age, a measure that protects capital and oppresses the workforce. Figures, nevertheless, that give only an imperfect picture of the countrys simmering social unrest.
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1: "Living Standards in 2008", published on October 1 2010, is currently only available in French on INSEEs web site.
English version: Sue Landau
