France: Hollande's support drops further as tax scandal poses need for radical change

Former budget minister Jerome Cahuzac has finally admitted to having a Swiss bank account for tax evasion purposes.
April 16, 2013

The admission on April 2 by former French Socialist Party (PS) government budget minister Jerome Cahuzac that he did have a Swiss bank account for tax evasion purposes has set off a storm of disgust and fury in France.

The already unloved government of prime minister Jean-Marc Ayrault has been shaken to its core. President Francois Hollande’s popularity has sunk faster and lower than that of any president in the history of France’s Fifth Republic.

It is not hard to see why. Here was the minister entrusted with the fight against tax fraud found out to be a lying tax cheat.

Here was an arrogant and contemptuous political oligarch, a “socialist” who proclaimed the class struggle dead in TV debate with the Left Party’s Jean-Luc Melenchon, caught out playing the same filthy game as Cayman Island-registered banks and Russian mafiosi ― a game that costs European Union governments one trillion euros a year.

Moreover, all the time Cahuzac was denouncing Mediapart’s reporters who broke the story as liars, he was part of a government that raised consumption taxes and introduced laws to make it easier for bosses to sack workers.

Plummeting support

Nor was a Cahuzac a lone fraudster. The Mediapart investigations have so far uncovered that Jean-Jacques Augier, Hollande’s presidential campaign treasurer, has been investing in the Cayman Islands.

Before the Cahuzac scandal broke, Hollande had plummeted to a 70% negative rating in the Ipsos opinion poll, from 27% in just 11 months. Over the same period his positive rating had halved to 26%.

The April 12 Mediapart lead article was titled “SP deputies on the edge of a nervous breakdown”.

Why have the hopes of May 6, last year, when Hollande defeated the right’s Nicolas Sarkozy, turned to ashes so quickly, at a record speed for disillusionment in a social democratic administration?

The answer lies in the blatant contrast between what Hollande promised. He pledged “to restore the sovereignty of the Republic over the markets”, but has so far delivered lower growth, higher unemployment, cutbacks in public services and higher taxes.

All this has been done without any lessening in the wealth, power and influence of the French oligarchy, or any reversal of European Union’s austerity policies.

The signs were there from early on.

As a candidate, Hollande promised to renegotiate the European fiscal pact (which locks governments into 0.5% maximum annual structural deficit, to be enshrined in national law). As president Hollande signed it into law without trying to renegotiate so much as a comma.

This surrender has been followed by others. These not only proclaim that the Hollande-Ayrault government is impotent before “finance”, but that it takes that sector’s interests very seriously.

Hence a law to increase “flexibility” in the labour market, made between the French employer federation Medef and two minority union federations and a budget this year that is helping shrink the French economy because it makes no serious attempt to raise public investment.

The budget also left in place 433 of the 449 tax exemptions operating under Sarkozy, foregoing about 42 billion euros in revenue this year.

Daunting challenge

Hollande’s situation dramatises the daunting challenge for social democracy in the present period of economic crisis and stagnation.

To implement even the mild set of reforms promised in his presidential election campaign (“Change is Now! My 60 Commitments for France”), Hollande needs economic growth rates to reach at least 2-3%. But that can happen only through increased private or public investment.

Business investment, however, is falling in the wake of slowing demand (-1.6% to the last quarter of 2012) and public investment is being strangled by EU fiscal discipline.

The result is that, despite Hollande’s studiously stilted style as an “ordinary Frenchman”, the PS-Greens (EELV) government is in near-complete continuity with Sarkozy’s on economic policy.

The millions of French people who voted for Hollande’s “change now” have ended up with a president who reminds them more and more of his predecessor ― right down to a growing manner of presidential government by press conference that Hollande as candidate had criticised very effectively.

Turning point

On April 5, the Left Party commented: “The Cahuzac affair is provoking anger and disgust.

“In its extreme seriousness, it not only lays bare one man’s lack of honesty and integrity. It also exposes once again a profoundly harmful oligarchical system, a democracy that’s run out of steam and the increasing collusion between the upper echelons of the finance system and those of the state.

“The reign of finance must be brought to an end.”

In the face of “an oligarchy that believes it is all-powerful”, the Left Party called for a “response that must be strong and clear”. This took the shape of a call for a mass citizen protest in Paris on May 5, which all people disgusted with the status quo (and not just Left Front supporters) have been urged to attend.

May 5 is not only the first anniversary of last year's presidential election, but also the 224th of first sitting of the States-General in the months before the French Revolution. The States-General began the process of creating France’s first democratic constitution.

The Left Front is using the anniversary to stress the need for a new constituent process to found a Sixth Republic so that “the people again take power”. Its statement ended by undertaking to do everything necessary to ensure that “legitimate anger finds an outlet in hope and social transformation.”

The Left Party initiative, particularly as explained in various television interviews with Jean-Luc Melenchon, has become the response to the government crisis towards which all tendencies on the left are having to orient ― including within the governing PS-EELV coalition.

Melenchon sees the citizens’ rally as indispensable so that the people can start the “clean sweep that must be given to clear this absolutely intolerable political atmosphere”.

For Pierre Laurent, the national secretary of the Communist Party of France (PCF), the other main Left Front affiliate, “popular repudiation is huge. The authorities have lost the confidence of the French and above all among those, the majority, who have wanted the bar set to the left.”

Inviting PS and EELV members and supporters to join the demonstration, he said, “the policy of Francois Hollande is no longer legitimate”.

“If we don’t want to open the road to a political crisis and the far right we must all come together: there is a majority for another policy.”

Laurent said that he wasn’t comfortable with Melenchon’s term “clean sweep”, specifying that March 5 should be “against austerity and finance and for the Sixth Republic”.

Tensions

The Left Party initiative has already produced splits and tensions within EELV, which has two ministers in the Ayrault government. While its 12-person national executive bureau voted that it would not participate on May 5, there with six abstentions.

This was “more than might have been expected”, according to Jerome Gleizer, a leader of the EELV left.

More importantly, Eva Joly, the EELV’s presidential candidate last year, said she would attend May 5 “to say clearly that we want a Sixth Republic, an end to holding more than one office and a real fight against finance, tax evasion and corruption. The measures taken to date have been totally inadequate.”

Joly added: “I think a lot of our members will be there.”

The mainstream EELV position has been put by David Cormand, in charge of relations with other political organisations. Cormand said: “I don’t identify with this unilateral appeal of Melenchon’s for a ‘clean sweep’.

“Building a democratic debate with sound and fury is not a good idea … if this government fails, it won’t be another left [coalition] that wins.”

Within the PS, the left currents have been noncommittal about May 5, even while calling for an end to austerity and more confrontation with the European powers-that-be.

The current “Leftwards Now”, which won 30% support at the last PS national congress, calls for a “new majority political pact, which would include the Left Front”.

On April 10, Hollande, under huge pressure to be seen to be doing something about the unraveling crisis, announced an “implacable struggle against excesses of money, greed and occult finance”, detailing a series of measures to address tax evasion and the financial affairs of France’s politicians.

The left daily L’Humanite described them as “thoroughly inadequate” for an economy which “loses” between 50-80 billion euros annually. They will, however, cause anguish in the finance sectors because French banks will be put on an uneven playing field compared with their competitors.

The measures include:

· Full exposure by French banks of profits, subsidies and state aid received by their foreign subsidiaries. France will push for the EU to make this a universal European norm;
· Publication of a list of tax havens and description of any country as a tax haven if it refuses to cooperate with French tax authorities;
· Setting up an independent authority to investigate tax fraud and corruption; and
· Promotion of an automatic exchange of information on bank accounts set up abroad by French nationals.

The first major shortcomings of Hollande’s proposal is it requires a huge restrengthening of the French tax authority (which has lost 25,000 workers over the past decade).

The second is it does not tackle the core problem identified by the Left Party and others: the increasing collusion between the upper echelons of the finance system and the state.

Laurent said: “It is necessary to address the root of the power of money, clarifying the relation between the political power, which must originate from citizens, and the financial sector, which must not replace the general interest.”

The turnout on May 5 will be an important indicator of whether Hollande has had any success in arresting the galloping crisis of his presidency.

[Dick Nichols is Green left Weekly’s European correspondent, based in Barcelona.]


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