There is a very fashionable scenario in Paris at the moment: why reform? The global financial crisis is almost over; the world is at the end of an economic cycle; growth will return soon everywhere and especially in the West; first in the United States and then in Europe. Unemployment will then decrease in France and the eurozone will gently sail into a federal future which all member countries will accept with no special disruption, through institutional and homeopathic reforms.
Some preliminary signs in favor of this thesis are present: the property sector is bouncing back in some areas of the United States; consumption and employment growth are picking up, and things are going to be better, some say, after the elections, thanks to the enormous progress in technology. Asia and Africa are experiencing a booming economy, with growth rates exceeding 10% per year in many countries. And the coming to power of a new Chinese leadership will put an end to the uncertainty. The eurozone, now joined together in the desire to remain united, will get swept up by this wave of growth, like a boat pushed by the current towards the high seas.
Nevertheless some other facts, established case facts, are pointing in exactly the opposite direction: in the United States, the need to control the internal and external debt is expected to result, beginning in January 2013 in tax increases causing a new recession, and a drop in the value of the U.S. dollar which will be catastrophic for Europe. In addition, nothing has yet been solved in the eurozone: the economic, social and political situation in Greece is worsening, public debt is getting close to 200% there; all the austerity plans are failing there; so in the same way, soon, it will be the case in Portugal, Spain and Italy. The French and Germans have not yet agreed on mechanisms to be put in place to finance banks and governments. And no leader, in Germany or France, is bold enough to confess to his constituents that in order to save the euro the cost to each country will exceed EUR 100 billion; and that to let it explode will cost us more. Nothing is ready to put in place a real federal budget, capable of issuing eurobonds, the only ones capable of financing these huge needs.
Moreover, even if global growth is back, we are not in a cyclical crisis, with a return to the starting point. But, just like after 1929, in a lengthy transformation towards a new world; a crisis from which some countries will come out far worse off than when they entered it, like boats washed upon the shore by a huge wave.
In other words, we could see a slight upturn towards the end of 2013; and even a return to sustainable world growth. But this would be very misleading for Europe and for France, because without long term security.
We can only understand what to do now but by having a vision of History longer than the one needed in the election timetable. And there, it becomes clear that Europe will not come out of the crisis without establishing a proactive and urgent fiscal federalism, in which France will maintain its standard of living only by daring to undertake some major reforms, listed for a long time.
To bet on global economic recovery as a substitute for reforms is very tempting. And politically comfortable. But, in my opinion, this is a bet that has only one in five chance to be a winner in the short term, one in ten in the medium term and none in the long term. Who can settle for that?