Dr. Doom has spoken: Europe is in for a storm, and it's not just the infamous PIGS - the acronym used to refer to Portugal, Ireland, Greece, and Spain, the four European economies most exposed to the debt crisis--but a true heavyweight: France. Nouriel Roubini, the new star of the economic world due to his accurate prediction of the economic crisis, has set off alarms in the French press by describing the state of France's debt as little better than that of the PIGS. This is a surprising charge for the Eurozone's second largest economy, whose deficit this year amounts to just 7.7 percent of GDP compared to 9.3 percent for Greece and with a sovereign debt evaluated at 77.5 percent of GDP compared to Italy's massive 115.2 percent. Indeed, more orthodox pessimists have pointed at Italy, rather than France, as a likely target of bond vigilantes following assaults on the PIGS. Roubini's charge is particularly troubling given the fact that France was largely spared the real estate bubbles and bank failures which exploded Spanish and Irish deficits.
For Roubini and like-minded deficit hawks, however, the concern isn't about the current debt levels but rather the lack of reforms aimed at reducing ballooning deficits. Whereas the Italian government has severely restrained its budget over the course of the financial crisis, French President Nicolas Sarkozy has pushed stimulus measures, significantly increasing spending figures. Of deeper concern for Roubini, however, was Sarkozy's inability to deliver on promises of important structural reforms and the improbability of any such reforms passing in the near future. Indeed, whereas austerity has been the buzzword in European governments from debt-stricken Greece to model student Germany, French leaders have refused to so much as utter the word, preferring to speak instead of accepting responsibility. Euphemistic acrobatics aside, it appears that by weakening the omnipresent Sarkozy, the fiasco surrounding this year's pension reforms may allow more efficient deficit-reducing measures to pass.
The images of the summer's national protests--which brought millions of French men and women, from high school students to retirees, to the streets and almost brought the country to a standstill as striking workers blocked access to the country's oil refineries--did little to inspire faith in the country's ability to pass the structural reforms desired by deficit hawks. Despite the comparatively timid nature of the pension reform--primarily raising the minimum retirement age from 60 to 62, and from 65 to 67 for full benefits--the measures faced sustained resistance from the opposition and labor unions. Since then, more violent protests have taken place across Europe, primarily in Greece, Spain, and the United Kingdom, against proposed austerity policies. Yet no other protest movement has gathered as wide ranging support as the French strikes. Whereas Greek voters have largely approved the current government's colossal budget cuts and protesters in Britain have been confined to small groups of students, polls indicated nearly two thirds of the public supported the strikes, with 55 percent opposed to any rise in the retirement age.
Despite strong public opposition, bolstered by a series of corruption scandals implicating the president and several government ministers, the conservative majority passed the reform measure last September. Sarkozy entered the fall nonetheless considerably weakened as his opinion ratings sunk to record lows and critics arose from within his parliamentary majority. Despite a long list of promised reforms yet to be introduced in parliament, including measures on public sector pay and elderly care, many analysts share Roubini's pessimism about Sarkozy's ability to push through any substantial reform with presidential elections fast approaching in 2012. …