Thomas Péran is professor associated with the Paris School of Business, he is also cteacher in finance at Sciences Po Bordeaux. He is aauthor of the classic Bank managementEditions Dunod. And it is by his quality of expert and actor of the economic world that we decided to interview him and to have his opinion on the economic offer of the presidential.
Public finances are among the major issues of this campaign. What do you think are the most pragmatic solutions to address this issue?
Indeed, this presidential campaign has very particular characteristics. It no longer follows the traditional scheme of the Fifth Republic based on the over-valuation of cleavages: government/opposition parties and left-wing/right-wing parties… Today, political postures are above all thematic. And that is the real good news of this campaign. For example, Emmanuel Macron is particularly representative of this recent trend. In addition to his statement “neither from the left nor from the right”, it is his willingness to embody the “Mr. Economy” that is striking.
Of course, the campaign also brings its share of bad news. Never before had the candidates’ legal cases taken such a place in a campaign (in number, fortunately not in intensity, because on this last point, the beginning of the 20th century remains the champion). And it is here, among the bad news, that we must mention the public finances of the State. Their level and the lack of policy consideration on this point is distressing. Since you are asking me about the solutions to be provided, the answer is simple: the universal vocation to change the doxa majority policy is displaced. We already have all the tools necessary for sound management of public finances: parliamentary and Court of Auditors reports, benchmarks, audits, cost calculations and ratios… We have never quantified so much, and yet the world has never known less where it was going. The instability of the political programmes put in place since the first use of the presidential five-year term in 2002 is a major factor. The distortions resulting from the presidential use of our system, even though it is constitutionally parliamentary, are also responsible for the state of public finances.
Just a reminder: the Stability and Growth Pact is a simple tool that advocates a 3% excessive government deficit and a debt ratio based on GDP of 60%. However, we are now at 3.4% and 96% respectively. It’s amazing! Reducing expenses is on paper a child’s play. It is to do it sustainably and consistently that is complicated.
Unemployment has never been so high in France. The business world is accused of all the wrongdoings. What solutions do you think are needed to change this state of mind in terms of investment philosophy and policy within companies?
Here again, the radicalization of the vocation to change is not to be encouraged. France is a more interventionist than liberal state. This is a historical fact, which in the end calls for few comments. It is necessary to deal with, and above all to integrate this component well into political action. In a state whose social and political constitution is fundamentally interventionist and “human rights”, the budgetary mass is logically large and the debt ratio more difficult to contain. Two measures seem interesting to pursue in order to improve employment policy.
First, the introduction of a single employment contract that is simpler and more adaptable seems, according to serious econometric studies, to be a credible approach. Some see it as an emanation of a powerful neoliberal regime, but this is not the case. The French seek equality, a strongly affirmed constitutional value (preamble and article 1 of the 1958 Constitution, among others), and this measure seems capable of responding to it. You refer to the “philosophical” aspect of employment and investment policy, and that is exactly what this type of contract is all about: the egalitarian philosophy of work and the end of a cleavage of the labour economy.
Second, in a perspective of permanence of political action, to be preferred over the permanence of institutions and guarded places which ultimately does not matter, a return to the Plan could be recommended. This should not be seen as a return to the dogmatism of the 20th century, but rather as a measure of consistency over time in public spending and investment. It is well known (and also well forgotten) that taking into account the time factor in the implementation and success of economic programmes is essential. We have established as a fundamental managerial trend, both in the public and private spheres, the functioning in “project mode”. But this does not always lead to coherence. The new economies (the concept of emergence is inappropriate), particularly the Gulf and Asian countries, whose growth figures Europe envies, are now intelligently implementing multiannual strategic plans, as we did a few decades ago. Multi-annuality and program laws are indeed components of our public finances (see the Organic Law on Finance Laws of 1er August 2001), but the instability of policies does not allow them to have full effect.
For some candidates Europe and the Euro are accused of all evils. What is your opinion of the European construction and what are, in your opinion, the projects that remain to be filled?
It is true that the Member States of the European Union do not have the same economic fundamentals. For example, in order for the euro zone to be balanced, experts recommend that the current account balance of States should not exceed 6% of GDP. France is now at -0.5% while the Nordic countries are getting closer to 10%. It is therefore difficult to pursue a single economic policy (although this is the aim of the European Union). The observation and imitation of federal states seems essential here to better understand how we could meet the challenge of heterogeneity. Let us recall that Europe is not legally a Federation since it does not have a Constitution that would be superimposed on the national Constitutions (it is the criterium of the Federation).
But it seems essential to affirm that, in the case of France, which has a public debt of 2147 billion (I borrow the figures of my colleague and brilliant economist Jean-Paul Betbeze), it is the fundamentals of the national economy that are responsible for the impasse. The reflection must also be carried out internally, and not only within the European Union. Europe is an opportunity and a strength, we must not deny what our predecessors have been creating since the 1920s. In this respect, the approval by vote of the framework of the Brexit 5 April 2017 and a demonstration of all the appeal and the fundamental place of Europe. By suspending the establishment of the United Kingdom’s trade relationship with the Union until its definitive withdrawal, the desire to preserve the euro is clearly put forward.
Finally, to increase the performance of the European Union’s economic policies, the focus on companies must be increased. This requirement is well understood by the European institutions (see for example European Commission Memo 11/879). Acting on rates as the European Central Bank does without building the regulatory framework to facilitate access to credit and financing for SMEs is illusory. The AIFM Directive 2011/61/EU of the European Parliament and of the Council, as well as the EU Regulation 345/2013 of the European Parliament and of the Council, have effectively led the way. We must now go further.
What economic policy do you think should be put in place to ensure the success of the next five-year period?
On a strictly economic level, the room for manoeuvre is extremely limited in terms of public spending, as is the redefinition of the trade balance within the single market. It is on innovation and tax exemption for privileged sectors that we will have to focus on. The French industry is, for a while to come, powerful. It is fully capable of winning tenders for major European and global projects. The impact of these major public and private markets is both strategic and reputational. The size of France in recent centuries was strongly correlated with the size of its industry. That is why we talked about an industrial revolution. In terms of energy production, the construction of transport infrastructure and technological innovation, France can still contribute to the world and the next President must be the main market. Providing strong support for competitiveness clusters such as Finance Innovation, at the head of which Joëlle Durieux is doing a huge job, is for me “the” lever for action for the next five years. The financial health and the role as a model played by the French FinTechs are the best indication of this.
Thank you, sir, for answering our questions