How France Is a Microcosm for the Euro-Zone Crisis

Renewed urban violence in France and continuing instability of the euro offer reminders that economic disparities and widening divisions can only be remedied through the difficult work of integration

The rioting that rocked the French city of Amiens on Aug. 13 and 14 was a grim reminder that little has changed since 2005, when the exclusion and alienation of France’s blighted housing projects exploded in violence that spread across the country. France, the world then discovered, was a seriously divided country. It still is. And despite billions spent on housing renovation and infrastructure improvement in some of France’s worst neighborhoods, the eruption in Amiens this week was another demonstration that the gap between mainstream society and its blighted banlieues remains as large as ever.

But France and its discontents are also a microcosm for the instability in the euro zone. Like France, the 17-country collective is in reality a fractured grouping of have and have-not members whose economic, employment and wealth imbalances are increasingly untenable. And in both the French and euro-zone crises, resolutions requiring a degree of integration, compromise and sacrifice of individual interests to wider common cause are still being resisted even as calamity looms. Instead, moves to unite under a single roof and mutually respected rules — whether fiscal or social — are rejected as too messy, unpopular and scary.

Aversion to decisive integration is quite evident in the euro crisis. Even as the financial markets put pressure on the most indebted and economically febrile euro partners, the zone’s leaders have shied away from the one thing investors want most: binding and enforceable rules on deficit and debt levels for all the nations using the common currency.

The accord produced at June’s E.U. summit took some steps toward budgetary and banking integration across the euro zone. But that stopped well short of the far-reaching measures needed to resolve what critics like Paul Krugman argue is the currency’s essential failing: the absence of a single economic area functioning under the same fiscal rules, capable of pooling collective reserves and debt, and overseen by a strong central bank ready to intervene in the face of economic or monetary troubles.

Why all the aversion to integrate — even as the euro’s very existence still appears imperiled? Wealthier and reform-strengthened states like Germany and Finland don’t want to jeopardize their finances by conjoining them with partners like Greece and Italy — whose history of reckless spending, nonchalance with escalating debt and horror of reform helped create the crisis in the first place. Why trust them to obey new rules when they flaunted existing regulations, higher-minded and deeper-pocketed members ask?

Of course, all euro nations — including Germany — violated deficit and debt limits as governments put national priorities over mutually beneficial strictures. Crisis or not, none are thus far willing to bow to the crisis by relinquishing spending power they may want to abuse once calm has returned. Plus, nationalism gets in the way.

Countries with generous welfare states and weighty tax structures like France and the Netherlands don’t want to be told how they can and can’t raise and spend public money by Brussels — even if it’s for their own fiscal good. In the meantime, if spending ceilings were to impose de facto shrinkage of big welfare states, affected nations would doubtless call for an increase in minimal levels of state assistance and taxation to prevent what France has called “social dumping” by partners like Ireland. Despite the payoff of a far stronger and more stable euro zone, no one wants to surrender the autonomy serious integration would involve.

A similarly dissonant dynamic is evidenced whenever efforts are made to solve the growing divide between mainstream French society and its riot-prone suburban housing projects. French leaders demand that inhabitants of those areas adapt to and integrate into French society and culture to enjoy its benefits — a rather revealing exigence given that most project residents are French born and raised. Indeed, suggestions of willful segregation typically spark counterclaims that France actively inhibits their attempts to enter the nation’s mainstream. Banlieue residents contend that good schools, functioning public services, comfortable housing, and above all jobs, are found only in affluent city centers and are inaccessible and unaffordable where they live.

No one in France contests that a more widespread affluence would quell the eruptions of violence like the one that exploded in Amiens. But that would involve more faces from the ghetto turning up in predominantly white work places — and an educational and behavioral effort by defiant and angry project youths to qualify for and land good jobs and living arrangements. Too much change, compromise and potential loss are involved on both sides of the socioeconomic divide for that to happen, so France remains trapped in a ritual of mutual accusation of just who’s preventing the needed surge of integration.

Employment is, of course, the key to bridging France’s gap — and reversing Europe’s deepening economic slump and euro crisis. But the job outlook in both scenarios is bleak. Even before the current economic crunch set in, jobless rates in French projects flirted with 25% for all adults and nearly 50% for younger people. Those notoriously high figures for French banlieues are now rivaled by national averages in Spain (24.6%) and Greece’s (23.1%); youth unemployment rates in both countries are similarly estimated at around 50%.

That has left Europe’s southern flank looking to northern euro partners — like Germany (5.4% unemployment), Finland (7.5%) and the Netherlands (5.3%) — for help out of their deepening crisis in same the way French project dwellers have long appealed to mainstream society. In both cases, responses have been similar: short-term handouts to buy time dished out with stern instructions for the afflicted to lift themselves up by their own bootstraps.

But tough love is only effective when it’s practiced as well as it is preached. To end Europe’s interminable debt crisis and economic spiral, all 17 currency members will have to give till it hurts — and then some. Stronger nations will have to pool their debt and reserves with debt-swamped countries like Greece, Spain and Italy to give them the breathing room they need to recover and rebound. In exchange for the higher borrowing costs and greater exposure to (theoretical) default that will involve fitter nations like Germany, Finland and even France, all euro partners will have to surrender considerable budgetary and fiscal autonomy in submitting to rules and enforcement on spending limits required to turn the euro zone into a real, united European economy. The only way out of the current crisis — and future prosperity — is through mutual strength and a far closer euro union.

In the same way, to end its regular fits of urban upheaval, France must end the geographical, occupational and economic isolation of its projects by welcoming a growing number of their residents as students, employees and neighbors within mainstream French society. Simply renovating blighted housing blocks and trying to spruce up shoddy public services in suburbs are not an alternative to true integration of banlieue residents. The denizens of the projects must want to buy into the idea of France and commit to the investment, with all privileges and hardships it entails.

In seeking to end divisions plaguing both France and the euro zone, all actors must resolve themselves to surrendering significant aspects of the familiar but dysfunctional status quo to create the possibility of receiving anything lasting in return. That’s a scary leap of faith that will provoke considerable political and public resistance. But it’s also an unnerving jump promising less trauma in the long term than sticking with unworkable arrangement that have produced so much instability and suffering thus far.

By Bruce Crumley

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