PARIS, Jan. 3 (UPI) -- In Europe at the start of this New Year, all eyes are turning to the east, where three intriguing dramas are under way.
Ready or not, Romania and Bulgaria have joined the European Union, and are thus safely within the gated community. Belarus is paying the price for being outside, bullied by increasingly assertive Russia into paying more for its energy supplies, and having to "sell" Gazprom half of its pipelines into the bargain. And Turkey continues to wait in the wings, uncertain whether the EU gates will ever creak open to admit its mainly Muslim population of 73 million, who boast a far more promising economy and demographic profile than Romania or Bulgaria.
But those eastward-looking eyes may be gazing in the wrong direction, because Europe's biggest headache in this coming year is likely to be in one of the EU's founding bastions, the "problem child" of France.
The phrase "problem child of Europe" was coined this week by Julian Callow, chief Europe analyst at Barclays Capital in London and one of the small handful of Europe experts whose views can move the markets. Few others are yet noticing, or are focusing instead on France's presidential elections in May, or on those fascinating dramas to the east.
But France is in trouble. In the third quarter of last year its economic growth was precisely zero. The grand project launched with Germany last year by President Jacques Chirac to build a European rival to Google, a new internet search engine called Quaero, has just fallen flat on its faced with the German decision Tuesday to pull out of the scheme. The Germans decided that the French proposals were unrealistic, too expensive and over-dependent on central government finance and direction, an unhelpful combination that last year damaged that other grandiose Franco-Germans venture, the Airbus.
Rather than the Franco-German boardroom battles and the messy role of French political scandals, Airbus itself has blamed the rise of the euro against the dollar, an exchange rate differential that has given its rival Boeing an important pricing advantage. But all the signs are that the euro will continue to rise and the dollar will continue to fall this year and French exports are going to suffer.
One reason for this is that France is pricing itself out of world markets. The minimum wage has risen by 40 percent over the past nine years, and business continues to complain about the impact of the 35-hour week on labor costs. By contrast, German wages have been held almost static for the past five years, allowing German exporters to recover the competitiveness they lost in the 1990s. French unit labor costs are now the highest in Europe and the result is that the latest survey of eurozone purchasing managers published this week by NTC Economics says "France has become the weakest link in terms of manufacturing growth."
The current self-image of France is on haunting display alongside the Canal Saint Martin in central Paris, where 250 tents line the quayside, erected by a charity to help the homeless. It has become trendy over the New Year period for concerned middle class French people to sleep in the tent cities, which are now mushrooming in Orleans and Lyons and across France, to display solidarity with the SDF. This is the French term for the homeless, and stands for Sans Domicile Fixe, without a fixed address.
Rocked by the TV images and reports of some homeless people freezing to death over the Christmas cold spell, the government Wednesday announced that it would prepare a new law to outlaw homelessness, although there is so far little sign of the funding required to build and staff shelters.
Over the past two years, France has been rocked by angry demonstrations that forced the government to drop plans to reform the labor laws, by a month of riots by angry and usually unemployed young Arab and African immigrants who torched cars and battled police in hundreds of towns across the country, and by a crisis in its relations with Europe.
In psychological terms, the decisive "No" vote in France's referendum on the draft EU constitution may have been the most serious shock, teaching the pro-EU French political elite that they had lost touch with popular opinion. This was important because France's political leaders and officials and business and media elites have traditionally seen Europe as the new vehicle for France's role and influence in the world, and the massive protest vote that rejected their plans for "more Europe" seriously jolted their world view.
And that brings us full circle, back to those unfolding dramas in the east, because one of the decisive themes of that current of protest that led to the "No" vote was the idea that the low-wage "Polish plumber" would undercut his French competitor.
The fear that Europe's enlargement would mean hordes of Eastern European or Turkish immigrants all flocking to France to steal French jobs is baseless; the French had already declared that the EU rules on freedom of movement for labor would be suspended. And the British, who have seen the arrival of some 600,000 Eastern Europeans over the past three years, have found it to be a net economic benefit.
But the result of that French vote has been Europe's new "enlargement fatigue," the view that more enlargement is politically unsustainable and that Romania and Bulgaria will be the last new EU entrants for a considerable time to come. This in turn means that Turkey will continue to wait in the wings, as political support steadily erodes for joining a club that is so obviously unwelcome and an alternative Islamic or Middle East vocations now beckons.
It means that Ukraine, let alone the wretched dictatorship of Belarus, is going to have to learn to live with a bullying and energy-rich Russia because the Europeans have taken away the welcome mat. And it means that Bulgaria and Romania will be second-class members of the EU, dashing their citizens' hopes of heading to the prosperous countries of Western Europe to work and study and build a nest-egg of savings that would allow them to return home to build a better future. France's malaise means that the European dream is on hold.
