Gaspard Koenig is a French liberal author and politician. The first meeting of his French think tank 'Génération Libre', took place at the Centre for Policy Studies late last year. You can follow him on Twitter @gaspard2012.
In his annual letter to the French President sent on the 27th of May, Christian Noyer, Governor of the French Central Bank (Banque de France), expressed a thinly veiled criticism of the Government’s policies. He pointed out how flagging competitiveness, high labour costs, and an unreasonably low retirement age were all problematic for the French economy. And he recommended cutting the number of civil servants and simplifying regulation. In short, he was arguing for a genuine austerity program with massive spending cuts and worthwhile supply-side reforms.
That is probably music to the ears of many Classical Liberals or just reasonable citizens who are appalled that public spending is forecast to reach 57% of GDP in 2013, the highest ratio in OECD countries – and rising. For once, a senior figure of the French Republic has raised the alarm on the unsustainable weight of the State in the French economy.
Unfortunately, the Governor belongs to a strongly established tradition of civil servants able to identify the disease and to recommend a cure, but without wishing to applying it closer to home.
Let’s take a look at the Banque de France, which recently published its annual report. Apart from being lavishly located in the Hotel de Toulouse, a 17th-century gem, its operating costs are bewilderingly high. It employs 13,000 agents for a total human resources expenditure of nearly € 1.5 bn a year (including pensions). With 6% of its staff aged under 30 and 32% over 55, the Banque de France’s age pyramid looks more like a cocktail glass.
By contrast, the Bank of England only counts 1,955 employees, for a total annual staff cost of £155 million. You have read correctly : the French central bank, which has no control over monetary policy, employs more than 6 times as many staff as the Bank of England. What are all these French officials doing ? Probably writing reports : the Banque de France annual report is nearly twice as long as the English one.
Let’s not be too harsh on Mr Noyer. Maybe, after all, he is not as well paid as his British counterpart. That may be the case, but none of us will know it for sure. Although Mervyn King’s salary is openly disclosed in the BoE annual report (amounting to £307,000), no such information can be found on the BdF database. The only thing that the taxpayer is kindly informed of, if he is punctilious enough to read article R142-19 of the Monetary and Financial Code, is that Mr Noyer’s salary is equal to that of the Vice-President of the Conseil d’Etat (the Supreme Court for administrative law). This salary is, of course, not to be made public. Isn’t it the most complete form of Republican Byzantinism ?
So why is Mr Noyer subject to such schizophrenia, bravely asking for spending cuts on one hand, and confortably running an oversized public institution on the other ?
Well, he may not be so wicked. The poor Governor’s action is heavily constrained by the civil service special status (statut de la fonction publique), a 1946 sacred text inspired at the time by Maurice Thorez, head of the French Communist Party and Stalin’s protégé. The status explicitely states that, if a civil servant’s job is suppressed, that civil servant can only be made redundant under a special act of the Parliament (loi de dégagement des cadres), which last occured in… 1951. The world moves on, but the French civil servant shall not take heed. At the BdF, 85% of the agents do benefit from this extraordinary Statut. Hence, if France loses control over its monetary policy, the Banque de France’s agents in charge of it have to stay, and are remunerated according to their position in the hierarchy and years of service. They cannot be blamed for the euro, can they ?
That explains why the number of BDF agents only went down from 15,500 in 2002 (when the French Franc had just been replaced with the euro) to 12,500 in 2008, and up again since then. The Governor can only wait for people to retire. And, surely, he also needs to hire fresh blood from time to time to rejuvenate his institution.
So the Governor is right to ask for spending cuts. But as he perfectly knows from his own experience, those will only seriously take place when the Statut will have been revised, or suppressed (I have a dream). Which implies confronting the 4 millions civil servants who currently benefit from it.
Who will have the courage to say : ‘There is no alternative’?