Wednesday, 14 September 2005 Chris SNUGGS, ISUGA 1 EUROPE - A variety of "Models" France & the "French Model" of "Olde Europe" The Anglo-Saxon model

Wednesday, 14 September 2005Chris SNUGGS, ISUGA

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EUROPE - A variety of "Models"

France & the "French Model" of "Olde Europe"

The Anglo-Saxon model

The Nordic Model

The East European Model

The Mediterranean ………


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France & the

"French Model"

of "Olde Europe"

France

The regions


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France: Period of Uncertainty & Anxiety

rejected the Constitution - a rejection by the people, not the government

unsure of role in Europe, world

severe strains through globalization - persistent high unemployment - threat to "French Model" - high government expenditure

Franco-German motor of EU now wobbly - Germany threatens to move to right

enlargement of EU threatens France's domination

poor relations with East European countries; (Iraq War - "they have missed a good opportunity to remain silent.")

poor relations with Anglo-Saxons, especially the USA - persistent anti-Americanism - resentment of English language

severe problems with immigration: failure to integrate immigrants into French way-of-life: ghettoes of high unemployment

social incohesion: powerful lobbies, civil servants, farmers, railway workers, "Université"

weak President approaching end of political career (court appearance?)

fragmentation of parties on both left & right

distance of people from government - arrogance of the French elite and "Enarques"


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The "French Model" - magnificent, but under attack from "New Europe" AND economic realities?

excellent health facilities - financed through insuranceeasy to see a doctor - short waiting times for treatment

excellent education facilities for young children - can start school as young as 18 monthssuper facilities for children in summer at "Centres de Loisir"free state education from kindergarten to university

excellent benefits for parents with childrenencouragement of large familiesbenefits include lengthy maternity leave as well as money

high protection against dismissal from jobshigh job security for civil servantsgood benefits when unemployed

pension provision relatively generouslong holidays, especially compared to USA and Japanclose intervention of State in organization of society


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The French Model - the downside?

high costs = high taxes in general

expensive to employ anyone - in bureaucracy & money

high unemployment - high proportion of CDD employment - (CDD v CDI)

public health system has growing deficit

abuse of "free" treatment - medicine, tests, doctors' time etc

free higher public education of dubious overall quality - general dissatisfaction

excessive power acquired by unions and the "université"

inflexibility to deal with change - tendency towards "street power"

excessive state interference and inflexibility: complications of setting up & running businesses

world-class major, prestige industries; weaker in small and medium business areas (PMEs)

A Tale of Two Payslips


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The French Model - the State omnipresent & interventionist?

high percentage of workforce are government employees

many government institutions and bodies

government reaction to intervene, to spend state money - latest project to pour money into anti-Google browser (Project Quaero)

recent reaction to Constitution rejection? to spend still more state money on setting up regional technology centres


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French Cultural Concerns - Anti-Americanism & The "Loi Toubon"

general fear of "cultural swamping" (mainly by Anglo-Saxons)

in 1994 France's National Assembly enacted "Loi Toubon" after its champion, French Culture Minister, Jacques Toubon

law called for ban, enforceable by fines of up to $1,800 and by prison terms, on use of foreign words in business or government communications, in broadcasting, and in advertising if "suitable equivalents" existed in French

committee previously established to draw up suitable equivalents where none existed; committee's work resulted in 3,500 new French words, mostly to replace English-language ones

France's Constitutional Council, country's highest judicial body, eventually weakened law, applying it only to government documents, but not before a bill was introduced in British Parliament authorizing British traffic wardens to impose on-the-spot fines whenever they heard a French word spoken

another law mandates that at least 40% of all songs played on the country's 1,300 FM stations be in French

considerable help given to film industry to protect it from Hollywood

little done to favourise learning of English - TV!!


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The Other side of the coin

•space: France is four times as big as England with same population

•climate: more sun, large, pollution-free beaches

•food: fresh food easily obtainable: traditional local markets in every town - high quality of restaurants

•cost: homes are much cheaper in France - couple retiring can sell house in Southern England, buy something much larger (especially with more land) and still have enough to serve as a pension

•English people like DIY; there are many houses in rural France waiting to be renovated …

•the French way of life ….. Part of the "French Model" that Mr Chirac defends

•ease of access: low-cost airlines

•12 million Britons holiday in France•500,000 have homes in France

What's the attraction?


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The French Way of Life?

•most Brits retiring to France live in small towns and villages

•strong identity and independence

•every Commune has a Mayor, and everyone knows his name

•80% of Communes have fewer than 1,000 inhabitants

•Mayors have powers over planning and services

•they are responsible for appearance, dignity, order and sense of identity

•small schools, clinics, post offices and town halls are maintained - at a cost

•strong sense of locality - refusal of purely commercial forces

•large share of agricultural subsidies from EU

•attempt to blunt the effects of market forces

Is this sustainable? Is the "French Model" under threat?


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The importance of agriculture in France

total agricultural area of metropolitan France is around 33 million hectares, i.e. 60% of the country

remainder divided between forest (15 million hectares) and non-agricultural land (7 million)

agricultural area slowly decreasing for many years; other uses increasing

French farmland about 23% of the total agricultural area of the fifteen EU States (before 2004 expansion)

STRONG FRENCH ATTACHMENT TO PRESERVATION OF RURAL WAY OF LIFE ……

The Danone Case!


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Groupe Danonemulti-national food products company; headquarters in France

specializes in dairy products, especially famous for its yoghurt

owns Volvic, Evian, Lattella, Actimel/Activia, Lu (biscuits) & HP Sauce (sold to Heinz June 2005)

world n° 1 in fresh dairy products & bottled water, n° 2 in biscuits & cereals

turnover 14,3€ billion; employees worldwide 88,600

http://www.danone.com/wps/portal/jump/DanoneCorporateIntl.Home


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Groupe Danone - history

founded 1919 by Isaac Carasso in Barcelona, as small yoghurt factory

at that time yoghurt not well-known in Western Europe, being from Balkans

name "Danone" chosen as diminutive of the name of his son

1929 first French factory was built

during WWII, company moved to New York, where Dannon Milk Products Inc. was founded

company returned to Paris in 1958


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Groupe Danone

excellent marketing - built up image as healthfood

strongly associated with farming & dairy industry in France

image of health, quality (contrast with coke & burgers!)

image also of ethical management, care for employees


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Groupe Danone

July 19th - share price rose 8.10€ to 87.60€ on rumour of bid by PepsiCo

rumours frequent; Danone vulnerable to takeovers - 80% of Danone's capital freely-floating - no "poison-pill" defence against takeovers

rumour believed to have started in small article in "Challenges"

by coincidence, one of magazine's editorial consultants is sister of Danone CEO Franck Riboud …. magazine denied all connection

both Danone & PepsiCo denied all knowledge of any offer or takeover bid

French AMF (Autorité des Marchés Financiers) has launched investigation; some suspect rumour an attempt by Danone to flush out Nestlé


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Danone Takeover - Establishment Reaction

French political establishment rallied to defend Danone from US "ogre"; one commentator compared takeover bid to Al Capone attempting to abduct Marianne

Dominique de Villepin: "A group like Danone is obviously one of our industrial treasures and we will of course defend the interests of France."

François Loos, French Industry Minister, repeated this by promising to list strategic French companies to be protected from hostile takeovers (even though there is free movement of capital in Europe and such protection is illegal if not impossible.)

Franck Riboud: "A hostile takeover, by whoever it may be, would mean risking losing our identity, our specificity, our culture."

Patrick Ollier (member of Jacques Chirac's party): "I find it scandalous to see the jewels of French industry going overseas, especially under the banner of Pepsi-Cola, when we're talking about Danone, the symbol of French dairy products and French quality."

Jacques Chirac said he was "particularly vigilant and mobilized."

some unions called for the nationalization of the company


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Danone Takeover - Establishment Reaction

Olivier Peyrin, Paris investment banker: "If this government loses Danone, the left will say: 'They have given in to American capitalism.' More important, Danone is so intertwined with French dairy and agricultural policy that to surrender it would be tantamount to political suicide."

Pierrre Labasse, author: "The French in general have a very bad image of American multi-nationals. Big American companies are considered soulless, only interested in making money, the very incarnation of the worst aspects of globalization."

issue became a contest between purity of Evian water and sweet fizzy cola some French call 'American champagne'

affair taken to represent French quality and morality compared to American unfeeling (and low-quality) multi-nationals and consumerism


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Renaud Dutreil (Minister for PME - small & medium-sized businesses): "The government does not have the right to interfere in the affairs of private

companies."

Business leaders remained mostly silent on the matter ……..

Danone Takeover - Business Reaction

Why? Hypocritical?

•French companies very active in recent years in foreign acquisitions

•Cap Gemini took over major US consulting firm Ernst & Young in 2000

•Vivendi bought USFilter for $6 billion

•EDF has 25% of the electricity supply market in the UK

•Alcatel has bought several US businesses, including Xylan for $4 billion

•in 2001, French companies invested 5 times more in US than US companies in France

•since January 2005, French companies spent over $60 billion on foreign acquisitions


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Danone Takeover

So why the nationalistic, almost hysterical reaction?

•general anti-Americanism

•suspicions of globalization (when it doesn't suit France!)

•assertions of moral supremacy (especially over Americans) in way companies are run

•closeness of Danone to French agriculture & dairy industry

•need for government to be be seen defending farming interests and France in general

•government a wounded tiger lashing out after rejection of Constitution referendum

•when weak, go onto the attack …… like attacking Britain's rebate at EU summit in July

Why all the fuss about Danone, when Groupe Taittinger's recent acquisition by US Starwood hardly caused a flutter, though Taittinger also traditional, French luxury brand?

The Nordic Model

many social benefits "from cradle to grave" = high taxes

yet, economies generally doing well ….

Finland, Denmark, Sweden & Norway in top 6 for competitiveness

high standards of education, health & living standards – low corruption

unemployment relatively low (but how real are figures?)

The rest are green with envy ….

The Nordic Model ….

UNEMPLOYMENT BY GENDER - 2004

0,00%

2,00%

4,00%

6,00%

8,00%

10,00%

12,00%

FRANCE

GERM

ANY

ITALY

FINLAND

SWEDEN

DENMARK

BRITAIN

NORW

AY

MEN

WOMEN


PUBLIC HEALTH EXPENDITURE - 2002

$2 9

00,0

0

$2 3

00,0

0

$2 2

00,0

0

$2 2

00,0

0

$2 1

00,0

0

$1 8

00,0

0

$1 7

50,0

0

$1 5

00,0

0

$0,00

$500,00

$1 000,00

$1 500,00

$2 000,00

$2 500,00

$3 000,00

$3 500,00

NORW

AY

GERMANY

SWEDEN

DENMARK

FRANCE

BRITAIN

ITALY

FINLAND


PRODUCTIVITY GROWTH - 2004

SWEDEN4,40% NORWAY

4,25%

FINLAND3,75%

DENMARK2,90% FRANCE

2,80%BRITAIN2,75%

GERMANY1,00%

ITALY2,50%

0,00%

0,50%

1,00%

1,50%

2,00%

2,50%

3,00%

3,50%

4,00%

4,50%

5,00%


NATIONAL BUDGETS - 2004

NORWAY 12,00%

SWEDEN 1,50%

FINLAND 2,00%

DENMARK 2,50%

BRITAIN -3,00%

ITALY -3,00% GERMANY

-3,30%FRANCE -3,25%

-6,00%

-4,00%

-2,00%

0,00%

2,00%

4,00%

6,00%

8,00%

10,00%

12,00%

14,00%


high taxes: 50% of income compared to Anglo-Saxon 35% & French 42%

people accept it, as benefits are good ….

COST OF NORDIC MODEL?

HOW DO THEY DO IT?

painful restructuring in 80s/90s

manufacturing allowed to decline without paranoia

R&D and development of services privileged

example: Getinge, maker of medical respirators, 120 out of 300 in R&D

"mature", realistic attitude to globalization, outsourcing, delocating……

workforces flexible – agree to adapt hours to work

more acceptance of dismissals

co-operative unions – management-union partnerships, not confrontation

workforce generally rejects protectionism – accept restructuring


SO, ALL IS ROSY IN GARDEN?

Nordic countries on upward curve, but nothing lasts for ever

high taxes are brake on economy: IKEA, TETRA PAK, SKYPE all based outside Scandinavia

massive benefits of oil to Norway, Steel in Sweden & wood pulp to Finland

Norway just elected leftish government …..

WHY NOT EXPORT THE “MODEL”?

human nature to want the benefits, but not the pain

cultural gulf between Northern & Southern Europe

being a large country not always a help (pretentions ….)

Adoption of Nordic model demands change in "Olde Europe" mindset



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Bureaucracy typical of

"Olde Europe"?

France, Germany, Belgium & Luxembourg ….


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E.U. Bureaucracy?

•the Italian pilot

•the new traffic lights

•farmers paid not to grow anything

•farmers dumping apples, collecting their EU guaranteed payments, then going home to grow more apples

•EU projects

•The Denied Boarding Directive

•the Scottish hill water insanity (http://www.guardian.co.uk/comment/story/0,3604,1558418,00.html

•the Thai shrimps: (http://timworstall.typepad.com/timworstall/european_union/) Jose Manuel Barroso, boasted that the EU had given €2 billion in aid (about £1.4 billion - three quarters of it raised in private donations to charities). But the prime minister of Thailand, Thaksin Shinawatra, sternly responded that his country did not want aid from the EU. It wanted a repeal of the crippling tariff imposed by Brussels on Thai shrimp imports, which had cost his country, the world's largest prawn exporter, £3 billion since 1997, twice as much as the aid the EU was now offering.


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And German red-tape?

•not allowed to serve milk in jugs, only plastic containers (requirement to show expiry date)•forced to watch four-hour "kitchen-horrors" film at Chamber of Commerce; then given Certificate saying she'd watched it•multiple permissions required from different bodies

•four million civil servants•90,000 laws & regulations•many claim this stifles business•estimated costs for German business = €46 billion•paradox of great business and poor bureaucracy

Patricia Ferer wanted to open tea shop

Running a business

•with more than six staff, you have to register them•18 different forms from different departments•each extra employee costs company extra €4,500


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•municipalities suffer from flood of legislation from Federal Government and Länder

•small town Lippe set up foundation to lend venture capital to new entrepreneurs in region: district council unanimously approved establishment of the new

foundation, but state politicians debated nine months on whether establishment of such an institution violates the municipal rules or not

•The small town of Barntrup is even supposed to close down a 30-year-old school because it does not comply with the latest fire regulations. It is a one-storey building in which "nothing has ever happened".

•"BASS" one of worst examples of red tape. The "BASS", which is the acronym for the "Consolidated Official Collection of School Rules", stipulates how many

teachers must accompany a class on swimming trips, what helmets pupils have to wear when skating. (school trips in Europe …)

•"BASS" contains so many rules and regulations that people supposed to apply them can no longer find their way through them

•Germans aware of problems - some attempt to improve things, but don't hold your breath …

German red-tape continued


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Documents

Wednesday, 14 September 2005 Chris SNUGGS, ISUGA 1 EUROPE - A variety of "Models" France & the "French Model" of "Olde Europe" The Anglo-Saxon model