Strikes Against Austerity May Cost France Over $200 Million A Day

Labor strikes in France, aimed to get the government to reverse plans for pension cuts and a higher national retirement age, may have cost the nation $200 million in lost business a day. “Beyond the costs, which are difficult to measure, it damages the attractiveness of France,” Finance Minister Christine Lagarde said in an interview on Europe1 radio. France is the No.1 tourist destination in the world, attracting more than 80 million visitors. Tourism is 6% of the nation’s GDP.

The $200 million number may not sound like much by US standards, but France’s GDP is only about $2.6 trillion and its economy has been substantially weakened by the global recession.

France seems to have become a canary in the coal mine of anti-austerity labor unrest in Europe. There have been strikes in Greece, but its austerity decisions are largely behind it. The French Senate has only just voted on the administration’s plans to cut government costs and the age at which people get retirement benefits.

France is clearly the front line of the battle between workers and government austerity programs. What is not clear is whether labor or the government will eventually get the upper hand. A compromise would mean government expenses would rise and deficits with them. A win by labor would force many politicians who favor austerity from office, which could lead to chaos as France tries to balance its books. The French government may never entirely win the battle. Strikes could go on for a long time, although they might decrease in severity and number.

The lesson of France is likely to be that the government’s leverage is no more powerful that the electorate allows it to be. That is common sense, however, austerity may wind up being stillborn if fierce labor resistance continues.

At one time, it appeared Europe had begun to address the problems that caused a crisis of confidence about the sovereign obligations of some of the nations in the region. The optimism that solutions were underway is likely to be short lived.

Douglas A. McIntyre