French Prime Minister: Bring Back the Franc

A quote from Dominique de Villepin in The Daily Telegraph, 12 December 2006

We must clarify matters in exchange rate policy, which means taking back our sovereignty and our margin for action so the states can play their part. […] There are some states that are happy with the current situation, but for France it is not acceptable. This is a tough fight that we are going to have to carry out at a political level.

It's not the exchange rate that will solve France's problem

Exchange rates do play a role in the economy but one shouldn't overestimate it. An important aspect that shouldn't be left out of eyesight is that any devaluation is only valid for so long as the other countries don't take  countermeasures by devaluating their currencies.

Up to now there's been no country that has created constant wealth by simply devaluating its currency.

It's an innovative and skilled workforce and authorities that can guarantee the safety of its citizens and their property that keeps an economy prospering in the long run, nothing else.

France seems to be failing on both ends. France's Muslim population is growing. The welfare state is becoming hungrier,while in more and more parts of the French territory the state is loosing its authority.

Here's a little list of "sensible urban areas"

At the same time the economy which is needed to feed the welfare state is stagnating more and more. And no relieve in sight. Pure coincidence?

Who wouldn't love to spend a year's wage on a new car only to see it get burnt??

France seems to have become a ticking time bomb.


'Flanders Fields' is right, again, and so is Vanhauwaert.  This is not about a return of "the Frank", but about the governance of the Euro.  It is essentially about the nature of exchange rate policy (hard currency versus soft currency) and about the independence of the European Central Bank.

Both economic theory and economic history support the contention that a central bank needs to be 'independent' from the politicians-of-the-day, and needs to focus on price stability.  At the same time, a central bank needs to be operating under 'rules' which ensure accountability vis-a-vis the public that it serves.


However, to the extent that the French establishment (and others) may succeed in undermining the ECB's independence, by forcing ECB consideration of other 'goals' besides price stability, they will have converted the Euro into a currency like the old French Frank but with the Euro label.

In that specific sense, the provocative title chosen by the Brussels Journal could be considered 'right' too.

In a sense this is a struggle between the old Bundesbank philosophy and that of the old Banque the France.  The irony is that the defense of the Bundesbank-line (or take) on the Euro will depend in large measure on a former Gouverneur de la Banque de France  (Trichet). And Duisenberg is gone...

Villepin was speaking to

Villepin was speaking of the Ministers taking back control over the ECBs authority to set the rates, referred to as the nuclear option.  I see his comments as being a reflection of the determination of the French to assert French interests over the interests of the EU.  They use sections placed in the framework of the EU by the French which allow them to assert such control and influence.  The EU is primarily a vehicle for French control and influence in Europe and an attempt for them to place themselves at the center of world balance of power.


The other countries seem to accept the French dominance and attempt to assert their own interests around those of the French.  The entire proposed Union will be in danger of collapse without the French.  The southern sectors have indicated their willingness to resist and France doesn't like that the Germans are the primary beneficiaries, while their own economy faces further strains.

The EU will always have a battle to adapt around the French but its French basic framework will always maintain primary French influence over the EU.

Misleading title

Villepin was not talking about getting back the French franc, but taking back influence over the independent ECB on interest rate policies.

Translation: We can't bring

Translation: We can't bring our budget deficit within the Growth and Stability Pact even after helping to gut the pact with the aid of the Germans so we are going to threaten to leave the euro unless you give our spoiled lazy farmers even more free money.