Special report: Old France, new France

As Nicolas Sarkozy takes over Jacques Chirac's party, it signals the beginning of a battle of ideas over the future of France

IN THE summer of 1975, at a party congress in Nice, an energetic and ambitious young French centre-right prime minister introduced to the packed auditorium an equally energetic and ambitious centre-right party youth member. The 20-year-old student had travelled on the overnight train, and had written his first political speech on a single sheet of paper. The prime minister warned him to speak for no more than five minutes. Defiant, intoxicated by the applause, he went on for 20. The prime minister was Jacques Chirac. The young hack was Nicolas Sarkozy.

As with fine wine, France likes its politicians to mature over time. The rivalry between this pair is of unusual vintage. It was at that Nice congress that Mr Chirac first spotted Mr Sarkozy: he summoned him to the prime minister's office the next week. The young man became his protege, but fell from grace when he backed a rival presidential candidate against Mr Chirac in 1995. Since then, the fils rebelle has been a thorn in President Chirac's flesh.

Now the story takes a new turn. On November 28th, at a stage show outside Paris, Mr Sarkozy will be declared the overwhelming winner of an election to head the Union for a Popular Movement (UMP), the ruling party and the descendant of the one Mr Chirac launched a year after the Nice congress. Mr Sarkozy succeeds Alain Juppe, Mr Chirac's preferred heir, who in January was found guilty - pending appeal - of political corruption. The man Mr Chirac most distrusts is about to get his hands on the party the president created.

Running the party might appear a marginal job in a system that invests so much power in the president and so little in parliament. It is surely a lesser job, too, than finance minister, which Mr Chirac is insisting Mr Sarkozy relinquish. In reality, the post gives France's most popular centre-right politician an electoral machine and a platform from which to develop an alternative vision for France, and to position himself as the natural candidate for the 2007 presidential election.

Although they spring from the same political family, Mr Chirac and Mr Sarkozy embody two quite different and competing ideas about the future of France. Mr Chirac is a neo-Gaullist conservative who believes that French power should be projected through a strong Europe, built on the Franco-German axis and forming a counterbalance to the United States. At home, he defends the costly but comfortable French social model. And he believes that France's Muslim population - Europe's biggest, at around 5m strong - is best served by traditional means of integration: strict separation of religion and state, and equal treatment of individuals before the law. “There is no crisis,” says one of his advisers. “Therefore, there is no need for fundamental reform.”

Mr Sarkozy, by contrast, has no time for tradition for tradition's sake. In an enlarged Europe, he argues that France can no longer rely on the Franco-German motor and needs to cultivate a group of six that also includes Britain, Spain, Italy and Poland. Atlantic-minded, he urges a milder approach to America. He advocates an overhaul of the French social model, pushing for less state regulation and a more flexible labour market; his inspirations are Britain and Spain, not moribund Germany. He considers that the French model of integration has failed French Muslims, and argues for American-style social engineering to help minorities advance. In short, where Mr Chirac urges caution and conservatism, Mr Sarkozy presses for modernisation and change. “France is not eternal,” says one of his aides. “If it does not reform, it will disappear.”

These two contrasting appraisals reflect two quite different political personalities. Mr Chirac was first elected in deeply rural Correze. Farming was his first ministerial portfolio, and he is seldom more at ease than when caressing a Charolais bull at an agricultural fair. He may be married to an aristocrat, Bernadette Chodron de Courcel, but he embodies less an upper class than an upper caste in the republican tradition: as an enarque (a graduate of the Ecole Nationale d'Administration, France's post-graduate civil-service college), he glided effortlessly into the high offices of state.

The French may know that Mr Chirac is an old-style rogue - despite many questions concerning his time as mayor of Paris, he remains protected from prosecution while in office - but they seem to find him a reassuring one. Fully 76% of the French like the way he represents France abroad. With this veteran political survivor and defender of French grandeur, they know what they are getting.

Mr Sarkozy, however, is unlike other politicians. His father was a Hungarian immigrant and his mother is of Greek-Jewish descent; his wife, Cecilia, is of mixed Spanish-Russian parentage. This outsider quality probably explains his determination to take on French tradition. “His handicap is heavy,” writes Nicolas Domenach in a recent biography. “No name nor fortune, no family connections, and even less an inherited fief. On the political right, if you have no inheritance, you need to be an enarque.”

But Mr Sarkozy is not an enarque. A former lawyer, he worked his way up through the party ranks in Neuilly, a smart suburb of Paris of which he became mayor. He is also of a different generation. Like Mr Chirac, 22 years his senior, he claims to champion ordinary folk - but policemen, firemen and supermarket shoppers, not the farmers of yesterday's France. And he loves being in front of the camera. While the Chiracs pose for Paris-Match seated stiffly in the Elysee Palace garden, the Sarkozys have their photos taken pounding the beach in jogging gear.

In short, if Mr Sarkozy's popularity outstrips both Mr Chirac's and that of other centre-right politicians, it is because he embodies something different. “The relationship between the French and Sarkozy is not one of affection, as it is with Chirac,” says Brice Teinturier, political director of TNS Sofres, a pollster. “Instead, it is one of intrigue and excitement.” The French do not warm to Mr Sarkozy, but they are impressed by his hyper-energy and determination to get things done. If Mr Chirac's France is fine just as it is, Mr Sarkozy's urgently needs to change. Who, though, is right?

The French paradox

The most devastating recent critique of the French model was delivered last month in a report by Michel Camdessus, a former head of the IMF, summarising the work of a 20-strong commission (set up by Mr Sarkozy when he was finance minister) of the French great and good:

“We are in a paradoxical situation. On a world scale, France is a rich and prosperous country, its standard of living among the highest. Our companies perform remarkably well. Our labour force is one of the most highly qualified. The quality of our infrastructure and our public services is envied the world over...But the world is changing, and certain mechanisms of our growth in the past have today worn out. Without a change of direction, decline is a real threat.”

The strengths of the French economy are impressive. Its private sector boasts leading firms that, among other things, wash the world's hair (L'Oreal), insure its homes (AXA), inflate its tyres (Michelin) and clothe its women (Louis Vuitton). For each hour worked, the French are 5% more productive than the Americans. Their economy has outperformed Germany's over the past six years. The French live long, healthy lives and, to the annoyance of Anglo-Saxon theorists, seem happy to boot.

The main flaws, as the Camdessus report points out so crisply, are twofold. First, not enough people work, and those who do fail to work long enough; second, the heavy state has become a costly drag.

For 20 years, France's unemployment rate has been stuck between 8% and 10%. The young and the (not so) old are largely shut out of work. The employment rate among under-25s is now just 24%, where the OECD average is 44%, but that of 55-64-year-olds is 34%, compared with 50% in other OECD countries. Between 1980 and 2003, the total number of hours worked in America jumped by 39%, and in Britain by 8%; in France, it fell by 6%. This by itself almost entirely explains the differing economic growth rates over the same period in these three countries.

This, it could be argued, is a simple political choice: the French would rather have more leisure time than faster economic growth. But this is not a choice, Mr Camdessus retorts, for the 10% who are unemployed. The French model has not sheltered its people from poverty as sturdily as is often claimed. Despite devoting 30% of its GDP to social spending, among the highest shares in Europe, France's poverty rate (after social transfers) is not much below that in Britain, and is higher than in Finland or Sweden. Young people, unqualified and often Muslim, are isolated in the grim tower blocks that ring France's cities, which are becoming fertile recruiting grounds for radical Islam.

Some elements of the French public sector are efficient, but not all. The state spends 54.7% of GDP, compared with 44% in Britain. Too many people, filling in too much paper, enforcing too many rules and extracting too many taxes; the system is unsustainably piling up debt for future generations.

A heavy price is paid in job creation, too. High non-wage employment costs, coupled with tight redundancy rules, mean that companies make do with small payrolls. If hotels and restaurants employed proportionately as many people in France as they do in America, says the Camdessus report, the country would create 3.2m extra jobs overnight - albeit the sort of low-paid “McJobs” at which French governments tend to sneer. Over-protection of permanent jobs has prompted employers to recruit increasingly on precarious short-term contracts: these now account for over three-quarters of new jobs created. This two-tier job market particularly traps the young and low-skilled.

The upshot over the next ten years, argues the report, is that, as demographic pressures build, the potential yearly growth rate will fall from 2.25% to 1.75%. If, on the other hand, the employment rate was improved, the tax burden reduced, the labour market deregulated and more jobs created, the yearly rate could reach 3%. It is, in short, a prize worth striving for.

Mr Chirac's government has not sat wholly idle in the face of these challenges. His prime minister, Jean-Pierre Raffarin, has pushed through partial reforms of both state pensions and health insurance, and eased the 35-hour work rules a bit. Yet Mr Chirac defends the underlying model. “Do we need a liberal revolution in France?” asks one aide: “No; the state has always played an important role, and that is not a problem.” Mr Camdessus's report, in other words, has been met with polite silence.

Would Mr Sarkozy really be different? History hints at his motivation. From that precocious start in Nice, he was admitted into Mr Chirac's political and social orbit. (Mr Sarkozy was a witness at the marriage of Mr Chirac's daughter, Claude.) The split came when Mr Sarkozy ditched Mr Chirac to back Edouard Balladur in 1995. Mr Chirac did not speak to him for three and a half years, and Mr Sarkozy was cast into the political wilderness. “I have never considered Jacques Chirac as a friend, in the familiar sense of the term,” he wrote in his book “Libre” (“Free”) in 2001, “and the reverse is undoubtedly just as true.”

His years spent dans le placard, as the French put it, from 1995-2002, were formative. They gave Mr Sarkozy, as one adviser admits, “a hunger for power”. But they also mellowed him, helping him to soften his abrasive image. By the time he became interior minister in 2002, he was bursting to put his new thoughts into practice. His gravity-defying popularity dates exactly to that time.

Mr Sarkozy's strategy is based on action and communication, shot through with energy. In this post-ideological age, Mr Sarkozy - like Tony Blair or Bill Clinton, both of whom he admires - prefers inventive, tailor-made solutions over lofty visions. As he says, “I do what works.” Although he is happy in Britain or America to label himself “liberal”, he is careful to avoid the term in France, where it suggests extreme libertarianism. As one of his advisers puts it: “You can't preach open markets and get elected in France.” In the presidential system, a candidate in the run-off needs to appeal to the centre: he cannot afford to appear to come from the ultra-liberal right.

Markets and coercion

What does Mr Sarkozy really believe in? “Openness, suppleness, and letting citizens make their own choices”, is how he summed it up in “Libre”. In his seven months at the finance ministry, he pushed for an overhaul of the 35-hour week; trimmed the budget deficit to below the EU's 3% limit (though resisting deep spending cuts); reduced taxes on inheritance; sold stakes in various state enterprises, and set Electricite de France, against union resistance, on its way to privatisation.

Yet, in practice, Mr Sarkozy makes use of coercion as much as markets to get results. To reduce supermarket prices, for instance, he summoned grocers to a meeting and forced them to agree to price cuts on breakfast cereal and soap. To save jobs at Perrier in France, he persuaded its Swiss parent, Nestle, not to sell this loss-making subsidiary. To create a French-flavoured national champion, he tried to bully EADS and Thales, two defence companies, to merge. His liberalism has limits not only in industrial policy. It is hard to see him taking on France's farm lobby. As interior minister, he clamped down on both prostitution and immigration.

Does this all add up to incoherence? His advisers argue that, while Mr Sarkozy does believe in a strong industrial policy, such views are also tactical: they give him the credibility to impose free-market solutions elsewhere. His economic adviser, after all, is a Harvard-trained free-marketeer. Mr Sarkozy considers the Camdessus report as a sort of manifesto. His supporters include Ernest-Antoine Seilliere, the liberal head of the employers' federation. But this is France. “He's not from the school of Ricardo or Smith or Hayek,” says an aide, “His first school is pragmatism.”

This prompts unorthodox suggestions in other areas, too. Mr Sarkozy sounds most animated when railing against France's failure to ensure the social mobility of ethnic minorities. He links this failure to the growing appeal of radical Islam. Against prevailing wisdom, he co-opted hard-talking Islamists into a new official Muslim body. Against secular tradition, he suggests allowing public finance for mosques, to cut French Islam off from foreign sponsors. At the UMP, a flurry of other controversial ideas - affirmative action for ethnic minorities, curbing benefits to restore a culture of work - is promised.

Mr Sarkozy's hyperactivity suggests that he has the energy to pursue all this. But do the French want it? France's politicians are paralysed by the experience of Mr Juppe, who as prime minister backed down from reform in 1995 after the French took to the streets. How can anybody get elected promising painful change?

Mr Sarkozy's answer is that the French will accept reform, if it is explained honestly and presented as in their interests. Advocacy, after all, is his profession. He likes nothing more than taking on a room of hostile unionists, and he has a heroic belief in his own powers of persuasion.

All of which promises tempestuous, possibly dirty, politics, and uncertain policymaking in the months ahead. After nearly ten years of Mr Chirac, Mr Sarkozy's electoral pitch relies ever more on distinguishing himself from his former mentor. For his part, Mr Chirac may well try to counter the threat by replacing the loyal but unpopular Mr Raffarin. Dominique de Villepin, the former foreign minister, now at the interior ministry, is the most likely candidate. Should Mr Chirac decide not to stand again in 2007, Mr de Villepin - a fellow neo-Gaullist - is also the man he is most likely to mould as his successor.

And on the left...

The victory of the right in 2007 is by no means certain. On the contrary, the left is well ahead in the polls, and crushed the right in the recent regional and European elections. Yet the Socialist Party faces its own internal power struggle: on December 1st, members will vote whether to back Laurent Fabius, the party's number two, in his call to reject the European Constitution against the wishes of Franois Hollande, the party boss. The absence on the left of a single natural candidate will test the electorate's current leftish sympathies.

The manufacture of presidents is a curious business in France. In the fifth republic, there have been only five, and two - Mr Chirac and Valery Giscard d'Estaing - are still active. Mr Chirac had been in politics for 28 years before the French would elect him. Like Mr Sarkozy, he had formerly quit government to lead a political party. Like Mr Sarkozy, he once had a restless ambition, preternatural energy and - yes - a reputation for liberalism. Yet it was not until the agitated young man grew into a more conservative, paternalistic figure that the French backed him.

“To be a Gaullist is to be a revolutionary,” is a standard Sarkozy line. But in today's France, radicalism, let alone modernity, is not self-evidently a virtue that the electorate values. Mr Sarkozy may be ready for the French. But are the French ready for Mr Sarkozy?

As Nicolas Sarkozy takes over Jacques Chirac's UMP Party, it signals the beginning of a battle of ideas over the future of France.

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