All Sizzle But No Steak

Is France's speedy maitre d' better at the sell than the service? Over the past eight months French President Nicolas Sarkozy has given the impression of a fresh new leader hungry for change, charging through reforms that, in his own words, were merely the "appetizer." But while observers give the rookie president kudos for keeping his electoral promises—a novelty in France and a precondition for any worthwhile reform—Sarkozy, they say, has proved to be far more flash than substance. "The headlines say Sarkozy's 'rolling like a hell train,'" says French political scientist Dominique Reynié, of Paris's Sciences Po. "But what is he going so fast on? I don't see it. I read he's 'on the charge.' I saw a magazine cover story calling it 'a commando rhythm.' It's propaganda. I don't find that in the legislation."

Indeed, Sarkozy's modus operandi since taking office in May seems to be to just keep on moving, making announcements, jetting around the world, promoting big symbols of French reform—but leaving scant opportunity to assess the outcome. He has kept so much reform on the docket—watering down the 35-hour workweek, tightening immigration rules, giving universities more autonomy—that unions and others can't keep pace. So busy has he been, both personally and professionally, that the French complain there are too many Sarkozy mentions in broadsheet newspaper coverage. One group implored the media to make this past Nov. 30 a Sarkozy-free day (the movement failed miserably). "The effect of this announcement after announcement is an impression that everything is moving," says former junior minister François Goulard, a dissenter in Sarkozy's own UMP party. "But it's only an impression."

There is little question that Sarkozy has made the right noises—and lots of them. His first major reform was a package of tax cuts this summer that was intended to provide a "shock of confidence" to boost growth. It cut taxes on overtime hours, inheritances and some mortgages. It also capped personal tax at 50 percent to encourage rich expatriates to return home and spark investment. Instead, the nearly €14 billion per year package tied up a budget that already has a €41 billion deficit. Worse, growth remains at 1.9 percent, falling short of the 2 to 2.5 percent Sarkozy wanted. Economists now say the tax cut looks more like a sop to the rich than an economic stimulus, and criticize the self-styled "purchasing-power president" for failing to see the core problem wasn't consumer spending, but helping companies become more competitive by eliminating or reducing rigid labor laws.

Not helping matters were global financial woes, which sparked inflation and increased French anxiety. But the crisis made Sarkozy's tax cuts look more hasty than take-charge. "It shows 'I'm going so fast that I don't look at what is happening around me,'" says Xavier Timbeau, the director of analysis and forecasting at the French Economic Observatory.

His next big reform was an attempt to abolish the archaic "special regimes" that gave a minority of public-sector workers early retirement. It sparked nine days of crippling strikes in November—and though Sarkozy's government stood firm, the effects are hard to discern. Sarkozy shifted the burden of negotiating from the government to the relevant state firms such as the public railway company. But it is still unclear what concessions will be made. In the end, argues political scientist Reynié, the retirement battle was a stark illustration of Sarkozy's penchant for presenting run-of-the-mill reforms as something much, much larger.

These expensive symbols are starting to exhaust the international community's patience. In November, the International Monetary Fund said it understands the politics but not the economics of Sarkozy's summer tax incentives. "We fully appreciate the signaling intent of the package: to extol work effort, impart greater confidence and keep electoral pledges—key to the success of the reform agenda," it wrote. But the best response to slowing growth would have been to increase business competitiveness by eliminating the 35-hour workweek rather than tacking on complex new loopholes. Still more difficulties lurk. France is working with a budget drawn up with some astoundingly sunny assumptions: oil at $73 a barrel (it now trades around $100); a euro at $1.37 (it is now $1.47); inflation at 1.6 percent (now forecast at 2.4 percent), and growth at a dreamy 2 to 2.5 percent. Public support for Sarkozy has started to flag. A recent poll shows only 25 percent now trust Sarkozy to boost their buying power, down from 36 percent in August. "Sarkozy has already used the dose of oxygen afforded by [a new leader's] state of grace," says Gaë Sliman, a pollster at BVA.

Paris has optimistically pledged that the bulk of Sarkozy's social- and economic- reform agenda will be broached in 2008. But many of these reforms are wider-reaching and more unpopular than those undertaken last year. One hot-button issue is a plan to bolster the state pension piggybank by raising the retirement age from 40 years in the system to 41. The plan would affect 25 million workers. Also up for review is a benefit-rich employment contract for workers in both the public and private sector. Sarkozy's government will also look into cutting costs that could involve closing military bases and hospitals while increasing spending in a number of areas, including the so-called Marshall Plan for France's troubled banlieues due this month and new social benefits for the elderly and infirm.

Alongside this ambitious agenda, Sarkozy will also have to navigate new obstacles. A global economic downturn seems more likely today than when he took office. His EU presidency, which begins in July, could be tense as he runs up against Brussels bean counters impatient with France over its debt burden. And in the nationwide municipal elections this March, the Socialist opposition will be sure to goad him as prices for daily necessities like gasoline and baguettes rise, while spreading fears about some secret austerity plan his government allegedly has in the works. But real reform is finally on the table. A proposal due out in January could help make French firms more competitive, and it has become clear that appetizers will no longer do. To revive France, Sarkozy will have to see through meatier fare, from pot to plate.

Join the Discussion