4 - Monetary integration and the French model

Summary

Much of contemporary French history is about defining and maintaining the French version of the European social model in changing economic conditions. By the early 1970s, a solid, if comparatively idiosyncratic, employment relations system balanced weak, politicized, competitive unions and anti-union employers, both reticent about bargaining, with a strong state and legal order. The French welfare state was a Gallic translation of Bismarckian social insurance with “paritary” management, once again backed by a strong state.

In the 1980s, however, French politicians took the lead in consolidating the European Monetary System (EMS), in making it happen, and opening the road to EMU. As the major actors in renewing and changing the shape of European integration, they also were the instigators of new European-level economic constraints that would force reforms to France's employment relations system and welfare state. In the 1980s, when France committed to achieving price stability within EMS, labor market and welfare state changes were largely improvised in the face of a rapidly changing economic environment. In the 1990s EMU “convergence” period old and new leaders partially absorbed these new constraints to conform to the new situation, in large part through significant reforms. French leadership toward EMU thus paralleled developments in French social policy.

The French postwar economy was successful until the 1970s. Growth, state-stimulated and state-centered, then boosted by the coming of the Common Market, was so robust (5.6 percent annually) that in the 1960s, France became the international model of the day, despite chronic inflationary propensities managed by periodic devaluation (Shonfield 1965).