Place Your Chips on French Success

Written By Brian Hicks

Posted May 9, 2007

You’ve probably heard, "the chips are down" to mean that times aren’t good. But the original French phrase means all bets have been placed. This weekend, French voters put their chips down, and investors in France will win.

Many French expressions are difficult to put in English terms, so we choose to borrow the original instead. In diplomacy we cling to idioms like détente and rapprochement. For the French, the toughest translations have to do with economic policy.

"The chips are down," is a free translation of Les Jeux Sont Faits, a 1947 work by the French master of existentialism, Jean-Paul Sartre. While Sartre and his countryman Camus, along with Rodin’s famous sculpture Le Penseur (the Thinker) have shaped France’s self-image and perception abroad, the country has tumbled in turmoil.

This past weekend, French voters directly elected the right-wing (though conservative by U.S. standards) Nicolas Sarkozy to be the next president of their storied and stagnant republic. After decades of staring at a spinning roulette wheel, the voters’ chips are down.

Les jeux sont faits also means, "the games are done."

As the first president-elect born after the end of World War II, Sarkozy’s tenure will hopefully usher in a new generation of doers, not dilly-dalliers like Jacques Chirac who, though they may have held office for more than a decade, picked flawed strategies only to abandon them at the first sign of civil unrest.


France’s Best: Cheese and Whine

Segolene Royal, Sarkozy’s now-vanquished Socialist Party opponent, took a page from Dick Cheney’s campaign playbook last week. Sarkozy "would be a dangerous choice," Royal said, adding predictions of rioting and violence should he win.

In autumn 2005, Sarkozy used his office as interior minister to denounce the "thugs" and "rabble" of France’s poor and predominantly immigrant suburbs, who began rioting after two immigrant youths died while running from police.

The dignified response to Sarkozy’s characterization was, of course, to riot some more. Cars were set ablaze, roadblocks set up, and chaos reigned in the streets for weeks.

I chatted with a close associate in France last week, as the final salvos of election rhetoric and nightmare scenarios sailed over the country.

He told me about the night before, when a middle-aged man had come to him and begged for money at a seaside café in Nice. The man was sporting a fresh-looking jumpsuit and a necklace, so my friend refused on principle. My American friend was scowled at in turn as a "Sarkoziste," in reference to the Freddy Krueger of the welfare state.

Maybe that’s why 80% of the self-employed voted for Sarkozy in Sunday’s election, in a country where some 40% of an executive’s pay goes towards taxes (though the same goes for New York City, according to Forbes).

Sarkozy has promised tax reform and greater flexibility in employment laws, especially the 35-hour workweek (compared to a standard 40 in the U.S. and 50+ in China).

Sarkozy brings experience into this reform arena, as it was he who helped resolve a major labor dispute over the CPE (the French acronym for the first jobs’ law) early in 2006. Ironically, the law was intended to make employment of young workers more flexible after the 2005 riots were largely blamed on youth unemployment. In 2006, it was the white, urban youth who took to the streets.

Sarkozy has also proposed a revival of movement towards a European Union constitution, through a treaty process that would provide assurance to wary French and British citizens that their national identities would not be obliterated. French voters rejected adoption of an EU constitution two years ago, bringing the process to a halt across the continent as that major failure called the agreement’s overall feasibility into question.

100 Days

Sarkozy promises to carry out major economic reforms in the first hundred days of his presidency.

He will try to eliminate major payroll and income taxes on overtime pay in order to soften the 35-hour barrier. He will also attempt to pass legislation to ensure minimum service during public sector labor disputes and strikes, which often cause heaps of trash and undelivered mail to pile up across the country.

Sarkozy’s intended moderate prime minister, Francois Fillon, will provide an important helping hand in the process, as he has plans to deal with labor unions as "social partners" on the path to reform.

All in all, the signs point to growth and reform for France’s economy, much of it based on what is already in motion. The CAC40 French benchmark index has kept up with the S&P in the past year, but the German DAX has outrun the U.S. standard by nearly 10%.

France Germany US

Companies like Veolia Environnement (NYSE:VE), a French environmental services company that does business worldwide, also stand to gain from pro-business policies in France.

Veolia 6 month

American shares of Veolia are up nearly 35% in the past six months, showing that the best of French companies have been able to turn profits even in a less-than-optimal environment.

If Sarkozy’s policies take hold, I predict a riot of profits in French companies listed in the U.S. and at home.

Place your bets now.

Kind Regards,

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Sam Hopkins

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