The French Government Spirals Elegantly Into Self-Destruction

France might not even notice if the Eurozone fell apart—that’s how tangled up it is in the Jérôme Cahuzac fiasco that blew up with phenomenal effect on Tuesday and Wednesday.

Former Presidents Jacques Chirac and Nicolas Sarkozy were and still are dogged by scandals, investigations, and trials that laid bare all manner of misdeeds they personally had been involved in. But it never caused this kind of ruckus. By contrast, the Cahuzac fiasco doesn’t implicate President François Hollande personally. Not yet. But it’s tearing up his government.

In reality, not much changed on Tuesday, except that ex-budget minister Cahuzac admitted some of the facts that Mediapart had been putting on the table since early December. The left-leaning investigative online journal was launched in 2008. It’s not easy for upstarts in France. So when it published a recording of a conversation where he admitted having a bank account in Switzerland, the mainstream media picked it up skeptically, and they gave Cahuzac a huge platform to deny everything time and again with, as he called it on Tuesday, a “spiral of lies.”

Until he admitted that he had a Swiss bank account since 1992 and that €600,000 were transferred from it in 2009 to Singapore – dark clouds are gathering over where the money had come from – the mainstream media and the government worked hand in glove to contain the affair. The voice on the recording? It wasn’t his, Cahuzac said. Why didn’t the prosecution examine the recording right away? It wasn’t interested in the case. Meanwhile, Cahuzac as budget minister played an integral role in the infamous 75% income-tax bracket and the 2013 budget with all its additional taxes.

On January 24, pressured by a restive population, the Ministry of Finance, under Pierre Moscovici, finally asked the Swiss authorities to confirm Cahuzac’s Swiss bank account. The Swiss response was never published. Instead it was “leaked” to the press, and the press ate it up: Cahuzac didn’t have an account in Switzerland. He was “cleared,” the headlines screamed. The mainstream media was eager to knock down Mediapart, their upstart competitor whose scoop thus turned into a dud. And the government gladly accepted the verdict of the leak.

It was budget crunch time in France. The state auditor asserted that the government was dreaming; the deficit would be much higher than the maximum 3% allowed under EU treaties. More money would have to be extracted from people and businesses. So, on February 11, Prime Minister Jean-Marc Ayrault declared that fighting tax fraud had become a national priority and outlined some new tools [read…. Draconian Cash Controls Are Coming To France].

Budget Minister Cahuzac was busily fighting tax fraud in late March when experts for the prosecution finally determined that the voice on the recording was indeed his. And on March 29, the affair began to wobble off course: the prosecution opened an investigation.

It wasn’t just plain-vanilla “tax fraud” but also “tax fraud laundering,” a serious crime with two steps: committing tax fraud and acquiring with this money assets that can be sold legally. Penalty: five years in the hoosegow and €375,000 in fines. If it can be proven that he laundered his tax fraud habitually, his time in the hoosegow could rise to seven years with up to €1 million in fines. Cahuzac still denied everything. But Hollande had to axe him.

So when Cahuzac confessed, the opposition had a field day. They didn’t worry about him. He was road kill. They attacked Hollande, Ayrault, and Moscovici. Particularly Moscovici. They accused the finance minister, who’d had Cahuzac under his wing, of having “leaked” the fake Swiss report to the media, of having protected Cahuzac, and of having covered up his tax fraud. They demanded that he resign. Alas, the more he defended himself and denied that he’d protected Cahuzac, the guiltier he looked. And he had the gall to refuse to resign.

François Copé, President of the opposition UMP, declared earlier on Wednesday that the “credibility of the President has been seriously challenged.” A few hours later, he upped the ante and demanded the resignation of the entire government. Marine Le Pen, leader of the right wing National Front, and third in presidential election, saw “no other solution” than new elections. A parliamentary session turned into a slugfest. The opposition found the government’s explanations “insufficient.” And the burning question everyone had: “What did they know, and since when?”

Hollande declared on Wednesday that he’d learned “yesterday with stupefaction and anger” about the “unpardonable” act that Cahuzac had committed. It came at the worst possible time. In a poll taken after his big TV address last Thursday before the Cahuzac fiasco erupted, Hollande’s popularity plunged 6 points to 31%, a low that took Sarkozy four years to achieve. And the Cahuzac fiasco will drag Hollande down a quantum leap.

“Justice will be done,” he asserted with the firmest voice he could muster. Cahuzac hadn’t “benefited from any protection,” he said and offered some policy tweaks, including the old standby, reinforcing the “independence of the judiciary,” a tricky issue in France where the judiciary is by design subject to government control. Then he bailed out and flew to Morocco for a previously important state visit that absolutely no one paid attention to.

The Socialists were shocked. After years of Sarkozy scandals, they’d won the election on a holier-than-thou platform. Now their adherents felt betrayed. So they kicked Cahuzac out of the Socialist Party. Their laments were emotional. With unemployment above 10%, with “10 million poor people” in France, with a budget that got squeezed for every euro to shave off yet another tiny fraction of a percent, with an economy sinking ever deeper into a quagmire… and now a budget minister who’d been committing tax fraud for two decades! Enthusiasm of the Socialist rank and file deflated with an audible hiss. You could hear the cries, “They’re all rotten.”

Thus the situation in France has morphed from a financial crisis to an economic crisis with an added political crisis now wrapped in a moral crisis. The Ayrault government and President Hollande might never recapture any sort of control or initiative. Their credibility has been shot, their political capital destroyed. Even among their own. Their economic policies have failed, their options expired. The people have lost confidence. And this, while the resurgent crisis in the Eurozone, though forgotten in France, is exacting its pound of flesh all around.

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