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Unrest grows as crisis spins out of control in France

Angry confrontations between police and young people on housing estates near Amiens are a sign of growing social unrest in France as the recession, highlighted by the threatened Peugeot plant closure, deepens.
 
Amiens has often experienced unrest, but the prefect's office said there had never been violence "as serious as this". After just 100 days as president, François Hollande made his position clear, with a statement that could have come from his right-wing predecessor, Sarkozy: “The state will mobilise all its means to combat these violent acts. Security is not only a priority for us, it is an obligation."

There were riots here during the nationwide disturbances in 2005 across France, but economic and social conditions have greatly intensified in the wake of the global financial meltdown of 2007-8. Massive upheavals in the Middle East, North Africa, Greece and Spain and riots in cities in the UK are indicators of social turbulence on a transcontinental scale.

Unemployment is already as high as 40% amongst the mostly immigrant youth on the estates surrounding French cities, and now the deepening slump is driving corporations onto the offensive throughout Europe. Growth in the eurozone has turned to contraction, so workers and unemployed people throughout the whole continent are being driven into action against employers and the state.

With no possibility of any recovery in demand for mass market cars, car maker PSA Peugeot Citroen has announced plans to close its Aulnay-sous-Bois factory in the suburbs of Paris. Other cut-backs are certain to follow.

Sergio Marchionne, the chief executive of Chrysler and Fiat, two of the world’s biggest car companies, and president of the European Automobile Manufacturers’ Association, warned in April that the industry needed to cut capacity in Europe by 20%.

Translated into jobs that would hit close to half a million workers in an industry directly employing 2.3 million people in Europe, including sub-contractors. Economic conditions have worsened since Marchionne’s forecast, so the assault on jobs is likely to be much worse than his prediction.

The crisis is echoed in steel production – one of the car industry’s main inputs.  World crude steel capacity utilisation was running at 80.4% in May, down 2.5% on last year.

No part of the world is exempt from the global contraction. Its impact is reflected in a crisis in shipping where disappearing credit and overcapacity interacts with falling demand. The second-hand ship market has collapsed. Both bulk ships and tankers are trading at lower levels today than during the worst moments of the 2008-09 crisis.

Clarkson’s ClarkSea Index for maritime freight rates has halved since mid-2010, and fallen by 80% since 2008. This includes the wildly volatile Baltic Dry Index for bulk freight, which has crashed by 90% to post-Lehman depths.
 
Responses to the Aulnay-sous-Bois planned closure have been mixed, to say the least. Jean-Pierre Mercier, head of the CGT union at the factory targeted for closure said: "We have the power to make Peugeot back down, to preserve our jobs." He told a crowd gathered by its gates. "We are a political bomb, a social bomb, and we intend to detonate."

The union is planning a long-term campaign of protest, including marches on the company headquarters, to keep the plant open. Other unions are more intent on extracting improved redundancy terms for workers. Gerard Segura, Aulnay’s Socialist Party mayor, has ordered Peugeot to find a new industrial employer for the site, threatening to expropriate the factory grounds if it fails.

A closure would wreck the town's finances. It would lose taxes from the company and from hundreds of families that would have to rely on social services. Already deep in the red, its debt payments have doubled in the past four years to €90.4 million euros in a budget of €226 million.

These attempts to preserve jobs, attract a new employer or even win improved redundancy conditions only serve to hide the impact of the unfolding economic holocaust. Conflict is certain to sharpen when French car workers return from their August holidays.  

Gerry Gold
Economics editor
15 August 2012

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