by Manuel Alvarez-Rivera
Barely a month after electing conservative Nicolas Sarkozy as President of the Fifth Republic, voters in France head back to the polls on June 10 and 17 to choose members of the lower house of the country's legislature, the National Assembly.
Members of the National Assembly are elected in two rounds of voting in single-member constituencies; France's overseas departments and territories also take part in the election, returning 22 of the National Assembly's 577 deputies. As in presidential elections, candidates who obtain absolute vote majorities in their constituencies on the first round (and a vote total equal to at least one-quarter of the electorate) are elected to office. However, while in presidential elections only the top two candidates qualify for the runoff when no candidate secures a first-round absolute majority, in legislative elections third- and lower-placed candidates who obtain a number of votes equal to at least one-eight (12.5%) of the electorate may remain in the ballot for the second round - unless they choose to withdraw from the race.
Thus, the first round of a National Assembly election is not unlike a typical French presidential election, with candidates spanning the whole ideological spectrum from far right to far left; usually, few constituencies elect their deputies at this stage. Although French legislative runoff elections may have more than one candidate from the center-right or the left (or both), most second round contests are straight right-versus-left races: when more than one candidate from either ideological pole qualifies for the runoff, lower-ranked candidates usually withdraw in favor of a better-placed competitor from an allied party, in order to prevent a split-vote victory by a candidate from the opposite pole; this practice is known in France as désistement.
In the 2002 National Assembly election, a second round was held in 519 of 577 constituencies: just ten of these had three candidates, as opposed to 506 with two candidates (in the remaining three only one candidate remained on the ballot). On average, the one-eight of the electorate threshold translated into a fairly steep twenty percent of the valid vote, which partly explains the very low number of three-way races.
While the two-round voting system generally favors larger parties such as the ruling, right-of-center Union for a Popular Movement (UMP) and the Socialist Party (PS), usually amplifying the winning party's popular vote majority, smaller parties can do reasonably well - provided they find a suitable partner with a larger electoral following. Historically, this has been the case with the French Communist Party (PCF), which in the 2002 legislative elections polled only 4.9% of the vote in the first round and 3.3% in the second round, but secured 21 National Assembly seats (3.6% of the total) in constituencies without Socialist candidates in the runoff election (and in some cases the first round as well). Likewise, the centrist Union for French Democracy (UDF) won 29 seats (five percent of the National Assembly) with 4.8% of the vote in the first round and 3.9% in the runoff vote, mostly in constituencies where the party had no competition from the UMP.
On the other hand, small or middle-sized parties that are unable to form alliances with other parties usually fare badly under this system. The best example in this regard is the far-right National Front (FN), which despite polling as much as fifteen percent of the vote has never elected more than a single deputy (and often none at all) since the runoff voting system was re-established in 1988, after being briefly scrapped in favor of proportional representation in 1986. In the 2002 National Assembly election, the National Front won 11.1% of the first round vote, but only thirty-seven of its 565 candidates made it to the second round - nine in three-way races, and the rest in straight contests with the center-right (20) or the left (8); none of them was elected.
Presidential and Legislative Elections in France has more information about the French electoral system, as well as results of the 2002 National Assembly election.
Although the 1958 constitution of the French Fifth Republic provides for a strong presidency, its powers are contingent upon the president's ability to command a majority in the National Assembly. If opposition parties were to prevail in the upcoming legislative election, President Sarkozy would have no choice but to appoint a prime minister from the opposition ranks, and the regime would essentially revert to a parliamentary form of government, under which Sarkozy would be little more than a figurehead, with very limited influence on policymaking outside some specific areas such as foreign affairs.
However, such an outcome appears highly unlikely, barring any unforeseen developments. In past National Assembly elections held immediately after a presidential vote, the ruling party has either won an outright majority or come within striking distance of it. Moreover, opinion polls (which correctly predicted Sarkozy's victory last month) are forecasting a large popular vote plurality for the UMP in the legislative election, well ahead of the Socialists and their allies - which would translate into a crushing National Assembly majority.
Not surprisingly, most UDF deputies will be running in this year's legislative election as pro-Sarkozy "presidential majority" candidates, rather than under the banner of the new, centrist Democratic Movement (MoDem) established by UDF leader François Bayrou, who came in a strong third place in the presidential election. Both the Democratic Movement and the National Front are trailing badly in recent polls, with MoDem barely reaching double digits and the FN mired around five percent, narrowly ahead of the Communist Party, and well below its average share of the vote in French parliamentary elections since emerging as a major political force more than two decades ago.
Update
Nationwide results of the first round of France's 2007 legislative election (aggregated on the basis of final constituency-level figures published on France's Interior Ministry website) were as follows:
Union for a Popular Movement - 10,289,737 votes (39.5%), 98 seats
Presidential Majority - 616,440 votes (2.4%), 8 seats
Socialist - 6,436,521 votes (24.7%), 1 seat
Movement for France - 312,581 votes (1.2%), 1 seat
UDF-Democratic Movement - 1,981,107 votes (7.6%), no seats
National Front - 1,116,136 votes (4.3%), no seats
Communist - 1,115,663 votes (4.3%), no seats
The Greens - 845,977 votes (3.3%), no seats
Left Radical - 343,565 votes (1.3%), no seats
Hunting Fishing Nature Traditions - 213,427 votes (0.8%), no seats
Ecologist - 208,477 votes (0.8%), no seats
Far right - 102,124 votes (0.4%), no seats
Far left - 888,234 votes (3.4%), no seats
Regionalist - 133,473 votes (0.5%), no seats
Other right-wing parties - 641,842 votes (2.5%), 2 seats
Other left-wing parties - 513,407 votes (2.0%), no seats
Others - 267,755 votes (1.0%), no seats
Voter turnout in the first round was 60.4%, down from 64.4% in 2002, and well below the turnout rate in the recently held presidential election.
A total of 110 constituencies (out of 577) elected a deputy in the first round of voting; in the remaining 467, a second round was held on June 17. Among the latter, the ruling UMP was ahead in 317, the Socialists in 110, "Presidential Majority" candidates in 17, the Communists in six, Left Radicals and Greens in two each, the Democratic Movement in one, a regionalist candidate in one, other right-wing parties in five, and other left-wing parties in six. Although twelve constituencies could have had three-way runoff races, just one actually had three candidates for the second round.
Only six Democratic Movement candidates (including founding leader François Bayrou, who topped the poll in his Pyrénées-Atlantiques constituency), four Greens and just one National Front hopeful (Marine Le Pen, daughter of party leader Jean-Marie Le Pen) qualified for the runoff, along with twenty-four Communists, twenty-one "Presidential Majority" candidates and seventeen Left Radicals; nearly all of these took part in the second round.
The results of the first round of voting appeared to confirm earlier findings from opinion polls, which suggested a landslide victory for the UMP and its allies in the second round. As it was, the ruling party won a clear victory in the June 17 runoff election, but fell fall short of a landslide, losing a substantial number of seats to the Socialists and allied left-wing parties.
Nationwide totals of the second round of France's 2007 legislative election (aggregated on the basis of official constituency counts published on France's Interior Ministry website, and including 110 deputies elected on the first round) were as follows:
Union for a Popular Movement - 9,461,087 votes (46.4%), 313 seats
Socialist - 8,624,472 votes (42.3%), 186 seats
Presidential Majority - 433,057 votes (2.1%), 22 seats
Communist - 464,739 votes (2.3%), 15 seats
Left Radical - 333,194 votes (1.6%), 7 seats
The Greens - 90,975 votes (0.4%), 4 seats
UDF-Democratic Movement - 100,115 votes (0.5%), 3 seats
Movement for France - (no runoff candidates), 1 seat
National Front - 17,107 votes (0.1%), no seats
Regionalist - 106,484 votes (0.5%), 1 seat
Other right-wing parties - 238,588 votes (1.2%), 9 seats
Other left-wing parties - 503,556 votes (2.5%), 15 seats
Others - 33,068 votes (0.2%), 1 seat
Voter turnout in the second round was 60%, marginally down from 60.3% in 2002.
The second round of voting turned out to be a very closely fought race both in terms of votes (49.7% for the center-right to 49.1% for the left) and seats (236 for the center-right, 226 for the left). In fact, the center-right parties' retained a substantial parliamentary majority only because they had previously captured 108 seats in the first round, compared to just one for the left.
The left-wing parties' fortunes were apparently bolstered by widespread opposition to a proposed increase of the VAT (value-added tax).
The most notable political casualty in the election was former Prime Minister (and sitting mayor of Bordeaux) Alain Juppé, who had been recently appointed as energy and environment minister but narrowly lost his Central Bordeaux parliamentary seat to a Socialist. Following his defeat, Juppé resigned as cabinet minister.
Wednesday, June 6, 2007
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Special Feature, The German Economy At A Glance
Welcome to the Global Economy Matters Blog. Below you will find the normal chronological blog posts. But first here is our Monthly Special Feature which in January 2008 focuses on Germany. Here you will find charts which provide background data on the German economy. We hope these will be of some help to the first time reader here, making it easier to contextualise, assess and get to grips with the general argument being presented on the blog. The big question which arose concerning the Germany economy in 2007 was whether or not the new found dynamism in German economic activity constituted some form of remaissance, and formed part of a global decoupling process whereby a sustainable recovery in domestic demand was taking place. Analysts on this blog never really accepted this view. The key question and central enigma associated with the German economy is really why domestic demand should have remained so congenitally weak over such a considerable period of time.
Since this phenomenon is also to be observed in the the two other societes with very high (circa 43) population median ages - Italy and Japan - we postulate that demographics and population ageing processes offer some part of the explanation here.
Basically what we can observe as societies move above the 40 median age mark are a number of stylised facts. Weakness in domestic private consumption would be one of these, absence of consumer credit driven property booms would be another, growing pressure on the national debt as the elderly dependence ratio steadily rises would be another, and growing dependence on export growth for sustaining GDP growth would be the central feature of the whole edifice.
We hope you will find the background data presented here useful in assessing the argument which we are presenting on this blog, which is basically that a key component in the longer term growth stagnation from which Germany is suffering has its roots in the underlying demographics. Basically and in the long run (possibly with a 30 year lag) fertility does matter. Please click on thumbnails for better viewing.
What follows is a very rough and ready attempt to describe in broad brush strokes how the contemporary German economy actually works. First off, and as is well known, German society is ageing, and at the same time the German population has started declining. Not only is Germany's median age rising, the proportion of the population in the key 25-49 age group is now falling.
As can be seen from the chart this crucial age group touched its highpoint in 1997/98. This could be thought of as the moment of maximum capacity for the German economy since it includes the crucial 25 to 40 household-former, first-time-homebuyer group. In terms of credit expansion, it is this group which drives a significant part of internal demand.
The age group also includes another important group, the 35 to 50 years one. This group drives an economy in productive terms, since these are the prime age workers. If you think of a society as a 100 metres sprint athlete, then there is an age when this athlete is at the maximum of his or her running potential, an age after which each time they can only run the 100 metres more slowly.
Well a society is the same in terms of its collective economic potential, without addressing underlying issues either through fertility or immigration, it can only move forward more and more slowly. Consumption becomes flat, and GDP growth - gioven the external dependence - fragile.
Private consumption has hovered pretty close to the 60% mark for many years now, while government consumption - after moving sharply upwards as a total share in the first half of the 1970s has subsequently remained pretty constant, moving around the 19% of GDP mark. The big difference has been in the importance of fixed capital formation (GFCF) which reached from 1975 to 2000hovered around the 22 - 24% of GDP mark.
Prior to 1975 GFCF was at a much higher level, while post 2000 it has dropped substantially And So what we can see is that the year between, say, 1975 and 2000, when GFCF remaind a more or less constant share of GDP, constituted - to use the language of neo-classical economics - the constant growth period of the German domestic economy.The years prior to 1975 were the convergence, or "catch-up" years
And especially the 1960s, after Germany finally broke out of the destruction and devastation of WWII - while the years after 2000 constitute what the neo-classicists would call the "balanced growth period", although as we can see, it isn't very balanced, and there certainly isn't a steady state.
2008 Forecasts: There is a consenus at the present time that the German economy is slowing. Where there is no real consensus is over the rate at which it is slowing and where and when it will settle. It is clear that GDP growth in 2007 will be below the heady 3.1% annual rate achieved in 2006. The OECD last December revised their 2007 German forecast down to 2.6%, and their 2008 one down to 1.8%. The IMF in their October World Economic Outlook forecast growth for 2007 at 2.4%, slowing to 2% in 2008. Morgan Stanley's Elga Bartsch, while optimistic that the German economy will whether the credit crunch better than most (and here she may well be right) is somewhat more sanguine, putting 2008 growth at 1.5%. In general though I rather doubt her overview that "Germany could well be on the way to becoming the new growth locomotive in Europe." and especially her suggestion that "the phase of underperformance in terms of GDP growth, which has plagued Europe’s largest economy for years, is clearly over." Unfortunately, what we are arguing on this blog is that Germany's GDP growth rates since the mid 1990s are not some special kind of "underperformance", but what can be expected from a society with a rapidly rising median age which is increasingly dependent on exports rather than domestic consumption for growth.
The EU commission in it's November 2007 forecast was also convinced that the German economy was now on a "solid growth path", forecasting 2.5% growth for 2007 and 2.1% for 2008.
I personally will be very surprised if we see growth in the region of 2% for the German economy in 2008, and I even consider the 1.8% from the OECD and 1.5% from Morgan Stanley still on the high side given the extent of downside risk. Basically the reasonably favourable depreciation rules which currently apply to German investment have been changed as of 1 January 2008, and we might reasonably expect to see some sort of impact on investment comparable with the negative shock which hit private domestic consumption following the VAT rise on 1 Jan 2007. In addition all the indications suggest that German consumption will continue to be weak in 2008. So if consumer consumption is at best flat, governemnt consumption equally so, and investment and construction weakening, we are simply lefy with export growth, and here the outlook is definitely more negative in 2008 than it was in 2007. The Spanish economy (one important German customer) is visibly wilting by the day, as is the UK (another big customer), but it is to Eastern Europe we must look for the biggest impact on German exports of any correction in 2008. Just one data point should suffice, Germany exports roughly the same value of goods to the Czech Republic (and more to Poland) as it does to China. This means that Geramny is proportionately not that exposed to any slowdown in China, but hugely exposed to any sudden shift in growth and demand in the East of Europe.
So I would say, that on current data, 1% growth in Germany in 2008 look a reasonable estimate at this point, but that this needs to be taken to mean with considerable downside risk. Germany is now tremendously dependent on what happens elsewhere, and until what does actually happen elsewhere becomes clearer it is difficult to be more precise on Germany.
The only apparent bright spot on the horizon is employment, but I am dubious that in the context of Germany's ageing workforce this will work through as some are hoping, as I expain at some considerable length in this post here. My opinion is that Germany will enter recession at some point during 2008, and that we may well have 2 consecutive quarters of negative growth. The continuing high euro will maintain pressure on German exports, and high oil and food prices will maintain pressure on the inflation front, at least in the first half of 2008. The ECB will probably switch stance towards rate reductions at some point, but since, as Elga Bartsch among many others so eloquently argues German internal consumption and investment are not especially dependent on credit conditions, easing from the ECB may not have as much impact as one would hope for.
Key Posts For Understanding The Present Path of the German Economy
Is The German Economy Heading For Recession in 2008?
Employment and Unemployment in Germany January 2008
Germany Economy, What Price the VAT Effect Now!
The German Economy, Employment, Export Shares and Age Structure
Structural Aspects of German Export Dependence
Does NeoClassical Steady State Growth Really Exist?
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