‘The best on Earth’: Can weak economic growth undermine Europe’s ‘very sophisticated social system’?

Remind of our top story, Francis President saying that he's warning of bans on illegitimate protests in the days to come after last week's rioting. The protests, the political uncertainty six months out from a presidential election and growing a growing deficit continue to push up the borrowing cost now at its highest level since 2002. And that brings us to our spotlight segment. Well, joining us from Brussels, he's the former European Trade Commissioner, former president of the World Trade Organization, Pascal Lamy. So many thanks for speaking with us here on France 24. My pleasure. First off, the uncertainty in France. Is this a crisis for all of Europe? I would say yes. We have strong social movements in France. We have that in Italy, in Belgium, in Spain. So there is something in the European dimension, and trying to take a bit of distance, I think the common cause to these turbulences is the mismatch between a very sophisticated European social system, which is the best on Earth on the one side, and on the other side, the weak growth of Europe that probably, at this stage, has become not enough to feed our generous social model. We have a potential vote of grace, which is half of the U.S., one-third of China, one-fourth of India, and we have a social system which is much better than the U.S., or China, or India. And I think this is the root of the problem lies in this growth deficit in Europe, which has to do with competitiveness, which has to do with innovation, but which also has to do with a major trade problem we have to cope with with China. Yeah. Before I ask you about China, just one last question on this. There's something off, right? Because the unemployment rate is not that high compared to what it's been in the past in Europe, people are employed, but yet they have trouble being able to make ends meet, to pay their rents. It's all boiling over because of the recent spike in inflation, but it's something that's been a long time coming. Has globalization gone in a way that we didn't expect? We wouldn't say that in the case of Europe, where we precisely have a social system that buffers the shocks that globalization did bring, and that's a different case in the U.S. But I think you're right. We have, for the moment, not that large inflation, but a large inflation in areas where the more modest of the household suffer, i.e. energy, and that has a lot to do with the war in Iran, and as you know, Europe was not at all consulted nor in any way associated to this war, and we pay the consequences of that, and that also trickles down because the price of energy, as you know, trickles down a large part of the energy into food systems for instance. Now, this being said, there is a specific French coefficient which has to do with a very long tradition of political violence in France. If you were looking at the demonstrators, a number of them were quoting the French revolution of 1789, which showed that in the French political memory, the notion that streets matter and that street violence may matter is something which most of our neighbors north-south do not have in common with us. Now, you talked about China. In the last weeks, the EU has been bargaining with Beijing over trade surpluses in areas such as the electric vehicles, which are now flooding the markets of the world coming from Beijing. Let's take a listen to the German chancellor. He was speaking Wednesday at a business conference in Berlin. With the global situation as it is, however, economic openness alone is no longer enough. We also need to protect our markets and defend ourselves against those who don't play by the rules. Anyone who disrupts the functioning of the markets through unfair subsidies, overcapacities, aggressive pricing, or artificially undervalued currencies must expect a response. Now, there's something perhaps missing from that clip. And by the way, later in the speech, He said, oh, we still want to negotiate with China. China's still our friend. We heard the Canadian prime minister tell his citizens that when it came to the current trade war with the U.S., there's going to be pain. I didn't hear that from Friedrich Merz saying, look, if we want to really have a showdown over dumping, there's going to be pain if there's a trade war. That's correct, if there is a trade war. But this is not the European plan A. The European plan A, as I see it, is negotiate with the Chinese, try to convince the Chinese that moderating, containing part of their exports, surges that flood the European market, because other markets, by the way, are much more closed than the European market. That's Plan A. And by the way, this is what the European Commissioner got from Beijing a bit more than a week ago, which is China accepting a self-limitation of hybrid vehicles into Europe, probably more to come, in areas where the Chinese export surge is a threat to the life of part of the industry in Europe. Now, if that was not to work, and I think we all wish this Plan A to work, then Europe have to go to Plan B with new trade defense instruments, which will be stronger than what We have the moment, which is anti-dumping, anti-subsidy, safeguard closures in some possible occurrences, but which are procedurally extremely controlled, heavy, according to WTO and European rules, and which take too much time. So I think it's either plan A, and we've had a step in the right direction, or if it was not to where it can be, but you're absolutely right. We have to know that whatever trade conflict with China would raise prices in Europe, and that's absolutely correct. We have to know that in the area where we would ask them to sell either less or at a higher price or even possibly retaliation from China, which is why the think tanks which I coordinate, the Jacques Delors think tank family, have proposed a new possible instrument, what we call structural rebalancing, with a sort of solidarity system that would bind the Europeans together in case there would be Chinese retaliations. Pascal Lamy, so many thanks for joining us from Brussels. My pleasure.