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R 251628Z MAY 07 ZDK MULTI SVC
FM AMEMBASSY PARIS
TO RUEHC/SECSTATE WASHDC 7655
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UNCLAS SECTION 01 OF 03 PARIS 002196 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
E.O. 12956: N/A 
TAGS: ECON PGOV ETRD FR
SUBJECT: GOF RESTRUCTURING: IMPLICATIONS FOR ECONOMIC AGENDA 
 
REF: A) Paris 2027  B) Paris 2065  C) Paris 2043 
 
PARIS 00002196  001.2 OF 003 
 
 
¶1.  (SBU) Summary:  Reorganization of the French government's 
economic, social and transportation ministries (reftels) will create 
new challenges and opportunities for our interaction with the French 
on economic issues.  The incorporation of transport and energy into 
Minister of State Alain Juppe's "super ministry" for sustainable 
development may lend coherence to policymaking, but might limit our 
ability to influence policy by reducing the number of independent 
power centers in the GOF. For now trade falls under Minister of 
Economy, Finance and Employment Borloo, though a state secretary for 
foreign commerce is likely to be named following legislative 
elections in June.  Part of the development portfolio will devolve 
to the newly-created Ministry of Immigration, Integration, National 
Identity and Co-development, reflecting an emphasis in development 
policy on the source countries for French immigration flows. 
Otherwise the main impact of the restructuring will be on Sarkozy's 
domestic reform agenda.  We expect the Elysee to play a more 
activist role in both foreign and domestic economic policymaking. 
End summary. 
 
Two Ministries for Economic and State Reform 
-------------------------------------------- 
¶2. (SBU) One of the most powerful baronies in the French Government, 
the Ministry of Economy, Finance, and Industry, has been split into 
two separate ministries.  The Ministry of Budget, Public Accounts 
and Civil Service, headed by former treasurer of the UMP Party and 
former Junior Minister of State Reform Eric Woerth, will manage the 
budgets of the State, local authorities and Social Security, with a 
view to controlling public expenditures.  At the same time, the new 
ministry will oversee reform of the state, including President 
Sarkozy's campaign promise to thin the ranks of civil servants 
through attrition.  While Sarkozy has committed to tackling public 
debt, currently 63.9% of GDP, initial statements by both Woerth and 
PM Francois Fillon indicate a willingness to tolerate an initial 
increase in deficit spending as the government follows through on 
campaign promises to cut taxes. 
 
¶3. (SBU) Equally dramatic in its long-term effect is the 
establishment of the Ministry of Economy, Finance and Employment. 
The merger of economic and employment policy reflects a major shift 
in government strategy.  Employment and unemployment issues have 
traditionally been handled together within a Ministry of Employment 
and Social Affairs.  The focus was not on job creation -- with the 
exception of government-subsidized jobs -- but rather on financial 
assistance and income-substitution schemes for the unemployed.  The 
Fillon Government hopes that the explicit link between employment 
and policymaking for long-term economic growth will help to trigger 
a shift in French mentalities. 
 
¶4. (SBU) Although government "attribution letters" delineating the 
formal responsibilities of the various ministries have yet to be 
issued, we assume the French Tresor (Treasury), which handles debt 
issues and IFI relations among other matters, will remain largely 
intact. It will continue to operate under the aegis of Borloo's 
Ministry of Economy, Finance and Employment.  Tresor Director 
General Xavier Musca - nominated for his position by then-Finance 
Minister Sarkozy in 2004 - is likely to remain in his current 
position. 
 
¶5. (SBU) Borloo's ministry also appears likely to maintain 
responsibility for key aspects of French industrial policy, 
including front-burner issues such as the possible evolution of 
EADS/Airbus shareholding structures, and the proposed merger - still 
in abeyance - between energy companies GDF and Suez.  But it is 
clear that the Elysee, and Prime Minister Fillon, will play an 
active role in critical dossiers.  Sarkozy's post-inauguration jaunt 
to Airbus headquarters in Toulouse was emblematic: Borloo 
accompanied the president but remained in the shadows and said 
little.  And it is PM Fillon who has done most of the talking on 
GDF/Suez, telling the press on the margins of a May 23 GDF 
shareholders meeting that the government was open to the proposed 
merger, but also wanted to entertain other options before making its 
position known in late June or early July. 
 
The New "Green" Ministry 
------------------------ 
¶6. (SBU) Another powerful civil service barony, Transportation and 
Public Works, is being merged into the new "super-ministry" of the 
Environment, Sustainable Development and Planning.  The move has the 
potential to create cultural clashes that will take time to 
overcome, even with political heavy-weight and former Prime Minister 
Alain Juppe at the helm (ref B).  Former Minister of Agriculture 
(and former Trade Minister) Dominique Bussereau will serve as State 
Secretary for Transportation within the ministry.  Juppe has given 
 
SIPDIS 
an early indication of areas of interest - and potential conflict -- 
including a call for attacking CO2 emissions in the air transport 
sector, and a challenge to the auto industry to improve pollution 
standards. 
 
 
PARIS 00002196  002.2 OF 003 
 
 
¶7. (SBU) While there continues to be a lack of clarity on who will 
have responsibility for what in energy policy, employees within the 
Ministry of Economy's existing energy directorate assume their 
mission will fall under the purview of the Sustainable Development 
ministry.  Energy and Raw Materials Directorate DAS-equivalent 
Sophie Galey-Leruste told us she was excited about the change, 
noting that Juppe would "get things done" thanks to the influence he 
enjoys as a result of his long political career, and as the number 
two in the government. 
 
¶8. (SBU) Galey-Leruste seemed unconcerned by potential 
intra-ministerial rivalries, noting that the nexus of energy, 
transportation and the environment had featured prominently at the 
May 14 - 15 IEA ministerial and was indicative of the synergies to 
be had in bringing the issues together in one ministry.  She also 
suggested that energy policy would enjoy a higher profile in the new 
ministry than it had in the Ministry of Economy, where it was one of 
several equal sectoral directorates.  For his part, Alain Juppe has 
said that his ministry would be responsible for defining the general 
orientation of energy policy, implying that implementation might 
fall to others. 
 
Who Gets Trade? 
--------------- 
¶9. (SBU) It appears that trade will remain within the Ministry of 
Economy, Finance and Employment, most likely under a state secretary 
for foreign commerce to be appointed following the second round of 
legislative elections on June 17.  DAS-equivalent for the Americas 
Philippe Beaudry tells us that Agriculture Minister (and former 
Trade Minister) Christine Lagarde has asked for the broad WTO 
portfolio, in addition to her agriculture responsibilities.  The 
government's "attribution decree" of May 23 indicates that Lagarde 
will hold onto the responsibilities given to the previous minister 
of agriculture, and in addition will "participate in the 
implementation of government policy on international trade."   What 
that means in practice is unclear, but given Lagarde's experience 
with the details of Doha, we can assume that she will continue to 
play a role in defining French policy on the broader issues under 
negotiation. 
 
¶10. (SBU) We should not expect the appointment of Lagarde as 
Minister of Agriculture to signal a major shift in French policy on 
Doha (ref C).  In her initial public appearances she has strongly 
defended the French position, and said the ball is "in the 
Americans' court."  Although both she and Sarkozy may be more 
sensitive to the potential upside to the French economy of a 
positive outcome on NAMA issues, neither will want to risk the wrath 
of French farmers while the government is in the midst of pushing a 
broad domestic economic reform agenda. 
 
Development 
----------- 
¶11. (SBU) In an interesting twist Sarkozy has hived off the sphere 
of "co-development" from the rest of the GOF's development 
bureaucracy and attached it to the newly-created Ministry of 
Immigration, Integration, National Identity and Co-Development run 
by close ally Brice Hortefeux.  Formerly a backwater at the Quai 
d'Orsay, co-development refers to French programs that promote the 
return of immigrant workers to their countries of origin, or that 
attempt to leverage the economic impact of remittances and skills to 
promote economic development in their home countries.  The 
reorganization gives new prominence to development efforts that can 
be presented as a response to illegal immigration flows.  Though it 
is unlikely to have much immediate impact on long-established 
development programs, it signals an interest in reorienting French 
development efforts and may spill over into broader GOF strategy. 
 
 
Labor, Social Relations and Solidarity 
-------------------------------------- 
¶12. (SBU) Responding to French labor unions' concerns over initial 
plans to transfer employment issues to the Ministry of Economy, the 
Fillon Government has maintained a Labor, Social Relations and 
Solidarity Ministry and put it in the hands of Xavier Bertrand, 
former Junior Minister for Health Insurance.  Bertrand will be 
responsible for negotiations with the labor unions and employers, 
particularly on the sensitive issues of minimum service in public 
transportation and schools, and on the unification of France's 
bifurcated labor market.  Bertrand will have responsibility for the 
four "social summits" on labor representation, flexibility, gender 
equality issues and work safety announced by President Sarkozy, to 
take place in September.  On these and other issues, he will work 
hand-in-hand with Woerth and Borloo. 
 
The Culture Ministry Remains Intact 
----------------------------------- 
¶13. (SBU) The Culture Ministry was also slated to disappear into a 
larger Ministry of Knowledge, which would have grouped Culture, 
Higher Education and Research.  The president and prime minister 
reportedly failed to find a personality that matched their ambition, 
 
PARIS 00002196  003.2 OF 003 
 
 
hence two separate ministries.  The new Culture Minister, Christine 
Albanel, previously served as Director of the Chateau de Versailles 
and as speechwriter to Jacques Chirac.  Nothing in her background 
would indicate that she has the background to prepare her for the 
highly technical issues on her agenda, including the new digital 
copyright bill as well as the shift from analog to digital 
television and the new EU directive "Television without Borders." 
 
Comment 
------- 
¶14. (SBU) Sarkozy and Fillon have orchestrated what many observers 
have called a "big bang" of the French government.  The challenge of 
pushing forward with a broad economic policy agenda, while 
simultaneously undertaking a major restructuring of the responsible 
ministries, cannot be overstated.  But polling data show strong 
public support for Sarkozy's strategy.  If confirmed by June 
legislative elections, Sarkozy may enjoy a sufficiently strong 
tailwind to overcome bureaucratic and other obstacles to his 
signature policy proposals. 
WHITE