The simple macroeconomics of North and South in EMU. Bruegel Working Paper 2012/12, 30 July 2012

The euro area today consists of a competitive, moderately leveraged North and an uncompetitive, over-indebted South. Its main macroeconomic challenge is to carry out the adjustment required to restore the competitiveness of its southern part and eliminate its excessive public and private debt burden. This paper investigates the relationship between fiscal and competitiveness adjustment in a stylised model with two countries in a monetary union, North and South. To restore competitiveness, South implements a more restrictive fiscal policy than North. We consider two scenarios. In the first, monetary policy aims at keeping inflation constant in the North. The South therefore needs to deflate to regain competitiveness, which worsens the debt dynamics. In the second, monetary policy aims at keeping inflation constant in the monetary union as a whole. This results in more monetary stimulus, inflation in the North is higher, and this in turn helps the debt dynamics in the South. Our main findings are: •The differential fiscal stance between North and South is what determines real exchange rate changes. South therefore needs to tighten more. There is no escape from relative austerity. •If monetary policy aims at keeping inflation stable in the North and the initial debt is above a certain threshold, debt dynamics are perverse: fiscal retrenchment is self-defeating; •If monetary policy targets average inflation instead, which implies higher inflation in the North, the initial debt threshold above which the debt dynamics become perverse is higher. Accepting more inflation at home is therefore a way for the North to contribute to restoring debt sustainability in the South. •Structural reforms in the South improve the debt dynamics if the initial debt is not too high. Again, targeting average inflation rather than inflation in the North helps strengthen the favourable effects of structural reforms.

The French Constitutional Council as the Rottweiler of the Republican Ideal in the Language Field: Does Jurisprudence Really Reflect Reality? EDAP 03/2012, 2012

France is known for being a champion of individual rights as well as for its overt hostility to any form of group rights. Linguistic pluralism in the public sphere is rejected for fear of babelization and Balkanization of the country. Over recent decades the Conseil Constitutionnel (CC) has, together with the Conseil d’État, remained arguably the strongest defender of this Jacobin ideal in France. In this article, I will discuss the role of France’s restrictive language policy through the prism of the CC’s jurisprudence. Overall, I will argue that the CC made reference to the (Jacobin) state-nation concept, a concept that is discussed in the first part of the paper, in order to fight the revival of regional languages in France over recent decades. The clause making French the official language in 1992 was functional to this policy. The intriguing aspect is that in France the CC managed to standardise France’s policy vis-à-vis regional and minority languages through its jurisprudence; an issue discussed in the second part of the paper. But in those regions with a stronger tradition of identity, particularly in the French overseas territories, the third part of the paper argues, normative reality has increasingly become under pressure. Therefore, a discrepancy between the ‘law in courts’ and the compliance with these decisions (‘law in action’) has been emerging over recent years. Amid some signs of opening of France to minorities, this contradiction delineates a trend that might well continue in future.