The MT Diary: As French banks head for the rocks, DSK returns

Howard Davies reaches philosophical conclusions in Paris, regards the return of Dominique Strauss-Kahn, and wades into Singapore's politics.

by Howard Davies
Last Updated: 21 Oct 2011

Spending some time in Paris has led me to one important conclusion, which may surprise you: the French are different. They are just not like us. How so? Let me count the ways.Take coffee as a f'rinstance. In Sciences Po, the university where I teach, there are banks of Lavazza machines. The coffee is not bad and the price (50 cents europeens) is right, but there is a problem. They supply only coffee with sugar, which of course is what 99.99% of our cross-channel chums drink. As I am at that figure-watching stage of life, and was convinced by a long-ago girlfriend that granulated sugar was close to heroin in its impact on the body, this came as quite a blow.

I had almost reconciled myself to a caffeine-free term, but early one morning, when any self-respecting student was still au lit with her petit(e) ami(e), I decided on a forensic examination of the offending dispenser. I discovered that after the paper cup descends into its cradle, Signor Lavazza sprinkles a dose of poison into it, rapidly followed by a plastic stirring stick. Then he pauses to grind three or four fair trade coffee beans, before squirting 2 millilitres of hot water through them and into said container. So if you kneel on the floor, pull the cup out with your right hand when the stick appears, smartly transfer the sugar into your ready-cupped left hand, and instantly replace the cup in its cradle, you can get it back in place before the liquid appears, and an unsweetened Americano is yours, at no extra cost.

Catching me in mid-manoeuvre, praying to the Lavazza-God, two women from my class clearly concluded everything they'd heard about eccentric English profs was true. I wish them well in the rival course to which they moved.

Sad to say, the French did not lose much sleep over the fate of the British banks that imploded in 2007-08. They saw them as examples of the dangers of light-touch regulation ('legere touche' has a rather different 'personal services' connotation in French). Such things didn't happen in the better ordered world of French banking.

Now, however, they are finding that the crisis movie is showing at a branch near home.

The big French banks have lost two-thirds of their value this year, and even though Societe Generale has sued the Mail on Sunday for spreading malicious rumours (the Mail, malicious, come now!), that doesn't seemed to have stopped the slide.

As part of its southern European diversification strategy, Soc Gen bought a bank that was previously owned by the Greek army. Credit Agricole bought one too. They were both up to their eyes in government bonds, which are now worth a lot less than they paid for them. 'Beware the Greeks bearing banks' might have been a useful motto to bear in mind. Classical education in France is clearly not what it was.

Even though the slow train-crash of the eurozone has given the papers quite enough to keep them engaged, the return of the prodigal Kahn from New York has also generated a few thousand column centimetres. There was a warm, if rather subdued, welcome at Roissy airport from a few DSK diehards, but it has not been plain sailing since.

His Socialist colleagues have given Strauss-Kahn a wide berth so far. They are fully occupied knocking spots off each other in the primary campaign to select the challenger to Sarkozy next year. There have been hostile demonstrations under the elegant sash windows of his apartment in the fashionable Place des Vosges, and Tristane Banon, the elfin novelist who claims DSK took more interest in her trousers than in her Dictaphone when she interviewed him six years ago, is on his case. (There is an old Bernard Manning gag about using a Dictaphone rather than a handset, which has no place in a family newspaper.) Banon is attempting to mobilise a monstrous regiment of feminists to take part in an anti-philanderer crusade. All good, dirty fun. How unlike the home life of our own dear Milibands.

It was a relief to breathe the clean, if muggy, air of Singapore again. Even its economy is slowing down a little, though, after posting a growth rate of 20% a year over last winter. But, for once, the political scene is more interesting than the economy. The People's Action Party of Lee Kuan Yew, which has ruled the city since 1959, got a bit of a shock in April when it won only 60% of the popular vote, though that still secured it 85% of the seats (it learnt the virtues of a gerrymandered first-past-the-post system at Her Majesty's knee). The shock was compounded when its candidate for president crept home by a few hundred votes.

There is a lot of rethinking under way. Maybe its single-minded pursuit of growth and prosperity no longer appeals to a mature electorate? Maybe a liberal immigration policy, which has fuelled growth, is not in the interests of lower-paid residents? Maybe a little more biodiversity in the political class is needed?

These are not trivial problems, but solutions are available. And with more or less full employment, low inflation, a strong currency bolstered by a large trade surplus and a robust fiscal position, they have a lot of room for manoeuvre. I suspect they will find a way of preserving PAP hegemony for a while longer. But if ever its current government found itself out of a job, I can think of another group of offshore islands that might do worse than to invite them in.

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