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Debt crisis feels far from Europe’s small towns

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MONTARGIS, France — When dusk falls and Christmas lights illuminate holiday shoppers strolling along Golden Street, this little town seems a world away from Europe’s economic crisis. President Nicolas Sarkozy’s dire warnings that the European Union is at risk of collapsing and that hard times lie ahead for France are drowned out by Christmas carols broadcast into the wintry air.

“The people who are talking about the crisis and those kinds of things all the time are not right,” said Viviane Malet, the proprietor of four stores along Golden Street who heads 150 Montargis shopkeepers in the Commercial Union. “It’s a mistake to keep harping on it. Life is beautiful.”

In thousands of Europe’s little towns and villages, the debt crisis threatening the common currency, the euro, is like the sound of distant thunder — it may bring a storm, townspeople say, but so far the sun is still out and Christmas is still merry. The atmosphere of foreboding that has settled over Paris and other European Union capitals is nowhere to be seen here as children on their scooters swerve between elderly couples admiring the seasonal decorations and young families out window shopping.

The expensive social protections that helped pile up the debts — generous unemployment benefits, inclusive health insurance, long vacations — are under attack for living on borrowed funds. But so far they have also buffered the people of Montargis and millions of other Europeans from the worst effects of the financial turmoil in their capitals.

And yet the shadow of a slowdown hangs over the festivities. News from Greece and Spain of devastating government cutbacks and economies grinding to a halt suggests that even here and in the many other European towns that have enjoyed a good life for more than four decades, financial realities may finally be ready to wreak their revenge.

“People are afraid when they hear the news, but in their daily lives they have not yet been hit,” said Benoit Digeon, a deputy mayor and businessman whose praline candies are sold around the world. “But it will come.”

Unemployment in Montargis, in the Loire River valley about 60 miles south of Paris, already has risen to more than 10 percent, significantly above the national average. The local newspaper, the Republique du Centre, headlines a drop in real estate prices and the danger of more layoffs at Hutchinson, a rubber-products giant that is a major employer for the Montargis region’s 60,000 inhabitants.

Benedicte Masson, whose pharmacy lies at the top of Golden Street, said her customers have become more and more cautious about spending money, particularly on the side of the store where nonessential products such as beauty creams are displayed. Even with doctors’ prescriptions, she added, they sometimes refuse to buy a medicine if it is not covered by the government health insurance.

“I have a customer base of ordinary French people, not rich but not poor, either,” Masson said. “But I can tell you, when they come in here, they look closely at what things cost.”

Similarly, Veronique Fauchon said her customers at the Lord bar on Golden Street have changed the way they order coffee and beer, holding back and counting their euros rather than paying for a round the way they used to.

Social protections

The pinch felt by Masson, Fauchon and other Golden Street shopkeepers, however, is not yet the European debt crisis that worries Sarkozy, unsettles the world’s financial markets and forces European Union leaders to negotiate through the night at summits in Brussels. Rather, it is the economic contraction set in motion by the banking crisis of 2008, which started in New York, unfurled across the Atlantic and, late but ineluctable, has seeped into Montargis.

The worst of that crisis was absorbed here by France’s social protections. For instance, Digeon pointed out, 45 percent of the local housing market is subsidized, offering low rents to low-income families. Similarly, he said, the local offices of unemployment insurance, health insurance and welfare payments have a reputation for particular efficiency, drawing young people to Montargis from surrounding villages to enjoy the town’s benefits if they cannot find a job at home.

“Paris is not the provinces, and the provinces are not Paris,” he explained. “People here know there is a problem in the European Union. But it is a financial problem among governments, and they don’t feel it here yet. When the crisis hit three years ago, the buffer worked.”

His words seemed true at the Brasserie de la Poste, a popular restaurant in the Place Victor Hugo. Every one of the dozens of tables was occupied at lunchtime on a recent day, with families, couples and business associates enjoying the daily special of a large chunk of roast pork.

Malet said turnover at her stores this Christmas season so far has held firm, not rising but not falling from the levels booked in the last several years. This marks a triumph, she said, because it means the shopkeepers of Golden Street have succeeded in keeping customers shaken by the 2008 crisis from deserting the city center to look for bargains in sprawling suburban super-stores.

“We have to seduce them every time they come in,” she said, standing beside a rack of slinky black dresses.

Targeting civil servants

The Ibis Hotel, the city’s main business stopover at the center of town, was booked solid last week, as was the small Hotel Central a few streets away. Jean-Louis Clerc, who runs the Hotel Central, said his establishment is occupied most of the time with a mix of business travelers and tourists.

“France is a rich country,” he said cheerfully.

Sarkozy and his prime minister, Francois Fillon, have warned that France may soon lose its AAA standing from the major financial rating agencies. That would be a political blow to Sarkozy, who is running for reelection in the spring, and would push up the interest rates France will pay for a number of bond issues that come due for renewal at the first of the year.

But Digeon, a pro-Sarkozy conservative and part of a conservative city council under Mayor Jean-Pierre Door, said that here in Montargis the main financial concern is thinning out the ranks of civil servants, following Sarkozy’s rule of not replacing one out of every two who retire.

When they were elected to city hall two terms ago, he said, Door and his followers found civil servants’ salaries took up 57 percent of the budget, or 300,000 euros a month. By cutting back over the past several years, they have reduced the percentage to 52 percent and are still looking at posts they can get rid of.

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