As private coin retreats, governments fill the void

When the times get tough, the films get better.

That’s the opinion advanced recently by two men well placed to judge the artistic quality of European cinema after a year of economic meltdown, Locarno fest director Frederic Maire and Venice topper Marco Mueller.

“I haven’t come across a crisis; I’ve seen a wide range of really interesting and inventive productions — in both narrative and stylistic terms — from all corners of the globe,” Maire commented just before his final Locarno in August. “Basically, I think the world is living through something similar to the effects of the (2001) Argentinian crash, which prompted one of the richest times in Argentinian cinema.”

Mueller expressed a similar view to Variety as he prepared his Lido selection, noting the strength of the European films on offer. He suggested that as private finance has become more cautious, public funders have also become more rigorous about which projects they back, with positive results.

It’s a seductive argument — a squeeze in private and public finance means that only the fittest films survive. But the picture of film funding across Europe is more complex and contradictory than this thesis suggests.

The private sector, whether banks or distributors, has certainly pulled back. But there’s little evidence yet of a parallel contraction in subsidy coin. Indeed, if European cinema has managed to stay robust through the turmoil of the past 12 months, it’s largely because governments whose budgets are under severe pressure have remained steadfast in support of their local producers.

European filmmaking has flourished in recent years on a huge expansion of automatic subsidies, based on tax breaks or local expenditure. At the same time, the selective public funds have become more financially disciplined and market-driven, even as the market itself, in the shape of distribs and TV stations, has stepped back from production.

The economic crisis has simply accelerated that long retreat of market finance and intensified the dependence of the European film industry upon public subsidy. “In the finance models we are seeing now, the percentage represented by public money, including automatic systems, is very much higher than it was,” says Simon Perry, chief exec of the Irish Film Board. “The market is able to sit back, so there’s very little market money now in most European films.”

The subsidy cuts now threatened in some countries, such as Ireland, the U.K., Italy and Spain, could thus cast a severe blight upon the creative flowering identified by Maire and Mueller.

“I was never of the school that believed there were too many films being made, that money came too easily,” says Francois Ivernel, exec VP of Pathe. “Film is a creative process, and independent European films don’t usually have pre-saleable value because they don’t rely on big stars and big properties. We need a system that nurtures new filmmakers, so if the number of films reduces, that’s a big concern for the long-term health of the European industry.”

However, these cuts have yet to materialize, and some governments are sending out mixed messages. Silvio Berlusconi’s Italian government is slashing its arts budget with one hand while launching new film tax breaks with the other.

In Ireland, Perry’s IFB is facing the threat of abolition to help plug the vast black hole in the nation’s finances, just a few months after the government improved its film tax break. Irish producers, like their Italian colleagues, argue that they need both forms of subsidy to survive.

France and Germany, the two most powerful economies now leading the Eurozone out of recession, have a strong political culture of investment in national industries, whether cars or movies, particularly in time of crisis. France will also launch a new tax incentive aimed at foreign producers this fall, and Germany is consolidating and expanding its lavish system of national and regional incentives, which is particularly friendly to international filmmakers.

“If anything,” says German producer Jens Meurer, “there have been more initiatives in the past year to boost the economy by putting more money into the film industry.”

The U.K. Film Council is already losing coin to help fund the 2012 Olympics in London and may be trimmed further. The Conservative Party, likely to be elected to government next year, is preaching a new fiscal discipline in the public sector, but is making supportive noises about the film business.

The greater concern is whether pubcasters Channel 4 and the BBC will continue to have adequate funds to invest in films. They are already increasingly dependent on the UKFC to co-finance their projects. Sally Caplan, head of UKFC’s Premiere Fund, notes that she’s being offered stronger projects now and speculates that’s because the shortage of market coin is forcing producers to spend longer in development getting their scripts and their packages right.

The IFB’s Perry has been a close observer and participant in the ebbs and flows of European public finance over the past three decades. He agrees with Maire and Mueller that European cinema is in robust creative health, but takes a long view about the causes.

“It’s been a long process over the last five to 10 years of the criteria for public funding becoming more concerned with reaching audiences and with value for money,” he explains. “That hasn’t always produced better movies. At the top end of European filmmaking, the best of auteur cinema is as good as ever, maybe the best it has ever been, quite spectacular in many ways. Yet in the midst of crisis, more films are getting made in Europe every year because of automatic subsidies and lower costs, and there’s also an uprush of very mediocre films made in a semi-professional way.”

Perry argues that the good and the bad are inextricable. “My view is that you can never make too many films. Through all the dross will rise the odd pearl.”

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