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May 9, 2012

Rough Road Ahead for New French President

Kevin E. Dayhoff

Much of the world’s political leaders – and the financial markets – are still trying to fathom the meaning of the narrow defeat of the center-right incumbent French president, Nicolas Sarkozy, by moderate-socialist Francois Hollande in Sunday’s presidential elections.


Many will argue that the defeat of President Sarkozy was the result of a critical bellwether referendum on the Eurozone’s current macro-economic framework approach to address the global recession.


Numerous media commentaries, including the BBC observed that “he is the latest European leader to be voted out of office amid widespread voter anger at austerity measures triggered by the Eurozone debt crisis…


“It is only the second time that an incumbent French president has failed to win re-election since the start of the Fifth Republic in 1958.The last was Valery Giscard d'Estaing, who lost to Mr. [Francois] Mitterrand in 1981.”


The Financial Times reports that “Mr Sarkozy, (is) the eighth leader of a Eurozone country to be replaced or swept from office in little over a year.”


President Sarkozy, France’s sitting conservative head of state since May 2007, was one of the key architects of the austerity economic policy response to Europe’s raging sovereign debt crisis, which relied upon spending cuts to reduce the large budget deficits.


President-elect Hollande, 57, who garnered 51.62 percent of the vote Sunday, to 48.38 per cent for Mr Sarkozy, will get no honeymoon.


Long considered an untested philosophical-political wonk, there are those who are quite curious as to just how well he will conduct himself in the face of the overwhelming number of real world challenges that may defy hypothetical partisan-political rhetorical campaign solutions.


Immediately upon taking office May 15, President-elect Hollande will face the challenges of putting together a legislative majority in the upcoming June parliamentary elections.


Although the office of the president of France is considered to be powerful, a large supportive coalition of legislators will be critical for President Hollande to get his legislative agenda passed. He promised during his campaign, according to a number of media reports including the BBC “to raise taxes on big corporations and people earning more than 1m euros a year.”


He also “wants to raise the minimum wage, hire 60,000 more teachers, and lower the retirement age from 62 to 60 for some workers.”


Then, there is the not so small matter of détente with German Chancellor Angela Merkel in the face of his campaign promise “for a renegotiation of a hard-won European treaty on budget discipline championed by Chancellor Merkel and Mr Sarkozy,” according to the BBC.


Not to be overlooked is the NATO meeting in Chicago and the G-8 summit at Camp David later this month. He has vowed to withdraw all remaining French troops from Afghanistan by the end of 2012.


And concurrently, he must put together his administration and a budget.


How is he going to do all of this? Well, those who wish to simplistically disqualify Mr. Hollande’s abilities overlook that he has been very much involved in the give-and-take of politics since he was a student volunteer for Francois Mitterrand’s unsuccessful 1974 presidential campaign.


Yes, that Mr. Mitterrand, who served as the president of France from 1981 to 1995 – and who was the last Socialist to serve as president of France. According to an article in the Irish Times on April 21, 2012, at 27 Mr. Hollande became an economic adviser to President Mitterrand.


If you recall, Mr. Mitterrand’s economic approach was tumultuous. Early in his term in office, President Mitterrand attempted to nationalize the industrial base of the country. Within several years after taking office, the French economy was in shambles.


After serving with President Mitterrand, Mr. Hollande went on to serve in the French National Assembly, representing the department (state) of Correze, in south-central France. He later served as the mayor of Tulle, in Correze. Since March 2008, Mr. Hollande has been president of the Correze General Council.


However, it may be argued that much of Mr. Hollande’s political acumen has come as a result of his tenure as the First Secretary of the Socialist Party during the turbulent years from 1997 to 2008.


It is a somewhat odd twist of fate that Mr. Hollande’s former domestic partner of almost 35 years, 1973 – 2007, Ségolène Royal was the Socialist Party’s presidential candidate in the 2007 election, in which she lost to Mr. Sarkozy.


Ms. Royal came out of nowhere to defeat Mr. Hollande’s bid to be the Socialist Party candidate after he supported the treaty for the European Constitution in the 2005 referendum and came out on the losing side.


Ms. Royal, who was never married to Mr. Hollande, is the mother of his four children. She is said by many to have lost the 2007 contest, in part, because of the poor leadership and political direction of Mr. Hollande, the head of the party at the time.


Since 2007, Mr. Hollande, who is the first president of the Fifth Republic, to not be married when assuming office and taking-up residence at the Élysée Palace; has shared his life with domestic partner, journalist Valerie Trierweiler.


As with a growing chorus of economists, I could not agree more with Financial Times writer, Jeffrey Sachs, who wisely wrote we must move beyond a stark and simple discussion of “growth versus austerity.”


“French and Greek voters have rejected Europe’s current macro-economic framework. The headlines cry that voters demand growth rather than austerity. Yet growth is not a policy, but an outcome. A vote rejecting the incumbents does not define the policy alternatives…,” observed Mr. Sachs.


Meanwhile, at first blush, from the cheap seats on this side of the pond, it doesn’t look like a socialist in the Élysée Palace is such a good idea.


It just doesn’t look like it is going to work out well. But it doesn’t appear to be causing a panic in the financial markets – yet…


. . . . .I’m just saying. . . . .


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