President François Hollande’s call for a new growth-led approach has resonated with many people across Europe who continue to suffer from a seemingly endless cycle of economic decline and painful public sector cuts. Nobel prize-winning economists Joseph Stiglitz and Paul Krugman, who have strongly criticised the self-defeating nature of the Eurozone’s austerity-based economic policy, have also welcomed his election as a much needed breath of fresh air. Yet amidst this initial wave of optimism, it is important to remain realistic about what Hollande can truly achieve.
Most importantly, unlike the dramatic political upheaval we have seen in Greece, Hollande’s victory was not primarily the result of a protest vote against austerity. Public spending in France has actually slightly increased since the financial crisis began, with the public sector now accounting for 57% of GDP. The few austerity measures implemented by Sarkozy were nothing like on the scale of the drastic budget cuts implemented in Greece, and were based largely on tax increases rather than a reduction in spending. If anything, many French people actually quite approved of Sarkozy’s handling of the economic crisis, and viewed him as more competent and decisive than his opponent. Furthermore, both Sarkozy and Hollande pledged to reduce the budget deficit to zero, albeit with a one year difference in time-scales. The French elections were marked not so much by a rejection of austerity, but rather a rejection of Sarkozy himself, specifically his personal image which over the course of his presidency had become viewed as vulgar and abrasive. You could say that Hollande didn’t win this election, Sarkozy lost it. As so often happens in leadership contests, personality trumped policy.
A central element of Hollande’s campaign was that he would be a ‘normal president‘; in other words, that he would not be another Sarkozy. Ever since he celebrated his 2007 election victory by dining in a lavish restaurant with a group his millionaire friends before taking a holiday on one of their luxury yachts, instead of withdrawing to a monastery as he had promised, Sarkozy’s popularity ratings began their steady, inexorable decline. He became known as a ‘bling-bling president‘, unfitting for the highest office of a country where leaders are traditionally expected to act with a high degree of dignity and class. His subsequent divorce followed by a widely publicised marriage with singer-model Carla Bruni, and the now infamous rude exchange with a man who refused to shake his hand, combined to cement his crass image. Personal dislike of Sarkozy overshadowed his performance as president, and by May 2008 his approval rating had dropped to a mere 32%, despite having been France’s most popular leader since Charles de Gaulle when he was elected just one year earlier.
Contrary to Sarkozy, Hollande comes across as friendly, dignified and unpretentious. He fully understands the importance of symbolism in French presidential politics. There were no yachts or extravagant restaurants after he won the presidency, but an initial victory speech in the square of his small sleepy home-town of Tulle. One of his first measures will be to reduce his own salary by 30%, in stark contrast to Sarkozy who doubled his salary within his first year. Undeniably, Hollande’s campaign also proposed a more radical, substantial agenda, including a 75% tax rate for the super-rich and the creation of 60,000 teaching jobs. But he also understood that France remains a majority right-wing country, as shown by the first round of the recent elections, and that in order for him to win public image and personality would have to take a front-seat over more substantive issues.
So what does this all mean for Hollande’s challenge to German-led austerity and the future of the Eurozone? Most importantly, Hollande will be keen to distinguish himself from the days of ‘Merkozy’ and especially from Sarkozy’s perceived weakness in his partnership with the German Chancellor. With Merkel refusing to budge on renegotiating the fiscal pact, Hollande is pushing for a complementary growth pact which would enable the European Investment Bank to fund more low-interest loans for small or medium size businesses and infrastructure projects. This would enable him to save face, but will provide little relief for debt-stricken countries such as Greece. While it is technically a not-for-profit institution, the bank ultimately seeks to make an annual profit and to preserve its AAA credit rating through low risk investments. It might therefore be able to give a well-needed boost to business, but is unlikely to address the fundamental imbalances, social crises and political instability which continue to hamper economic recovery in the Eurozone.
A more radical approach is required if the Eurozone is to survive intact, including a significant rise in wages and consumer spending in Germany, a temporary relaxation of the strict conditions laid out in the fiscal pact, and greater fiscal transfers to Europe’s increasingly impoverished periphery. The pooling of government debts into Eurobonds is also crucial in order to reduce interest rates for highly indebted countries and facilitate repayments. A currency union requires not just budgetary responsibility amongst member states, but economic solidarity.
Hollande has expressed his support for a number of these policies, in particular the issuance of Eurobonds, a proposal which still faces strong opposition from Germany. But he is ultimately answerable to the French public, who whilst being opposed to austerity measures being imposed in France, have no more appetite for transferring their wealth to Greece, Portugal or Spain than Germany does, and are more concerned with domestic issues such as enduring unemployment. He must also look to the upcoming legislative elections in June, where he needs to secure a parliamentary majority, and faces the threat of charismatic Marine le Pen’s far-right Front National making some sort of alliance with Sarkozy’s now leaderless right-wing UMP.
So whilst Hollande may enact some of his more progressive policies at home, he is unlikely to focus his efforts on a substantial change in policy at the European level, where it is currently most needed. A political compromise with Merkel, in which Hollande comes out with enough concessions to look strong in front of his countrymen without threatening the status quo, seems almost inevitable. Ultimately, the French elections were dominated by France’s politics of personality, not Europe’s politics of austerity. We should then remain apprehensive as to whether the new President will succeed in implementing the sort of radical change in approach many are hoping for.