The results of the French presidential election could be a critical turning point in the European economic crisis.
The results of the French presidential election could be a critical turning point in the European economic crisis.
The first round of the French presidential election confirms that Europe is gagging on the austerity demanded by the German government of Angela Merkel, and endorsed as recently as March by 25 European Union states. Francois Hollande, the Socialist, narrowly beat Nicholas Sarkozy, but parties of the French Left garnered 43 percent of the vote. A further 18 percent of the electorate voted for Marine Le Pen, candidate of the far-right, fiercely anti-EU and anti-immigrant National Front. Since this was very much a vote of protest, Sarkozy will find it difficult to win those voters over, and many could abstain.
Sarkozy himself has stopped backing austerity, and vowed to defend the French model from the ravages of free market capitalism. Francois Hollande now has to appeal to the 30 percent of the electorate that is radically opposed to the eurozone austerity pact that Sarkozy initially supported. Beyond the second round run-off on May 6th lie elections for the National Assembly in June.
Whoever wins—and polls suggest it will be Hollande—the victor will face further tough tests. The ‘Merkozy’ recipe of fiscal autocracy devised at the EU summit is in deep trouble. Insistence on balanced budgets as the continent tips back into recession has already raised the official unemployment rate to 10.6 percent. The Dutch government, Berlin’s closest ally, has collapsed. Cutbacks have weakened the Spanish economy and raised its cost of borrowing, swelling the country’s public deficit, and demonstrating austerity’s counterproductive results. Technocratic governments in Italy and Greece enjoyed a brief honeymoon, but Mario Monti, the Italian prime minister, warns that a storm is brewing both at the ballot box and in the street.
If the coming weeks produce a new French president and government, then the ‘Merkozy’ formula will have failed. The German chancellor will doubtless find this difficult to accept. But the EU may not have completely lost its will to live; it could at least adopt growth as its formal priority. A new stimulus package could win support in the leading eurozone states, including the Social Democratic Party (SPD) opposition in Germany that has long advocated greater flexibility. The euro elite is prone to accept the diktat of the financial markets, but even market sentiment is now worried by the specter of collapse.
Because of its size, its traditions, and its continuing areas of strength, France plays an important role in the economy, and the outcome of its presidential contest will be a crucial turning point. For the French, a stimulus package will mean not just a general boost for demand. It will include a public development bank and large-scale investment in R&D, infrastructure, and human capital as well.
Robin Blackburn is a professor at University of Essex, and author, most recently, of Age Shock: How Finance Is Failing Us.