The Unlikely Hollande

May 7 2012 @ 10:35am

Talleyrand notes the man's immense good luck:

Getting even, it is said, is the best revenge. François Hollande has many reasons to celebrate his victory in France. He has prevailed, not only over Nicolas Sarkozy, but also over Dominique Strauss-Kahn and every other politician who claimed the mantle of political glory ahead of him – including his long time ex-partner, Ségolène Royal, who lost to Mr Sarkozy in 2007. For a ‘nice guy’ from central casting, life doesn’t get better than this.

Which means to say it is now likely to get much worse. Money quote from the socialist winner:

“Europe is watching us. The moment that I was announced president, I am sure in many European countries there was a relief, hope at the idea that at last austerity is no longer inevitable, and my mission is to give to European construction the dream of growth. Europe is watching us, austerity can no longer be the only option.”

I don't quite buy the line that we are now likely to see a brutal European clash between Keynesianism and austerity. As the Guardian notes in a celebratory editorial today:

He has set himself just one year longer to balance France's budget than the man he defeated.

The truth is: the French government is as vulnerable to international bond markets as anyone else. Some easing of austerity will only be possible if Hollande were to implement the kind of labor market reforms that Germany instituted over the lastScreen shot 2012-05-07 at 10.29.15 AM decade to appease the global bond markets. And yet he appears to be going in the opposite direction. Germany, for good measure, has already insisted that the recently negotiated fiscal pact is not up for re-negotiation.

Nonetheless, the Tories just got whalloped in Britain's local elections, Merkel's CDU barely survived a regional election in Schleswig Holstein, the austerity-bent Dutch government has fallen, and the Greeks have voted for the far right and far left against German-imposed austerity. It's not clear to me that the EU can remain fiscally sound while remaining democratic – unless some glimmer of growth returns to somewhere other than Germany. Cameron and Merkel would provide a natural pro-austerity axis, if Britain had actually signed the fiscal pact. What I expect from London is pure anti-French schadenfreude:

A senior Conservative source told The Daily Telegraph that fears France was about to reverse course would cause turmoil and uncertainty: “Clearly it’s going to focus a lot of market attention on the French public finances, which are nothing to write home about. I don’t think it is going to make life in the bond markets any easier next week. We haven’t chosen austerity because it’s fun. We have to do austerity, and so does France. He will have to be very careful about his public spending commitments and the lack of welfare reform.”