"My true adversary does not have a name, a face or a party," said Francois Hollande, France's next president. "He never puts forth his candidacy, but nevertheless he governs. My true adversary is the world of finance."
No other leader of a major power would dare say such a
thing. If Hollande, who will be France's first Socialist president in 17 years,
simply defies "the markets", they will certainly punish him and
France severely. However, it remains to be seen how he plays his hand.
Hollande has one hurdle to cross before he is president-elect,
but he beat President, Nicolas Sarkozy even in the first round of voting last
Sunday, when 10 candidates were running. In the runoff vote May 6, the polls
predict that he will trounce Sarkozy by a margin of 14 to 16 percent.
Hollande is a shoo-in because in the second round his
center-left party will collect almost all the votes of parties to the left of
the Socialists, and also most of the votes of the centrist candidates. Sarkozy
leads a center-right party, but he has to pretend to be much harder right than
he is. If he does not spout anti-immigrant, anti-Muslim rhetoric, he will not
even win over the 18 percent of French voters who backed the far-right National
Front last Sunday. If he does talk like that, he will lose the swing voters in
the center — and he may still not get the endorsement of National Front leader
Marine Le Pen, who reckons that if Sarkozy loses the presidency his party will
disintegrate, making her own party the dominant force on the right.
So it will be President Hollande, who recently said that
"if the markets are worried, I will tell them here and now that I will
leave them with no space to act." Tough words, but what does "no
space to act" actually mean? Does it mean anything at all? The markets
don't think so, which is why they did not go into meltdown as soon as
Hollande's election became a certainty.
Hollande is certainly tougher and smarter than the
"Mr. Normal" who he claims to be. His calm, modest manner presents a
striking contrast to the hyperactivity, bad temper and sheer bling of Nicolas
Sarkozy, but he graduated from France's most respected post-graduate school for
high flyers, the Ecole Nationale d'Administration, and he has been in politics
for more than 30 years.
For over a decade he was the leader of the famously
fractious Socialist Party, and was nicknamed "Meccano-builder" for
his ability to bridge the endless personal and ideological disputes, a process
he once likened to picking up dog turds. And he has not promised French voters
the moon.
What Hollande has actually promised is slightly less
austerity than Sarkozy. He will balance the French budget by 2017, rather than
2016. For symbolism's sake he will introduce a new 75 percent income tax band
for people who earn more than a million euros, but he understands that bringing
the budget deficit under control must be accomplished mainly by cutting
spending, not raising taxes.
The markets will not have it any other way, and they have
France in a corner. In order to cover the interest on its existing debt plus this
year's budget deficit, France must borrow almost one-fifth of its entire gross
domestic product this year, and the same again next year. Most of that enormous
sum must be borrowed from foreign lenders, so Hollande cannot afford to
frighten them by radically changing the austerity policy he inherits from
Sarkozy.
He says what he must to get elected, but in office Mr.
Normal is likely to conduct business as usual — or at least, that is what the
markets think. It may be too simplistic a view. Hollande doesn't agree with the
current European orthodoxy, because it has put the eurozone (17 out of 27
European Union members that use the euro "single currency") into an
economic death-spiral.
Germany's huge and healthy economy gives it the whip-hand
in the eurozone. Berlin insists on savage austerity measures by EU member
governments to bring their budgets back into balance, but if the austerity is
so extreme that it kills economic growth, then the budgets will never balance.
Hollande argues that growth, especially in the form of big infrastructure
projects, must be stimulated by easier credit even while budgets are still in
deficit.
Many European leaders agree, as do observers like Nobel
Prize-winning economist Paul Krugman, who said recently that Europe would
"commit suicide" if it did not add reflationary policies to strict
budget discipline. Hollande will not start printing money right away, because
the euro means he cannot, but he is certainly going to argue for
"quantitative easing."
Without openly defying Berlin, he is likely to become a
rallying point for Europeans (and there are a great many of them) who believe
that the eurozone will never solve its crisis without economic growth in other
countries besides Germany. "Change in France will allow Europe to shift
direction," he says. He may be right.
**Gwynne Dyer is a London-based independent journalist
whose articles are published in 45 countries.