Global Insight Perspective

Significance

The first round of voting in the presidential elections was held yesterday, and 85% of those registered to vote did so. The poll was marked by the “vote utile”, or “sensible voting”, and has set up an exciting left-right duel between the two traditional parties of government, with the far-right and extreme-left parties marginalised.

Implications

The key features of the first round were the high turnout rate, boding well for the public accountability of the next president, but also the surprisingly high result garnered by the centrist Union for French Democracy candidate, François Bayrou. Bayrou’s supporters from the centre ground now hold the key to the final result.

Outlook

The second-round run-off is scheduled for 6 May. Sarkozy’s key challenge is to build upon the support he gained in the first round by appealing not only to the centrists, but also to voters of the traditional left as a credible catch-all candidate. The far-left parties have already united behind Royal, giving her a boost as campaigning begins. The risk is that a protest vote against Sarkozy will play straight into Royal’s hands, but it appears that the election is Sarkozy’s to lose.

Election Fever Grips France as Sarko-Ségo Run-Off Confirmed

The first round of the much-anticipated French presidential elections was held yesterday, and final results have confirmed that the ruling centre-right Union for the People’s Movement’s (UMP) Nicolas Sarkozy will battle it out on 6 May with the Socialist Party’s (PS) Ségolène Royal for the ultimate political prize. The excitement generated by the electoral campaigns of the key candidates and the openness of the contest led to a record rate of participation, with turnout at 85%. The low abstention rate was clearly indicative of the importance of the election, not just for policy-making, but for the political system as a whole. The spectre of 21 April 2002, when Jean-Marie Le Pen of the far-right National Front (FN) proceeded to the second round against incumbent Jacque Chirac loomed large yesterday at the PS headquarters in the capital, Paris, but the announcement that Royal had polled 25% of the vote and would go head to head against Sarkozy, who polled 31%, was greeted with joy by the party’s members. Similar scenes were witnessed among Sarkozy’s supporters; the last time a traditional right candidate obtained such a high first-round score was in 1974, by Valéry Giscard d’Estaing.

The gains made by the two traditional parties of government are indicative of the renewed interest and participation of the public in politics, something that had been far from evident in previous elections over the last two decades. The French public feels that this time they do have a real choice, after a first-round campaign based more on ideological differences, rather than attempts to pander to the centre. The decline in support for the parties at the extreme ends of the political spectrum, most notably the far-right FN, is indicative of the renewal of the left-right bi-polar political cleavage, which is at its most defined for decades. Moreover, the dynamism of the two key contenders, Sarkozy and Royal, has appealed to a public keen to shrug off the political apathy which the ageing, male-dominated system had inspired.

The key challenge in the next two weeks will be to bring about “rassemblement”. The impressively high score achieved by the “third man”, François Bayrou, means that to a large extent he holds the key to the final result. The leaders of the far-left parties, which suffered fairly major losses to Royal’s PS, have already pledged their support for her in the second round, many of them explicitly stating that it will be a vote “against Sarkozy” rather than one “in favour of Royal”. This is to be expected: the divisive nature of Sarkozy is clear, and he will have his work cut out to improve his image among many as a hardened, reformist, anti-worker megalomaniac. Although Bayrou did take votes from Royal in the first round, it would be a little simplistic to assume at this stage that the centrist advantage lies with the PS candidate. Traditionally, Bayrou, and indeed the UDF, has aligned himself with the right in France, a fact not lost on UMP members, who will step up efforts to sway Bayrou in their favour. One of the favourites for the premiership under a Sarkozy presidency is current Employment Minister Jean-Louis Borloo, who this morning already stated that he foresees “several” UDF ministers in the next cabinet. Moreover, many of the UDF’s voters are young, urban, and professional, many of whom have been disappointed with Royal’s campaign and lack of policy coherence, and have been charmed by Sarkozy’s clarity and straightforwardness in addressing issues such as structural reform and Europe.

New President Will Face Testing Economic Situation

Both Sarkozy and Royal have sought to distinguish themselves via their economic programmes. Neither can deny that France’s economic woes need significant action, but the measures they propose could lead to wildly different outcomes.

The new president will inherit a precarious economic situation. Despite reasonable economic growth in 2006, the economy failed to reap all the potential benefits from the far brighter international environment. Indeed, the acceleration in Eurozone growth outpaced that in French growth. Three factors contributed to limit the impact of the buoyant international environment: France's recent loss of market share and competitiveness; an ever greater penetration of imports; and a softer business-investment rebound than in earlier cyclical upswings. The only component that held firm last year was household consumption, which remained the true engine of growth. In addition, the French economy faces significant structural problems, which continue to constrain growth. The two main challenges for the economy are improving both the labour market and public finances. France has a high productivity rate and a sophisticated social welfare system, but it also suffers from low labour force participation and high structural unemployment. The high productivity partly reflects a low rate of labour utilisation—especially of low-skilled workers—whereas a number of other developed countries employ a much larger proportion of the working-age population. The low utilisation of labour is mainly caused by four factors: high structural unemployment; low labour-market participation among the youth; the early exit from the labour market of older workers; and a relatively low number of hours worked per worker (legislation has significantly reduced hours worked). So far, changes have been mainly focused on active labour-market policies, leaving the main labour-market rigidities unchanged.

Regarding public finances, public spending already absorbs some 55% of GDP, which means that an improvement in the overall balance would require a continuing fall in this share rather than increased revenues. We do not see this happening any time soon, however. Meanwhile, public debt now stands at around 65% of GDP, having risen from 20% in 1980. Moreover, substantial public ownership, the only gradual opening of the market in network industries, protection of some service-sector professions, and the absence of competition in parts of retailing in France have also been reducing the potential for growth, innovation, and employment. Network industries are still frequently state-owned near-monopolies, and even where there has been privatisation, they remain dominated by the historical incumbent company.

Outlook and Implications

The campaign for the second-round run-off between Sarkozy and Royal has already begun in earnest, with both candidates eager to appeal to the centre ground. In this battle for hearts and minds, François Bayrou is well aware that he could hold the key to the result. He has so far resisted speaking out in support for one candidate or the other, waiting patiently for the best offer. Yet, Bayrou cannot become arrogant; he must ensure that his actions pave the way for the continuity of the UDF in the next five years and beyond, and to this effect the legislative elections in June will be crucial. Without UDF deputies in parliament, Bayrou would carry very little weight in the next legislature.

The French public is now relishing the prospect of a left-right battle, which could result in the country electing its first ever female president. The real loser from yesterday’s first round is clearly the far right, for which the election has signalled the beginning of the end. The FN’s campaign was marginalised by Sarkozy’s prioritisation of immigration and crime and security, and the moderate right has sought to banish Le Pen from the mainstream. This, coupled with the renewed youthful dynamism in the campaign, has reignited public interest in the French political system.