Can Francois Hollande Break With History?

Sam Fowles 

Image © idf-fotos

Francois Hollande has said he wants to follow in the footsteps of his namesake Francois Mitterand – he has to and will do better.

In the nondescript town of Tulle, far from the glamorous Paris ballroom where his rival had just conceded, Francois Hollande gave his victory speech. He said he was proud to give people hope again, referring to his predecessor, the only other Socialist President of the Fifth Republic, Francois Mitterand. The reaction of the left wing press across Europe, hitherto bereft of a hero and sick of writing editorials condemning the same austerity in different languages, showed similar elation to when Mitterand himself came to power in 1981. The Guardian called it “a stunning victory, not just for himself… but for Europe too”.

Before Mitterand was elected, the last genuinely socialist leader of France (excepting a series of loose coalitions that rose and fell with the tides during the 1950s) was Leon Blum, elected in the depths of the Great Depression in 1936. Both immediately set about implementing classically socialist policies but were forced into dramatic u-turns within a year of their election for very similar reasons. Financiers, still skittish from the Wall Street Crash, looked at Blum’s Paris and saw Moscow, panic selling of French government bonds and causing a run on the franc so damaging that France was forced off the gold standard. Mitterand saw a rapid exodus, not just of capital but of capitalists, as the highest earners in France rapidly relocated (mostly to Margaret Thatcher’s Britain). Blum was forced into a pause in his policy agenda. The pause became a wait and Blum resigned a year later to be replaced by the centrist Camille Chautemps, shortly followed by the conservative coalition of Eduard Daladier. Mitterand hung on to power until 1995 but found himself in “cohabitation” governments with a conservative majority in parliament. He never attempted to re start anything resembling a truly progressive agenda.

As a young government advisor, Francois Hollande saw Mitterand’s shackling. He may be worried that history is about to repeat itself. Although the Sarkozy campaign’s dire warnings of another run on French bonds in the wake of Hollande’s election has proved false, industry sources suggest that this may be because Hollande’s victory seemed so assured for so long that the market had already adjusted (downwards). In addition, France’s national debt could hardly be more distrusted by the international markets at this point anyway.

But reports are already rife of the richest in France are already eyeing up the more 1% friendly climes of London. Some major banks preparing to enact contingency plans to relocate top executives to states with a friendlier tax band. While the bond markets may have already adjusted, some investors suggest Hollande might be living on borrowed time. It is one thing for the markets to adjust themselves to the man but a class of investors bred on the doctrine of austerity may find it more difficult to adjust to his policies taking effectRead more of this post

In Defence of Mrs Merkel

Daniel Crump 

Image © World Economic Forum

Back home in France, the election of Mr Hollande was hardly an occasion for national pandemonium, despite the usual clever camera shots to suggest otherwise. The French election has been dubbed by many in France as the day Sarkozy was defeated, rather than the day the French Socialist Party rose from the flames. The man they nicknamed ‘Mr Normal’ was, in many respects, the alternative to President Sarkozy, and not much else.

In Europe, however, he is firmly in the driving seat of the latest popular craze; all aboard the Anti-Austerity bandwagon! He has picked up some notable hitchhikers along the way, including Italy’s un-elected Prime Minister Mario Monti, who has taken a seat beside the un-elected Greek Prime Minister Panagoitis Pikrammenos. The most significant of these gentlemen is US President Barack Obama. In the past days he has been quoted as saying ‘’a responsible approach to fiscal consolidation should be coupled with a strong growth agenda’’. The bandwagon is now full to capacity, and carries the leader of the free world, probably riding shotgun. It is also travelling at alarmingly high speed straight towards Mrs Merkel and her Christian Democratic Union led coalition in Berlin.

Supporters of Hollande, and his merry men, are even claiming that the CDU’s poor performance in North Rhine-Westphalia last week is an indication that Merkel’s own citizens are turning away from Germany’s policies on the continent. This would be a slight misconception. According to the Economist, 82% of voters said that state matters were paramount, and that the CDU’s performance was mostly to do with former environment minister Norbert Rottgen, who failed to say whether he would stay in Dusseldorf to lead the opposition if he lost. He was simply no match for the campaign led by a minority SPD-Green coalition, which has held NRW since 2010.

Mrs Merkel remains Germany’s most popular politician, largely thanks to the German economy. German GDP expanded by 0.5% in the first quarter of 2012, and has kept unemployment well below the EU average. They have done this with the help of their much coveted ‘Mittelstand’ economic system. This comprises a group of small and medium sized businesses that cluster themselves around big manufactures and work closely with Universities and researchers. It is the perfect complement to Germany’s love of apprenticeships, which helps to keep the flow of qualified workers pouring in. Unsurprisingly, Germany is seen by investors and financial markets as Europe’s safe haven, keeping the cost of borrowing to below 2% for 10 year bond yields.  Read more of this post

Guest Blog: What the French election means for the Left

Jasper Cox

Image © The Prime Minister’s Office

If, as is expected, François Hollande wins La Présidentielle this weekend, it provides a boost for Ed Miliband and Labour party: a sign that perhaps the Left in Europe is, unlike the economy, on the road to recovery. In the United Kingdom, from the marginal Occupy movement to disgust over bankers’ bonuses, there is emerging subtle dislike of unregulated neoliberalism (even if most people don’t know what the term means). Meanwhile, Miliband leads in the polls, by perhaps 11%,  despite being unpopular personally with voters. However, there is a danger that the correlation between the French election and the state of British politics today is overstated.

Firstly, when faced with criticism over their handling of the economy, David Cameron and his government have been able use two simple excuses: our economy is heavily affected by the Eurozone crisis; and over-spending by Labour makes austerity necessary. Sarkozy cannot do this. Sarkozy came into power in 2007, before France’s GDP fell, before France lose its AAA rating and before public debt rose significantly. He has been a key figure in determining Eurozone policies. Going further back, he was an interior minister under the last government, and the Right has been in power since 1995. This means neither he nor the Right can be given ‘the benefit of the doubt’, and so he has a harder challenge defending his economic policy in the presidential election.

The gripes with Sarkozy are not (just) about austerity, whereas anger in the United Kingdom at the centre-right administration is directed at cuts and public sector reforms predominantly. Sarkozy has introduced some reforms to the state but has also indulged in antiimmigrant rhetoric (the link is but one example) and “Countless voters have told pollsters that Sarkozy’s personality and style turned them off”. As The Economist, which has generally been supportive of the UK coalition government, despairs:

Read more of this post

Master Storytellers

Seamus Peter Johnstone Macleod

Image © Saul Gordillo

It is argued that Scottish nationalism under the stewardship of the SNP has come of age. Gone are invocations of the spirit of William Wallace or Robert the Bruce. Less frequent too are references to the barbarity of Margaret Thatcher’s rule without mandate. It is said that romanticism has been replaced with a clear-minded pragmatism. The dominant narrative north of the border is that Scotland’s prosperity would be ensured and increased if it were free to pursue its own economic and political goals, free of control from Westminster.

There is much that supports elements of this account.  The SNP succeeded in presenting a convincing case that a pro-Europe, foreign investment friendly, socially conscious, independent Scotland would constitute a cause for monetary celebration. And it’s not all bluster. Mr Salmond’s high profile publicity trips to the Middle East and China, ostensibly securing bilateral trade and investment ties, are backed up by solid figures that show that foreign money has been flowing into Scotland – at a relatively steady rate – since 2002. The SNP’s dream to follow Ireland’s example of prosperity through low corporation tax, a skilled workforce, and modern infrastructure attractive to multinational companies cannot be discounted merely due to the unfortunate end that met that arc of prosperity. SNP ministers are more likely to be found quoting economic statistics than Rabbie Burns these days.

Scott Hill has rightly pointed out that it is the unionist side that now appear to be the champions of sentimentality and myth. Claims that “we are stronger together” sound hollow and are mostly unsupported by the rationality that appears to colour the rhetoric of the SNP. Melanie Philips does her cause no favours by perpetuating the false notion that Scotland receives a sizeable windfall from taxpayers elsewhere in the UK. Though the truth of this matter depends on which year or years of data are considered and what proportion of North Sea oil is considered to be Scotland’s, it is not the case that Scottish citizens would lose significant funds through independence. Equally, the notion that Scotland would have been bankrupted by having to independently bail out RBS during the credit crunch are grounded more in fiction than in fact. Joint bailouts by groups of states did take place during 2008 and this would likely have happened in the case of RBS given its sizeable presence south of the border. Read more of this post


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