New French president faces tough test in reviving economy
French President Nicholas Sarkozy came into office pledging to reduce government bureaucracy, boost the rewards for work and restore France’s economic vigor. Then came the financial crisis of 2008 and a prolonged slump, and voters Sunday decided they’d had enough of the mercurial “Sarko.”
They handed power to Francois Hollande, the first Socialist to hold the presidency since the close of the Mitterand years in 1995.
Hollande’s idea for restoring growth emphasizes higher taxes on the rich and classic pump-priming, meaning government-funded stimulus. But he may find that following through on a big spending surge tougher than he expects.
The financial markets will have a vote. If they sense that French spending is veering out of control, they could raise interest rates to punishing levels.
Then there’s the matter of how Hollande would raise spending in the first place. The European fiscal pact calls for the opposite: Countries must cut costs with the goal of reassuring debt markets, thus keeping interest rates relatively tame. Unfortunately for Hollande, German Chancellor Angela Merkel says the fiscal pact “is not up for negotiation.”
Hollande doesn’t seem to have a great deal of running room, especially with a narrow victory margin of 51.62 percent.
Sunday’s election results in Greece may be the bigger worry. The outcome left Greek politics even more fragmented across a broader political spectrum. Radical parties at each extreme made gains, while the two major parties failed to gain a majority and must now try to form a government by joining with smaller parties.
That increases the risk that Greece could ultimately leave the eurozone, which means the elections may well revive the crisis-a-week atmosphere of several months ago. At this point, Europe seems fated to run a perpetually losing race on a treadmill of debt.
Mark Hastert
1 year agoThe article fails to mention that the plan is for growing the economy and generating revenues, something the austerity hawks never seemed interested in. In all likelihood the recession was merely a context used to turn back the clock on the 20th century.
Mark Robertson
1 year agoRight that’s the answer, elect a socialist who wants to increase spending, with a government spending stimulus effort.(it worked so well here)and raise the tax rate to 70% on the “wealthy.” You can’t make this stuff up. Just shows that once the “benefits” take hold, the serfs would rather put up with about anything than have even a slight reduction in those entitlements. Something our president obviously knows and plans his strategy around to keep power. Thank you Mark Robertson Independence