Can Francois Hollande Break With History? By Sam Fowles
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 effect.
The left wing press has delighted in comparisons between Hollande and his two illustrious predecessors while the right has taken equal delight in predicting a similar downfall. But Hollande has advantages that neither Mitterand nor Blum enjoyed. The first is that he has a genuine chance at gaining international support for his policies. It is much more difficult to stymie a stimulus or a tax increase if the worlds other leading economies are doing the same thing.
Hollande is similar to Blum and Mitterand in that he faces a conservative government across the channel with a fetish for austerity. However, unlike in the 1930s or 1980s (although for entirely different reasons) Germany is now a major and engaging player in the global economy. Although Angela Merkel is widely seen as one of the loudest cheerleaders for austerity, she has indicated an interest in some of Hollande’s flagship policies including a financial transactions tax (although on a Europe-wide scale) and a Europe-wide agreement on growth. She is also under a new kind of pressure to pursue a more pro-growth agenda, both from within her own country and on the world stage. In Germany her centre right Christian Democratic Party recently lost badly in legislative elections in the electorally important state of Schleswig-Holstein. Legislative elections across Europe have returned pro-growth majorities and Hollande’s election enabled President Obama to up the pressure for a European stimulus at May’s G8 summit.
Although Mr Hollande struggled to find common ground with Mrs Merkel at last month’s EU summit, his calls for Eurobonds and a growth pact both found support from other European leaders including Italy’s Mario Monti, Spain’s Mario Rajoy and Ireland’s Enda Kenny. Despite Angela Merkel’s antipathy towards Eurobonds, they (or at least a compromise solution) are supported by the opposition SDP party, who’s votes the German Chancellor needs to push her Fiscal Compact agreement through the German Parliament. With her poll lead suddenly under threat ahead of next year’s federal elections, and ambitions of her own to push towards further European integration, Mrs Merkel may quickly find herself in the mood to compromise.
Hollande will also be more pragmatic in the implementation of his policies than Mitterand or Blum. While he gave his victory speech aides were already briefing German diplomats of plans to maintain a supply side focus in fiscal policy. He has also put off all but the most cosmetic of measures (cutting his own salary by 30%) until after he receives the report of the French National Audit Committee later this month. A win for the Socialists in France’s legislative elections on Sunday (as first round results indicate he will) will ease the political pressure at home and allow Mr Hollande to take a softer approach to his relationship with the German leader.
Finally, the power of finance in France may have been overstated. A relatively small section of the French population (especially compared to the UK or USA) will actually be affected by Mr Hollande’s headline tax on millionaires, indeed many French millionaires already live abroad. In addition, compared to other western economies, finance makes up a relatively small percentage of France’s economy. Membership of the euro, so often a source of woe at the moment for Europe’s leaders, may also help protect France from any run on its currency, although government bonds are still vulnerable.
Too often in the past French voters have been disappointed by the gap between what they vote for and what their leaders deliver. Mr Hollande may not deliver his manifesto word of word, or immediately, but he stands a much better chance than his predecessors of achieving lasting change.
Sam Fowles is Director of Representation at the University of St Andrews Students Association