Deja vu in France

Francois Hollande (left) and Nicolas Sarkozy (right)
Picture courtesy of  BBC

There you have it: Francois Hollande and Nicolas Sarkozy, the candidates of the main centre-left and centre-right, are through to the second round of the French presidential elections. While Holland, the candidate for the Socialist Party does not exactly promise milk and honey to his French compatriots, he does want to roll back the modest reforms put in place under Sarkozy. In particular, the rise of the pension age from 60 to 62 (in Germany the pension age is 67) attracted the ire of some of the French electorate. 

We have been here before. The last Socialist President in France, Francois Mitterrand, equally promised a lot. After being elected he dramatically expanded the state sector to reduce unemployment, yet found that there was little money left in the state coffers and had to back-paddle very quickly to avert economic disaster. 

There is a significant difference between Mitterrand and Hollande however. As Mitterrand promised to commit more public money to correct the ills of the French economy, he only gambled the money of the French. Now France has the Euro and any public spending commitments that cannot be met from taxation and public borrowing within the rules of the austerity pact signed with other Euro member states, will have to come from somewhere else. 

Hollande thinks he has solved the dilemma. He announced that he wants to renegotiate the recently signed Euro stability pact to allow the European Central Bank to lend directly to the French government. In other words, he wants to be able to tap into the cheap money underwritten by a more competitive German economy and German tax payers while delaying or reversing the much needed economic reforms in France. 

Whatever he thinks he can achieve by increasing the already enormous mountain of debt of the French state, the past should be a reliable benchmark of his chances of success. Mitterand’s actions triggered a rocketing inflation that threatened to spiral out of control and throw the French population into a deep economic crisis. He reversed course within a year. It seems that Hollande has failed the test of any responsible politician even before he wins his right to move into the Elysee Palace: learn from past mistakes.