Posts tagged "Mr Hollande"

France: no leeway for failure

François Hollande’s budget – the toughest in 30 years – is ameliorative but it is hardly a radical departure.

Rigour, austerity and recession are out. Combat, exceptional measures and solidarity are in. With those costume changes, François Hollande has just delivered the toughest budget in 30 years. But he has done what he said he would do. He hit the super-rich with a 75% tax. It will only effect a symbolic number of taxpayers, about 2,000 in all, but in a country which has turned its back on bling-bling presidents, Mr Hollande is sticking to his script. Two thirds of the €30bn the French public purse has to recoup will come from tax rises – a percentage that would have Ed Balls exiting stage right – and one third from a public spending freeze.

The larger question is whether French austerity will prove any less counterproductive than the Greek, Spanish or Portuguese ones have been. The assumptions on which this budget are based are balanced on a hairpin – 0.8% growth? In combative mood, prime minister Jean-Marc Ayrault said this target was both realistic and ambitious, but it appears to be more ambitious than realistic. It is a leap in the dark, but a government has to make a plan, and – in dark times like these – there is no well-lit way to jump. As Labour assembles in Manchester, Mr Balls ought to reflect that uncertainty about the future dogs social democrats when they come to office. In these circumstances of wild flux, the single most important thing to hang on to is flexibility to respond to events. Rushing to repeat the sort of restrictive spending commitments made ahead of the 1997 election at this stage in the game would be a mistake.

Already the French government has been forced to concede that France will not be out of the red by 2017. The remaining hope that the public deficit can be reduced from its current level of 4.5% to 3% of GDP in conditions where the economy is stagnating continues to strain credibility. Even in good times, such a cut would represent a considerable heave. To achieve this, Mr Hollande would have to pull off public-sector reforms that both of his conservative predecessors, Nicolas Sarkozy and Jacques Chirac, ducked.

There remain, too, fundamental concerns about the direction of travel. The central charge against European leaders is they are attempting to counter deflation with deflationary policies. That is not just a point made by the Paul Krugmans of this world. It is now being made by the IMF. By hurting the near-term growth outlook, tighter fiscal policy could be leading to wider rather than narrower spreads over German bonds. Especially so if it involved an outright decline in the overall size of the economy. Killing the economy while raising debt will not work. Seen from this perspective, Hollande’s budget is ameliorative but it is hardly a radical departure.

Borrowing at cheap rates of interest, France is petrified of another Moody’s downgrade. Any jacking up of the rate to Spanish levels would push these finely balanced budget projections over a cliff. Mr Ayrault has argued that if they abandoned the 3% target, France would become Italy and Spain overnight. The black hole in Spain’s banking sector was declared to be €59.3bn, which caused sighs of relief because it could have been worse . But the more essential your economy is to the euro, the better terms you can demand. A Spanish premier is always going to have a louder voice in Brussels than that of a Greek premier. If France ever needed a bailout, it could demand one on better terms.

Mr Hollande is to be applauded for sharing the burden on the people who can most afford to pay it. But he remains a hostage to fortune. With over 3 million unemployed, he has no leeway for failure. It is not his fault, but it is the legacy he has taken on. If small French companies who have been spared the pain in this budget don’t start hiring, and soon, France will have increased debt and declining means to pay it.


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Posted by admin - September 29, 2012 at 08:14

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France: François Hollande’s opportunity | Editorial

French Socialist leader will have some real room to manoeuvre if his party get majority in the national assembly

It looks as if François Hollande and the French Socialist party are heading for a dominant position in the country’s political structures exceeding their expectations. The results of the first round of voting for the national assembly indicate that the socialists and their allies will have a majority after next weekend’s second round. Indeed it is quite possible the socialists will get a majority on their own, removing the need for compromises with smaller parties, particularly those of the hard left.

This would crown the process under which the socialists have added the presidency to the already strong holdings they have in regional, local and big-city government, and in the senate. It is not a mandate that the French have bestowed on Mr Hollande with huge enthusiasm. But it nevertheless hands him an opportunity to rule and to make policy that could be of critical importance for France and for Europe. Unlike other recently elected European leaders, Mr Hollande will have some real room for manoeuvre. The key factors here are his solid domestic political base, France’s unique leverage over Germany and in Brussels, and the growing perception across the continent that the austerity solution, as crudely conceived and brutally applied so far, is worsening the European economic crisis rather than helping to resolve it.

France is more a part of that crisis than – under Nicolas Sarkozy, casting itself as one of the doctors rather than as one of the patients – it was prepared to admit. French firms are closing down by the week, outsourcing is undermining French employment, and the country’s fiscal position is by some accounts worse than that of Italy. Some charge that his announced policies, which include cutting the deficit massively by 2017 and putting money into growth-oriented projects to achieve a spurt of 3.5% next year, are overambitious and short on detail. But Mr Hollande is known to have been working with some of the best French economists on policy changes, including those designed to halt growing inequality, that could turn the situation around.

Detail is often a liability in campaigning, but it is a necessity in government. As he discloses it, and some of it will no doubt be unpalatable, Mr Hollande will have to carry a sceptical and politically weary public opinion with him while he attempts to restore the French economy, manage the relationship with Germany and rekindle French faith in Europe.

He will not do it by charisma of the flamboyant kind because that is the one quality, it is widely agreed, he does not possess. But there is also a sort of charisma of normality, of perceived competence, quiet wit, sincerity and good intentions. High office can have a transforming effect and Mr Hollande is already visibly growing into his job.


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Posted by admin - June 11, 2012 at 20:44

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The euro: thunder and lightning | Editorial

Continent-wide spending cuts are not about to be overturned in favour of a raft of policies designed to encourage growth – sadly

Thanks must go to the gods of metaphor, for it was presumably they who sent the lightning that forced François Hollande’s plane to turn back mid-journey to Berlin on Tuesday afternoon. This being rain-sodden reality rather than heightened drama, the French president had better luck on a second flight to meet chancellor Angela Merkel – but even so, you couldn’t have asked for a more perfect omen. Because there are those who view any mission to save the euro as cursed. Plenty more see policymaking in the crisis-hit eurozone as a lot of Sturm with a hefty dollop of Drang. And then there are the more excitable European politicians who would describe the fate of the single currency as hanging on a war of ideas: between left and right, between austerity and growth, and between the newly elected, idealistic Mr Hollande and battle-hardened German pragmatist Mrs Merkel. Stormy indeed.

If only things were so stark. Certainly, a shift of emphasis and policy is discernible, both in terms of the people making decisions and the economic and political backdrop they are now working against. But the continent-wide spending cuts are not about to be overturned in favour of a raft of policies designed to encourage growth – sadly. Nor, unfortunately, are stricken southern members of the euro about to receive the relief they need from the wrong-headed austerity programmes they have been forced to follow with such disastrous economic and social effect.

Plainly, the economic policies followed by eurozone ministers and officials are not working. First, their governments had the option in the summer of 2010 to go for sustained and substantial fiscal stimulus; they didn’t take it. The result was underlined, with the eurozone just avoiding its own double-dip recession – and that too largely because of strong growth for German exports. The domestic economy of the single-currency area remains in dire shape, with Spain and Italy both shrinking and France flatlining. Second, when it comes to warding off financial contagion, the euro club has finally cobbled together a firewall of pledged money, to be called upon if another nation ended up in serious trouble. The trouble is, Spain and Italy are already in financial turmoil – with their banks in desperate need of extra cash and their governments struggling to raise funds from markets – and yet very few analysts or financiers have much faith in the firewall. Finally, for the nations already forced on to financial life support, Brussels (with the IMF) prescribed a combination of drastic cuts, radical changes to welfare systems and labour laws, and a fire sale of public assets. In Greece, the guinea pig for all this, the result has been to seal a national economic depression, coupled with widespread unrest and violence – and to destroy support for the political mainstream. A failure on all counts.

So there is plenty of reason to hope that Mr Hollande has some substance behind his stirring rhetoric about the need for growth. The French president can point to the fall of 10 euro-area administrations since 2008, sky-high unemployment and even to Mrs Merkel’s own poor showing in this weekend’s elections in North Rhine-Westphalia. Yet his policies so far amount to slowing down the pace at which France reduces its (relatively small) budget deficit, and taxing wealth in order to create more jobs. At an international level, he wants to adulterate the pure austerity his predecessor, Nicolas Sarkozy, agreed with Mrs Merkel. But this is merely to slow progress towards the cliff edge, when what is needed is a U-turn. What the continent really needs to go for is an outright fiscal stimulus, of the kind even Mrs Merkel agreed to in 2009 (which gave German carmakers such a shot in the arm). In the crisis zones of Greece, Portugal and Ireland, the eurozone needs to impose a sharp reduction in the value of public debt. Preceding that, the euro club should set up an emergency pool to forcibly recapitalise banks, in return for European public equity stakes. Drastic? Yes. But the euro area’s existential crisis will not be alleviated by rhetoric, however cheering.


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Posted by admin - May 15, 2012 at 22:56

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Eurozone crisis live:

Greek shares fall nearly 8% at the open while French market is also down

9.14am: Good morning and welcome to our eurozone live blog, which on this public holiday in the UK promises to provide lots of twists and turns following the elections in France and Greece.

The prospects of a fight against austerity measures in Europe after the election of François Hollande – the first Socialist president in France for nearly 20 years – and an inconclusive election in Greece have already rattled markets in early trade.

The Greece stock market fell 7.7% in early trading at 636.7 while the banking index was off 19%. In France, the CAC 40 index fell 1.7%. The euro fell as far as $1.2955, its lowest since January 25.

There were also early signs of a flight to save havens. German government bond futures reached a record high of 142.40 in early trade while the yields on 10-year German bonds – which move inversely to price – were 2 basis points lower at 1.56%. The record low is 1.549% is within sight.

Over night, Japan’s Nikkei 225 index lost nearly 3%, to reach its lowest close in nearly three months of 9,127.39. Hong Kong’s Hang Seng slid 2.4% to 20,583.14.

The euro fell in the foreign exchange markets last night as currency traders across the globe digested the results from France and Greece. It lost
more than half a cent against the US dollar to $1.302, and hit a new three-and-a-half year low against sterling, making one pound worth €1.24.

London stock markets are closed today which is likely to ensure that trading volumes across the eurozone unusually thin.

Gary Jenkins of Swordfish Reasearch was quick with his take on the elections this morning.

The election of the new French president Mr Hollande may well be a seminal event in the history of the eurozone and over the next few days/weeks and possibly months we will see whether he sticks to his intentions to renegotiate the fiscal compact and promote a growth agenda or whether the reality of the situation and the German position results in him moderating his policies. Whilst many people have suggested that a Hollande victory is “priced in” to the markets that remains to be seen and it is his relationship with Merkel that may well determine the future of the eurozone.


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Posted by admin - May 7, 2012 at 09:23

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François Hollande: the change France needs

François Hollande has a rare opportunity to reshape the political landscape in a country whose default position is to the right

François Hollande won a stunning victory, not just for himself, as a man who spent much of his career in the shadow of others, nor for France, but for the left in Europe, too. With the governing parties who preached austerity under attack from a voter revolt on Sunday– in the Greek elections, where the extreme right was set to win enough votes to enter parliament; in Schleswig-Holstein, where the vote of Angela Merkel’s coalition partners, the Free Democrats, collapsed – the breakthrough of the left in France was a huge achievement and, just maybe, a turning point.

Nicolas Sarkozy is the 11th European leader to fall since the banking crisis broke and this result is more than just a shot across the bows for the former Sarkozy loyalists in Ms Merkel or David Cameron. France’s new direction is a mortal blow to the austerity compact which has been Europe’s anchor response to the crisis. Mr Hollande is no radical. Conscious of how polarised France has become between left and right, he wanted his supporters to celebrate, not demonstrate. He has set himself just one year longer to balance France’s budget than the man he defeated. But he arrives in power at that point in history where the victims of boom and bust, rather than its perennially self-satisfied authors, have become the dominant political voice.

The choice France faces is a bald one. The right has failed economically as its austerity measures continue to keep much of Europe’s economy bumping along the bottom. Either Mr Hollande reverses this juggernaut by creating jobs and stimulating growth in France – and his economic projections are cautious – or the far right has a field day scapegoating immigrants and central government. Protectionism and xenophobic nationalism will follow.

The new French president does have a sense of history. Styling himself on François Mitterrand, the last Socialist to capture the presidency 31 years ago, Mr Hollande’s date with destiny is with France, not with his party. If Nicolas Sarkozy latterly scooped up votes shamelessly from the gutter of the far right, France’s next president headed consciously elsewhere: “We need everything France has got to offer,” he said. He is going to need it. For Mr Hollande, there will be no honeymoon.

Out goes a remarkable and rare figure in French politics – a one-term president. Mr Sarkozy may have lost his presidency within hours of winning it so convincingly in 2007. His decision to celebrate his victory in the poshest of eateries on the Champs-Elysees with 55 of his closest and wealthiest mates set the tone of a presidency that was always fatally flawed. Fouquet’s inspired a book, its own Wikipedia entry and flash mobs of jobless which turn up to this day. Not content with one public relations blunder, the new president made another. The man that the daily Libération was to label “bling-bling” was pictured sunning himself on a billionaire’s yacht. The unconventional, mould-breaking qualities which inspired France when he was a candidate in 2007, turned off France when the same man became president. He sobered up, but never recovered from the tag that he was a president of the rich. Mr Sarkozy is right to take his defeat personally, because it was his personality that voters rejected above any other factor. The receding Sarkozy soap opera leaves his 10-year-old party, the Union for a Popular Movement (UMP), in a state of crisis. It hardly has time to recover before another electoral test comes knocking in June. The challenger will be Marine Le Pen, whose rebranded Front National could well, on the number of votes she got in the first round two weeks ago, break into parliament for the first time since the mid-1980s. The centre-right have got no one as divisive as Mr Sarkozy, but no one as charismatic either.

With the right in disarray, Mr Hollande has a rare opportunity to reshape the political landscape in a country whose default position is to the right. He will need all his steel as a leader if he is to succeed – and, one senses, not an insignificant amount of luck.


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Posted by admin - May 6, 2012 at 21:51

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François Hollande: the change France needs

François Hollande has a rare opportunity to reshape the political landscape in a country whose default position is to the right

François Hollande won a stunning victory, not just for himself, as a man who spent much of his career in the shadow of others, nor for France, but for the left in Europe, too. With the governing parties who preached austerity under attack from a voter revolt on Sunday– in the Greek elections, where the extreme right was set to win enough votes to enter parliament; in Schleswig-Holstein, where the vote of Angela Merkel’s coalition partners, the Free Democrats, collapsed – the breakthrough of the left in France was a huge achievement and, just maybe, a turning point.

Nicolas Sarkozy is the 11th European leader to fall since the banking crisis broke and this result is more than just a shot across the bows for the former Sarkozy loyalists in Ms Merkel or David Cameron. France’s new direction is a mortal blow to the austerity compact which has been Europe’s anchor response to the crisis. Mr Hollande is no radical. Conscious of how polarised France has become between left and right, he wanted his supporters to celebrate, not demonstrate. He has set himself just one year longer to balance France’s budget than the man he defeated. But he arrives in power at that point in history where the victims of boom and bust, rather than its perennially self-satisfied authors, have become the dominant political voice.

The choice France faces is a bald one. The right has failed economically as its austerity measures continue to keep much of Europe’s economy bumping along the bottom. Either Mr Hollande reverses this juggernaut by creating jobs and stimulating growth in France – and his economic projections are cautious – or the far right has a field day scapegoating immigrants and central government. Protectionism and xenophobic nationalism will follow.

The new French president does have a sense of history. Styling himself on François Mitterrand, the last Socialist to capture the presidency 31 years ago, Mr Hollande’s date with destiny is with France, not with his party. If Nicolas Sarkozy latterly scooped up votes shamelessly from the gutter of the far right, France’s next president headed consciously elsewhere: “We need everything France has got to offer,” he said. He is going to need it. For Mr Hollande, there will be no honeymoon.

Out goes a remarkable and rare figure in French politics – a one-term president. Mr Sarkozy may have lost his presidency within hours of winning it so convincingly in 2007. His decision to celebrate his victory in the poshest of eateries on the Champs-Elysees with 55 of his closest and wealthiest mates set the tone of a presidency that was always fatally flawed. Fouquet’s inspired a book, its own Wikipedia entry and flash mobs of jobless which turn up to this day. Not content with one public relations blunder, the new president made another. The man that the daily Libération was to label “bling-bling” was pictured sunning himself on a billionaire’s yacht. The unconventional, mould-breaking qualities which inspired France when he was a candidate in 2007, turned off France when the same man became president. He sobered up, but never recovered from the tag that he was a president of the rich. Mr Sarkozy is right to take his defeat personally, because it was his personality that voters rejected above any other factor. The receding Sarkozy soap opera leaves his 10-year-old party, the Union for a Popular Movement (UMP), in a state of crisis. It hardly has time to recover before another electoral test comes knocking in June. The challenger will be Marine Le Pen, whose rebranded Front National could well, on the number of votes she got in the first round two weeks ago, break into parliament for the first time since the mid-1980s. The centre-right have got no one as divisive as Mr Sarkozy, but no one as charismatic either.

With the right in disarray, Mr Hollande has a rare opportunity to reshape the political landscape in a country whose default position is to the right. He will need all his steel as a leader if he is to succeed – and, one senses, not an insignificant amount of luck.


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Posted by admin -  at 21:51

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