France may look a very different country on Monday morning. There has only been one socialist President since the birth of the Fifth Republic, but it seems almost certain now that François Hollande will be the second, and he’s made it pretty clear that things are going to change.
A one-time Presidential candidate, and the mother of Hollande’s four children, Segolene Royale, once famously said of her former partner “he has not had an idea of his own in 30 years”. This campaign he has tried to prove her wrong, and if he wins and sticks to his pledges (a big ‘if’, I grant you) France and the wider EU had better be ready.
Here is some of what to expect:
- Austerity: Hollande believes it is stifling growth. He has promised a decisive break with Sarkozy’s policies of reining in the French budget deficit at the expense of growth. He’s committed to spending €20bn on job creation for the young and hiring 60,000 new teachers, which he says can be paid for by scrapping €24bn in tax breaks for the wealthiest 5% in France. Expect the emphasis to shift to stimulating the economy rather than deficit reduction, especially in…
- Europe: Hollande’s most eye-catching promise is to renegotiate the ‘Fiscal Compact’ under which 25 EU countries have committed to reducing their budget deficits to 3% of GDP, and keeping them there in perpetuity. This was the centre-piece of Sarkozy’s co-operation with Germany’s Angela Merkel, more or less imposed on the rest of Europe by the Franco-German ‘motor’. So for France to be the country to tear it up and replace it with a deal that combines the words ‘growth’ with ‘austerity’ would be seismic. Merkel will be an ‘immovable object’ in resisting this one. Can Hollande prove to be an ‘irresistible force’? He will have allies: there is a growing rebellion across Europe against German-led austerity that stretches from the Netherlands to Spain, and even includes Mario Draghi, the Governor of the European Central Bank. But even so, history suggests that pre-election promises about ‘standing up to Europe’ rarely survive the realities of office.
- Tax: France is hardly known as a tax haven for the rich at the best of times. If Hollande does what he’s promised, expect to see many more wealthy French ex-pats in London. “I don’t like the rich”, he said this week, and he may not be lying. The tax rate for anyone earning over €150,000 a year will rise from 41% to 45%, but the one that has grabbed the headlines is the proposed 75% tax rate on all income over €1 million a year. It’s a very long time since tax rates this high have been imposed anywhere in Europe, and if it happens, don’t expect the wealthiest in France to sit back and quietly pay up.
- Reform: Sarkozy has not proved the be the champion of structural reform that he promised. Some taxes have been cut, and the retirement age raised from 60 to 62, but reforms to the labour market have been painfully slow. Expect even less under Hollande who is close to the unions and has promised to reverse even the modest rise in the pension age. As for the 35 hour working week, Sarkozy has not dared to touch it in 5 years and Hollande may very well appoint Martine Aubry, the woman who introduced it, as his Prime Minister. So it looks like that's here to stay.
- Afghanistan: Sarkozy has already broken with NATO and promised to have his 4,000 combat troops out of the country by the end of 2013, a year or so ahead of the the US and UK. Hollande will bring that forward by a year, promising complete withdrawal of all fighting forces by the end of 2012. This will be awkward, to say the least, for those who remain. French troops do not control areas with great Taliban activity, but they will still have to be replaced, and if Afghan troops are not up to it, other allies will have to fill the gaps.
- Foreign Policy: Sarkozy was a proud and energetic Atlanticist, which put him on the same wave-length as London but was wildly discordant with the attitudes of most of his compatriots. He thought he could change French instincts, but in 5 years he has failed. The agreement on Anglo-French defence co-operation will stay, France will remain a member of NATO’s military command, but don’t expect to see a repeat of the sort of joint France/UK/US operation we saw over Libya. There will be a distinct difference in tone; not a return to the anti-Americanism of de Gaulle, but Paris will be a lot trickier for both London and Washington to deal with.
David Cameron made it pretty clear earlier in this campaign that he wanted his ‘friend’ Nicolas to win. Given how difficult relations have been with the Elysée in recent months, this suggests he may be dreading a Hollande Presidency. Europe has been swinging firmly to the right since the financial crisis hit in 2008. Hollande’s victory would be the first major move back to the left, and if the new President establishes himself and creates some momentum in Europe, many of the continent’s right-of-centre Governments may start to look nervously over their shoulder.