Liberté, égalité, austérité

Economically Inept France Crawls Toward An Election Disaster

By Kyle Smith

Liberté, égalité, austérité isn’t catching on as a campaign slogan in France, and the spring’s election season is becoming a mad scramble to the left at a moment when France’s battered bond rating, and the European project in general, can ill afford it.

Widely disliked center-right incumbent President Nicolas Sarkozy is losing in polls to his Socialist challenger François Hollande, whom he faces in a free-for-all election on April 22. The top two finishers in that race will then face off in the general election two weeks later. Sarkozy and Hollande are almost certain to be the finalists, but polls say Sarkozy is behind Hollande by a substantial margin. Meanwhile, Hollande, who has soared in popularity as he has made increasingly ludicrous promises to the French people about reversing austerity and opening the floodgates of government spending, is getting pressure from his left in the person of a comically retro figure named Jean-Luc Melenchon, who wants to party like it’s 1789. 

Voters love it when Mélenchon, running on the Left party ticket, talks about simply confiscating all individual income above 360,000 Euros a year, leads a symbolic “march on the Bastille” (which was torn down more than two centuries ago) and calls his supporters “sans-culottes” after the Revolution’s notorious bloodthirsty peasants. His fans, noted a Sunday Times reporter, were baffled at a rally when he started referring to April as “Germinal,” in a nod to the wacky Revolutionary calendar that renamed all the months. He advocates an increase in public spending of more than $150 billion, a minimum-wage hike of more than 50 percent, a referendum on the EU austerity package agreed to in March, and the illegalization of worker layoffs at profitable firms. Lately he has doubled his support, to 15 percent.

Virtually all of Mélenchon’s fans intend to vote for Hollande in the general election May 6, but the radical has started to make the Socialist look timid in comparison, though he is dangerous enough. He promises a $25 billion spending splurge. France faces massive structural deficits and badly needs to reign in the public sector that the Left promises to shower with largesse. It took a titanic effort for Sarkozy to raise the retirement age to 62 just a couple of years ago. Hollande vows to return the cutoff to 60 for workers who started young. Hollande also vows to hire 60,000 teachers, create 150,000 state-assisted jobs for young people and implement a 15 percent bank profit surtax and a 75 percent tax rate on personal income above one million Euros. All these ideas are certain to exacerbate a national unemployment rate of ten percent. Government workers already account for one out of five jobs in France.

Privately, Hollande’s lieutenants are vaguely hinting that some of these promises aren’t exactly set in stone, but in a country where les citoyens are already practicing their marches on the Bastille — and where one recent survey revealed that 56 percent of the people think they’re in danger of being forced to live on the street — Hollande’s soothing fantasy of a government shelter from the market storms seems likely to commit him more than he would like. Sarkozy, who cut the deficit from 7.1 percent of GDP to 5.2 percent last year, warns that his chief rival will be a “hostage to Mélenchon.”

So bond-rating agencies are sharpening their axes just three months after S&P downgraded France from triple-A status, while France’s wealthy individuals are packing their bags. Those who work in finance, and others, will be especially comfortable across the channel in London — which, with 300,000 French residents, is now home to more French than all but five cities in France. Hollande, true to form, visited London in February and attacked finance “gone mad.” He elaborated, “I’m not getting at that part of finance which supports the real economy, I’m going after mad finance which disrupts markets and puts states into dependency, which uses financial products and has no more links with economic activity.”

Right of center governments are in charge of 23 out of 27 EU governments, and the Euro is barely holding together. Hollande’s likely victory in May, in the Eurozone’s second-largest economy, looks like a dangerous backslide that the markets will punish. Hollande has denounced “the exorbitant power of finance in our country.” He is about to learn that finance simply means markets, and markets are an enemy he can’t afford to make.