French president-elect Hollande promises 'kinder, gentler austerity'

As leader of Europe's No. 2 economy, French President-elect François Hollande has the power to challenge German Chancellor Angela Merkel's austerity doctrine. 

Sunday's elections in Europe mark a change in the political map here. French voters elected the first Socialist president in 17 years and angry Greeks rebuked mainstream parties associated with crippling deficits, bailouts, and spending cuts, voting in record numbers for radical left and neo-Nazi parties.  

Although the common sentiment in both elections is a rejection of austerity, the implications are quite different. While French elections represent a new power center in Europe on the center-left, Greek elections represent further political disarray in Europe’s southern tier.

The French voted in François Hollande, who promised a “new direction for Europe,” blending growth policies with the austerity model adopted under German direction. Mr. Hollande was congratulated by German Chancellor Angela Merkel in a phone call yesterday and invited to Berlin, a trip Hollande’s team says he will waste no time in taking.

US President Obama also phoned the French president-elect and said he looks forward to hosting him at the White House before a G-8 summit at Camp David and a NATO summit in Chicago, both later this month. 

European nations have slashed public spending the last couple years in an attempt to bring mounting public debt under control, but they have not seen the business and consumer spending necessary for a recovery. Unemployment rates have climbed, and economic growth has stalled, with some economies even contracting. 

Mr. Hollande, a pragmatic social democrat and Keynesian, advocates what analysts call a “kinder, gentler” austerity. He is unlikely to make any radical changes to France's public spending.

His promotion to top job of the No. 2 economy in Europe makes him the first European leader able to challenge Germany’s Angela Merkel, and brings to an end Europe’s “Merkozy” duo of Mrs. Merkel and outgoing French president Nicolas Sarkozy, who have steered Europe through the economic crisis. Merkel’s own ruling coalition showed signs of weakness yesterday, with a poor showing in local elections in Schleswig-Holstein, ahead of national elections next year.

The tide of pro-growth proposals has risen in recent weeks, with admonitions by the International Monetary Fund that austerity alone was harming Europe’s economic prospects, and, last week, an unexpected show of support for a growth pact by Mario Draghi, head of the European Central Bank.  

The president of the European Commission José Manuel Barroso, said today that he agreed with Hollande’s desire for greater investment in Europe through EU budget funds and the European Investment Bank. “We clearly have a common objective in reviving the European economy to generate lasting growth which rests on solid basis and is a source of new jobs. We now need to transform these aspirations into concrete action," he said.

The departing Mr. Sarkozy is the latest EU leader to see his mandate fall in the face of unpopular austerity measures, following those in Ireland, Portugal, Spain, Italy, Greece, Romania, and the Netherlands. Minutes after polls closed yesterday at 8 p.m., Sarkozy said that he would not lead his party in critical parliamentary elections in June and that he is leaving politics in France entirely. 

It is the outcome in Athens that troubles European analysts monitoring the economic horizon. Some two-thirds of Greeks voted for extremist parties – the radical left Syriza at 16 percent and the neo-Nazi Golden Dawn at 7 percent.

The Greek vote throws into messy question Greece’s role in the eurozone. The Greek pro-EU austerity party New Democracy received 19 percent of the vote, but it has no clear partners with which to form a coalition and establish a majority. The next EU bailout loan for Greece is set for later this month, but with little political stability it is unclear how the terms of that deal will unfold.