How France's Quiet Man Is Upsetting the European Applecart

Thirty-one years ago François Mitterrand became the only left-wing president of France's Fifth Republic, and set off on the path of Socialism in one country, with dramatic consequences. This spring, the current Socialist standard-bearer, François Hollande, is set to repeat his predecessor’s victory, and promises to set off tremors similar to those we saw in 1981.

The parallels are evident. Mitterrand faced an increasing unpopular centre-right incumbent Valéry Giscard d'Estaing whose administration was caught in the economic downturn provoked by an oil price crisis. Hollande is riding high in the polls against another incumbent, Nicolas Sarkozy, who has been battered by economic troubles and who, according to the polls, suffers from record levels of unpopularity, though his statesmanlike handling of the killings in south-west France by the gunman Mohamed Merah last month has helped to bolster his presidential image.

The President's poll ratings for the first round of the presidential election on April 22 have edged up. But he still faces the problem for the second round two weeks later that he has a relatively small ‘reservoir’ of votes from unsuccessful first round candidates whereas Hollande can count on backing from a wider range of voters.

Like Mitterrand, Hollande heads a party that is hungry for victory after long years out of power. As in 1981, the Socialists promise radical change. On a television show, he said that he does not like rich people and has added that 'my real adversary in this campaign is the world of finance'.

That makes Hollande, an amiable figure with whom one can imagine having a companionable dinner in his rural fiefdom in the Corrèze department, unusual among Europe's left-wing leaders in challenging the orthodoxy of austerity. He has set out an unabashed programme of domestic expansion and state spending while pledging himself to a 75 percent marginal tax rate on incomes of more than €1 million.

He has promised to boost state spending by €20 billion by 2017, create 60,000 teaching posts and 150,000 subsidized jobs for young people. That is to be paid for by higher taxes for the wealthy, a tax on financial transactions and a 15 percent rise in taxes on bank profits, a ban on stock options and trading in 'toxic' financial instruments, plus caps on bonuses. By the end of a five-year term in the Élysée presidential palace, Hollande says he could bring France's budget deficit back on target as the economy booms and austerity is replaced by expansion.

Vitally, Hollande says he will renegotiate the euro-zone fiscal pact to spur growth whatever the Germans think. The prospect of a clash with Berlin does not worry him, not at least while he is in campaigning mode. Such is Germany's concern that, in an unusual gesture in Franco-German relations, Chancellor Angela Merkel has come out in support of a French candidate – Sarkozy – and declined to meet Hollande on a recent visit to Paris; well, the Socialist candidate responded, when I am president she will have to see me.

There may be a fair measure of campaign bravado in all this and some observers expect Hollande to knuckle under to the consensus if he gets to the presidential palace after the second round of the election in May. But that is not a foregone conclusion, He has set out his stall unambiguously with the enthusiastic backing of his own party which may prove difficult to disown – left wing Socialists are openly highly critical of German policy as is the breakaway leftist politician, Jean-Luc Mélenchon who has attracted big crowds with his call for a 'citizen’s revolution'.

Those who remember the early Mitterrand period recall that his reflationary policies led to inflation, a rising trade deficit and two devaluations. The president had to change tack and enlist West German help. But France does not seem in a mood to heed the lessons of history.

In part that is because, for all his speeches and television interviews, Sarkozy has not convinced the electorate that it has to reform the economy – a task made all the more difficult by his relatively modest delivery of the reforms he promised when elected in 2007. In part it is because of the attachment the French feel for the benefits which have accrued to them over the decades of high state spending when the government could plunge ever deeper into debt – and are reluctant to accept the colder world now engulfing them.

Nor surprising perhaps for a country which has not had a balanced budget for four decades and where growth is flat. State spending amounts to 54 percent of GDP and state debt stands at 85 per cent of GDP with some analysts forecasting that it could rise to 95 percent by 2014 – and that is before the impact of a Hollande expansionary programme is felt.

But it is also because the equation which Charles de Gaulle and Konrad Adenauer forged in the 1960s has broken down. Under successive French presidents and West German – then simply German – chancellors, Paris provided political leadership while Bonn and then Berlin supplied the economic muscle. The deal was often not quite so clear-cut, but the political role of France continued to be vital.

Now, France remains very important but Merkel steps out in front of Sarkozy. The basic relationship in Europe has shifted, and the French cannot be expected to welcome it, even if they can do nothing about being the second leg in the 'Merkozy' duo. Speculation that the Chancellor would campaign for Sarkozy proved unfounded but her open support for him may be a double-edged sword given French susceptibilites – and the President's call for tougher controls at EU borders has caused concern in Germany.

Hollande's pledge to stand up to Berlin and insist on renegotiation of the eurozone agreements therefore plays into a nationalist stream that also plays a significant part in the appeal of the National Front which is credited with around 16 percent of the first round vote in the polls. Could this spur President Hollande on to an outright clash with Merkel – a pro-growth French policy colliding with belt-tightening directives from Berlin?

The realities of European politics, the habit of seeking fudges and papering over cracks, argues against any such confrontation. Hollande, who has spent his career as a backroom organiser and has never held government office, does not naturally fit the role of a 21st century Joan of Arc riding out against the forces of austerity. France's weakening economic position, especially compared to Germany, should act as a further brake together with major question marks over whether his expansionary programme can actually be implemented.