Tuesday, April 24, 2012

The French are Not Happy

It may seem hard to believe, but conservatives have held the French presidency for the last 17 years. In 2007, after twelve years in the Elysee Palace, Jacques Chirac, an unbelievably popular president, ceded control to his onetime protégé, Nickolas Sarkozy. Sarkozy began his term with high approval ratings but the honeymoon period he had with the average French citizen disappeared long ago. (It turns out that long, seemingly never ending recessions make politicians less attractive to voters.) Now, France’s coming runoff election, between the right of center Sarkozy and his ideological rival, François Hollande, could signal a seismic shift in the way Europe responds to the poor growth rate hanging over the continent. Until now, France and Germany (led by Angela Merkel) have remained politically united in the war to control Europe’s short-term debt, but with polls showing Sarkozy being routed at the ballot box in May, the sense of urgency surrounding austerity could fade. In truth, France is in no real position to lecture others about austerity – the country has not had a budget surplus in 35 years – but it remains Europe’s second largest economy (and indeed the world’s fifth largest, after the United States, China, Japan and Germany) and that economic clout brings a lot of political muscle. But Germany’s economy has been booming recently while France’s has foundered. If France decides that it no longer wants to fall in line behind Berlin (and instead begin an economic stimulus plan to jumpstart growth), it could cause an even greater fission in the fragile fiscal and monetary union between the Germans (who have bankrolled the majority of the European bailouts) and the rest of Europe, who have had brutal austerity measured forced on them. If Hollande does win, some countries in the Eurozone might even start pressuring the European Central Bank, based in Frankfurt, to increase the money supply and focus on other things besides inflation (like full employment). The fall of Sarkozy, if it actually happens (political races can change course quickly), does in no way signal the fall of the Euro, but this election highlights the fact that every passing day seems to bring more stories that indicate that the Euro project is becoming less and less feasible.
- Read more about it here: NYTimes