Sunday, May 6, 2012

The Fifth Republic has Voted

Sick of austerity and tired of Sarkozy’s bravado, the French threw out their incumbent president today and elected an inexperienced politician who campaigned on the idea of “change.” Francois Hollande, elected with 51 percent of the vote, will become only the second socialist to hold the presidency of the Fifth Republic. Ironically, it was Nicholas Sarkozy, in 2007, who challenged the French to accept change. At time, Sarkozy endorsed the idea of France embracing globalization and making the hard decisions needed to stay competitive. Unfortunately, France, like every other country in the world, was slammed by the headwinds caused by the global financial crisis. While doing some to retool France’s economy (like weakening the 35-hour workweek and raising the retirement age), Sarkozy failed to get France out of its recessionary blues, and, like so many other recent European heads of state, paid a big price for that failure. It’s unfortunate that Sarkozy, eager to gain traction with the extreme right, stooped to the level of promoting protectionism and bashing immigrants in the final few weeks before the election. One thing is for sure: Sarkozy, long a strong supporter of the U.S. on diplomatic issues and defense policy, will be missed by America. It is also sad that French citizens were forced to choose between someone they did not particularly care for and another person that they disliked! That fact didn’t dissuade voters from turning out in the second round of voting, though: turnout was a whopping 81%.

Hollande, the victor in the election, will not have time for a honeymoon. In fact, it will be international debt markets, not Hollande himself, that will determine France’s fate in the near term. The credit market’s dislike of Spanish, Italian and Greek sovereign debt over the last number of years could very well make its way to France. And with Hollande promising to spend big to try to reinvigorate growth, investors may become even more skittish. The markets would have been a lot happier with the person that was supposed to be the next president, former IMF chief Dominique Strauss-Kahn. Unfortunately, for him, he was caught up in a sexual assault case in the New York and later was investigated for being involved in a prostitution ring in France. For the sake of the global economy, here’s hoping that Hollande is more moderate than his campaign portrayed.
Read more about it here: The Economist