Francois Hollande, Frances new president, believes the austerity model with which Europe has tried to arrest and reverse its economic fall needs to be revisited and revised.	Picture: Reuters
Francois Hollande, Frances new president, believes the austerity model with which Europe has tried to arrest and reverse its economic fall needs to be revisited and revised. Picture: Reuters

New French leader Hollande seeks new deal for the recession-hit

By Time of article published May 8, 2012

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After slamming Europe’s austerity fix for the debt crisis, Francois Hollande’s crusade for growth picked up support even before his win, but can he bring the sceptics and the markets around?

One of only a handful of Socialist leaders at the EUtable, the freshly-elected French president said his victory marked “a new departure for Europe and hope for the world” because it showed “austerity can no longer be the only option”.

As unemployment hits its highest level in Europe since the creation of the euro, Hollande’s campaign calls to rewrite a just-inked and long-negotiated EU fiscal pact to enforce budgetary discipline is causing jitters on markets and ruffling German Chancellor Angela Merkel.

“There is real potential for friction,” said analyst Maurice Fraser from Chatham House think-tank.

“Can they change the wording, will he be happy with a vague shift?” he said of the pact agreed by 25 of the EU 27 on terms largely shoved through by Merkel and her French ally, outgoing incumbent Nicolas Sarkozy.

“These issues will take a long time to negotiate with Germany,” Fraser added. “But the Franco-German motor will need to demonstrate the show is not coming apart. They might have been high-handed but at least they looked like credible European leaders.”

Seeking to soothe fears of a breakdown in the Franco-German motor that drove Europe through the crisis, German Foreign Minister Guido Westerwelle said after Hollande’s victory: “We will work together on a growth pact. I have no doubt that we will rise to our common challenges.”

But as austerity fatigue sets in across the continent, driving far-right gains both in France and Greece, Hollande’s call for a switch of focus has found wide support, from French voters, from the European Commission and even, to an extent, from the man in charge of euro zone monetary policy, European Central Bank chief Mario Draghi.

Hollande, however, faces parliamentary elections as quickly as mid-June, just before an EU summit, and will need to show his electorate he can deliver.

“Europe should have no real reason to fear his victory,” said analyst Thomas Klau of the European Council on Foreign Relations, after The Economist labelled him “the rather dangerous Monsieur Hollande.”

The new French leader, a pro-European said to have arch European federalist Jacques Delors as his mentor, “is a natural compromise-builder”, Klau said.

“Hollande is far more predictable than Sarkozy, who was a man of his own, a little bit all over the place,” said a senior EU diplomat.

Hollande has four initial demands of the EU: he wants more money in the European Investment Bank, a new financial transactions tax, new EU bonds to fund large job-creating infrastructure projects and the use of unspent EU funds to spur growth.

Hollande “seems inert but might change the face of the EU”. said Hugo Brady of the Centre for European Reform in Brussels.

“Because a lot more is needed than the fiscal compact to save the single currency it will be easier for Hollande to present himself as the spokesman for the disenchanted of the crisis,” he said. – Sapa-AFP

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