The French Presidential election is entering its final spout of verbal jousting.
Currently, although the polls place Nicolas Sarkozy marginally ahead of François Hollande, the Socialist candidate is still predicted to prevail after the crucial second round of voting. Having raised hairs on rabid left-wing necks in his opening rally in January by declaring war on ‘the world of finance’, Mr Hollande has been forced to retreat into his shell somewhat, in order to hunker down against a raging ideological storm on either side of him.
To his right, Marine Le Pen and the more moderate Nicolas Sarkozy have looked to shift the agenda towards law and order, national security and immigration in the wake of the sickening terrorist attacks of Mohammed Merah.
To his left, Jean-Luc Mélenchon, a former Socialist Senator and nostalgic Trotskyite, has galvanized a disenchanted electorate with utopian promises on public spending and punishing taxes on the rich. Mr Hollande has increasingly found himself pressed in a tight squeeze as he has fought to promote his own agenda in unfavourable electoral winds.
Meanwhile, Sarkozy’s fight-back continues to gather pace, despite his deep unpopularity. In truth, Mr Sarkozy’s support stands firm on only a handful of issues, which are outnumbered by his fatal weaknesses.
On foreign policy and law and order, Sarkozy has staked his claim as a steady hand in a shaky world by leading a successful campaign in Libya, and remaining in control of the country during Merah’s vengeful attacks. But on all other fronts, his tenure has been blighted by his own opulent personal life, his country’s sclerotic economic growth, and his party’s ideological schizophrenia.
Conversely, Hollande is a man born to represent the Socialist party, but not groomed to lead it. What he lacks in oratorical charisma however, he makes up for in political adroitness. He has banked on Sarkozy’s fragile personal connection with the electorate being enough to secure him the Presidency.
Although Hollande may have tested the water for an ideological crusade in January when his campaign started, events have conspired against him, meaning that he has retreated into the comfort of lambasting the incumbent to gain popularity.
Hollande has opted for a strategic half-way house. On the one hand he rages against the glaring errors of Sarkozy’s tenure, while on the other, he sprinkles his intrinsic moderate ideological stance with hard-line left-wing gambits such as the 75% top rate of tax in order to mollify Mélenchon’s baying crowd.
However, as The Economist pointed out in a perceptive piece recently (entitled ‘France in Denial’), this electoral brinkmanship simply shirks France’s crippling economic problems. France has a public sector that remains cumbersome, underfunded and out of control.
Despite the attachment that many French people retain towards their generous welfare state and their abundant public services, the uncomfortable reality is that public spending now constitutes 56% of GDP in France, a figure that is grossly higher than the OECD average of 43.3%.
France continues to display the fatal high public debt and low growth ratios that have haunted profligate Southern European countries in recent years. In Northern Europe, a notable bifurcation of Franco-German parity is appearing.
Germany’s export-led economy is showing enduring signs of sustainable growth, whereas France shows sustainable signs of sclerosis. Both countries’ public debt levels teeter around 80%, but whereas Germany’s is decreasing, France’s continues to edge into the nineties. France’s competitiveness has become enslaved to the munificence of its welfare state, rendering its public finances far closer to those of Spain, than those of Germany.
And yet the politicians continue to shower their electorates with underfunded promises. Both Sarkozy and Hollande want to balance the books through tax increases.
Sarkozy has already hiked corporation and income tax, and now promises to implement a farcical tax on French tax exiles, a measure that could be comically impossible to implement. Hollande promises a top-rate of 75% on high-earners, which would equate to roughly 90% after social charges, hardly an incentive for wealth creators to put their roots down in France.
France has always been happy to castigate capitalism in public, while profiting from its fruits though in private. As globalization has gripped the world, France has faded away by increasingly trading wealth creation for failed attempts at economic redistribution.
Whoever walks up the steps of the Elysée in May will have to regress on over-zealous campaign promises to reassure jittery bond markets that France has a sustainable strategy to deal with its debts.
For Sarkozy, ‘protecting’ the French from austerity is a distant pipe dream. For Hollande, generous spending pledges are bound to run-up up against a severe lack of funds, while a reconfiguration of the European fiscal compact may meet an old-fashioned German cold-shoulder from Angela Merkel.
Both men share a delusional commonality, one that could fundamentally change France’s position in Europe and threaten to dangerously spook financial markets.
Image from UMP Photos on Flickr.