Socialists return after
17 years of ‘vanvaas’
By Vinod Varshney
Francois Hollande has been
elected France’s first Socialist president in nearly two decades. This moderate
socialist, however, could defeat the pro-American conservative incumbent
Nicholas Sarkozy by a narrow margin. Why voters showed him the door at a time
when he was more needed to bail the country out from the economic morass? They seemingly
punished him for not delivering what he had promised five years ago.
But to be fair to him, Sarkozy had to face more challenging
times than he could have anticipated when he made tall promises. One year after
he assumed power, global economic recession came like a bolt from the blue. No
wonder Sarkozy not only failed badly to generate jobs, but took unpopular decisions
to reduce existing benefits of government and public sector employees. He increased
the working years to earn eligibility for pension.
Many believe he could have still convinced the public on the
need to make sacrifices, but his authoritarian and ritzy style made him
unpopular. Socialists and other leftists took full advantage of this.
Sarkozy took steps timidly
When Sarkozy was elected five years ago he had generated
roseate hopes of giving new competitiveness to France. But he could not take necessary
harsh measures due to political expediency, and whatever measures he took, they
deeply shocked the working class. He increased the age of retirement from 60 to
62 to become eligible for the partial pension and from 65 to 67 for the full
pension. This led to strikes and
agitations. This was truly a bad time for any leader as due to recession the rate
of unemployment reached 9.3 percent.
Hollande has also made equally roseate election promises
this time—he would increase the growth rate and generate jobs rather than compel
people to sacrifice in the name of austerity. And he won the vote with about 52
percent in the second round. In the first round on April 22 he had got 28.6
percent votes to Sarkozy’s 27.2 percent. Though the margin is thin, Sarkozy has
become the first-ever incumbent to lose in the first round.
He is Mr Normal
Hollande is popular with French common people, he is being
described as a president who would lead a normal life—he used to go to work by
scooter. People call him as
Mr Normal who understands the cultural sensibilities of French society
whereas Sarkozy continued to live a lavish life in spite of people’s suffering amidst
economic recession. Hollande has also promised to
cut presidential and ministerial salaries by 30 percent as his first act.
His other election promises
include creating 150,000 new jobs, withdrawing troops from Afghanistan by the
year-end and reduce the share of nuclear power by 50 percent by 2025. It may be
noted, France depends heavily on nuclear power, to the extent of 78 percent. The
economic meaning of retracing from nuclear power is to find $444 billion to
install that much generation capacity. Not an easy task for France. Many wonder how Hollande would spur growth and increase welfare expenditure! His remedy is to tax the rich even more! He has declared to increase the marginal rate of income tax to 75 percent from the current 41 percent. Anybody having income more than a million euro would be taxed at this rate. Leftists wanted even higher tax rate, perhaps 90 percent if not hundred percent!
France
lost its AAA rating
France economically
is in bad shape like many other European countries. It has lost its AAA rating
and may find it difficult to get the necessary loan to keep its economy running
if Hollande implements his poll promises. Fiscal deficit is already 5.2 percent
and public debt is 90 percent of the GDP.
France is
already paying out around 2.5 per cent of GDP in interest payments, even though
the interest rates are at record low level currently.
Hollande has articulated that measures
to spur growth can be more fruitful for the sagging French economy than
pursuing austerity. It may be recalled that in 2002 France had dropped its
currency Frank in favour of Euro. Since then the monetary policies for France are
decided by the European Central Bank. That was the reason the Sarkozy government
had to resort to austerity measures and budget-cuts in welfare schemes.
Election-promises
may be shelved
Whatever
his commitment, the new president will have to play a cautious game while
pursuing his agenda of growth. The pitfall in his plans is that he has made an optimistic
projection of 1.7 per cent growth next year, and 2.5 per cent after 2013. Seeing
the growth rate of the last 20 years which is just 1.6 percent, Hollande’s
assumption seems too optimistic. Most economists believe France will grow by
only 0.9 percent.
Hollande is a novice, never had
any post in the government, but observers hope he would show maturity and may
shelve a few of his election-promises for the better times, but then there is
immense pressure on him from the other two leftist parties which supported him
in the second round to make his win possible. Since he needs majority in the
National Assembly also, the elections for which would be held in June, he would
not change any of his rhetoric just now. But he may proceed cautiously once he reaches
the bridge to cross the sea of challenges ahead. (This article was first published in May, 2012 issue of Lokayat).
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