Hollande Doctrine? France Leads from Behind in Mali

Paris’ gunships struck Islamist targets in the northern Malian town of Kona on Friday in support of a combined ground intervention by African troops from the Economic Community of West African States. French defense minister Jean-Yves Le Drian reported that during the operation, the French military suffered one casualty.

On the works for months, the intervention mandated by United Nations Security Council Resolution 2085 is meant to put an end to the swift takeover of northern Mali that Tuareg and Islamist groups undertook, in the process causing the political collapse of the central government through a military coup.

Instability in the Sahel has heightened since last year’s collapse of Muammar al-Gaddafi’s regime in Libya during a popular uprising that was supported by NATO air and naval forces. The “Arab Spring” in Libya caused a considerable power vacuum which brought political disunity along that country’s Mediterranean coast, loss of control over southern Libya and significant advanced weaponry in the hands of smugglers who have been able to export it to such conflict areas as Gaza and Syria. Read more “Hollande Doctrine? France Leads from Behind in Mali”

Hollande Plans €20 Billion Tax Increase to Balance Budget

French president François Hollande on Sunday announced €30 billion in new savings and tax increases to put Europe’s second largest economy on track to balance its budget in 2017.

“The government has not lost time,” insisted Hollande, who has come under criticism for reacting too slowly to the country’s worsening economic crisis, during an interview with TF1.

Despite a rise in industrial output in July, the French economy is expected to shrink .1 percent in the third quarter after posting zero growth in the previous three quarters. A BVA survey published in Le Parisien on Sunday found that 60 percent of voters is dissatisfied with the Socialist Party president’s performance so far.

Hollande, who defeated the incumbent Nicolas Sarkozy in May’s presidential election, is committed to reducing France’s shortfall from 4.5 percent of gross domestic product this year to 3 percent in 2013 and to balance his budget by 2017 to comply with the European Union’s fiscal rules.

In Sunday’s interview, the president insisted, “We will not spend one euro more in 2013 than what we did in 2012.” However, during the campaign, Hollande promised higher spending to hire tens of thousands more civil servants.

After they secured a parliamentary majority this summer, the Socialists repealed a planned sales tax increase and implemented a one-time tax on wealth. Further tax increases are imminent. €10 billion should be raised from taxing “large companies,” said Hollande, and another €10 billion from “well off” households. He previously promised to raise taxes to 75 percent for high-income earners.

The right-wing opposition is critical. Jean-François Copé, who is a candidate to replace former president Sarkozy as head of the Union pour un mouvement populaire, said, “I was the budget minister for three years and I have retained one lesson: that is, to reduce the deficit, one starts with cutting public spending and not by raising taxes.”

Copé warned that business leaders will leave France. “There is no country in the world with a 75 percent tax,” he said. Indeed, Hollande’s planned increase would give France the highest income tax rate in the world.

When they were in government, the conservatives did raise taxes on liquors, tobacco and soft drinks to reduce a €96 billion shortfall in 2011, equivalent to 7.1 percent of GDP. There was also a “temporary” 5 percent corporate tax increase. France’s 34.4 percent corporate tax was already more than twice as high as Germany’s which is 15.8 percent.

Hollande on Sunday also vowed to curb unemployment. “I am setting up a calendar,” he said. “Two years to create a policy for work and competitiveness.” Some three million Frenchmen are jobless, a thirteen year high. During his campaign, Hollande pledged to subsidize the creation of 150,000 jobs for young people.

Since the beginning of the crisis, France’s debt-to-GDP ratio has risen by 30 percent to nearly 90 percent this year.

France’s Hollande Putting Off Tough Budget Decisions

French president François Hollande has dealt only with the “easy stuff” in his revised budget this year, delaying tough but likely necessary spending and tax measures until next year.

Pierre Rousselin, foreign affairs editor for the conservative French newspaper Le Figaro, wondered on France 24’s Debate show on Thursday why the Socialist president, who was elected in May, is waiting for next year’s budget for austerity measures to take effect. “One would imagine that he would start with the difficult things, just by the fact that he’s enjoying the popularity coming out of his victory in the polls,” he said.

Hollande’s approval rating was still over 50 percent last month but is expected to fall if his administration announces entitlement and labor market reforms that are needed to rein in government spending and boost France’s competitiveness relative to other countries in the eurozone, including neighboring Germany. Read more “France’s Hollande Putting Off Tough Budget Decisions”

France’s Hollande Aims to Build Parliamentary Majority

Newly-elected French president François Hollande aims to build a left-wing majority in parliamentary elections this and next Sunday. His Socialist Party could, for the first time in a decade, win an absolute majority in the lower house. It already controls the Senate.

Hollande defeated conservative Nicolas Sarkozy in last month’s presidential poll and has called for voters to give him a strong mandate to fund public-sector job creation and raise taxes to reduce France’s budget shortfall which is expected by the European Commission to be 4.2 percent of gross domestic product this year.

To woo left-wing and centrist voters, Hollande, in the weeks since he was elected, has announced a reduction in the pension age back to the age of sixty for some workers and repealed a rise in sales taxes. Sarkozy’s right-wing government had increased the pension age and value-added tax rate to reduce government spending and bring in more revenue.

To implement actual stimulus measures and cement his status as Europe’s champion against austerity, Hollande needs a cooperative parliament.

Opinion surveys conducted before the first round of voting on Sunday predicted that the Socialist Party, with its Green and far-left allies, would emerge with a majority.

Conservatives try to lure voters by warning of the detrimental effects of higher spending and higher taxes. Jean-François Copé, the leader of the Union pour un mouvement populaire, said the Socialists are preparing “the biggest ever tightening of the screws on the middle class.” Former premier François Fillon, who is seen as a possible successor to Nicolas Sarkozy, said that Hollande will “massively boost taxes” if he is given a majority.

Right-wing voters appear largely apathetic to the election however. Polls also suggest that up to 40 percent of French voters will not participate in the election at all. Dispirited by Sarkozy’s failure to win reelection and the rise of Marine Le Pen’s populist Front national on the far right, many traditional conservative voters are staying home.

Hollande’s Fiscal Policy “Nonsense”: Austria

Austria’s finance minister dismissed as “nonsense” newly-elected French president François Hollande’s approach to combatting Europe’s sovereign debt crisis.

“Growth financed by debt? Those are the recipes from the day before yesterday,” the newspaper Oberösterreichische Nachrichten quoted the conservative Maria Fekter as saying.

The arguments that France’s new president François Hollande is putting forward again are nonsense and got us into this whole mess in the first place.

The socialist French president was elected on a promise to shift the emphasis from austerity to “growth” which means: more room for stimulus spending and a more expansionary monetary policy on the part of the European Central Bank. Read more “Hollande’s Fiscal Policy “Nonsense”: Austria”

Hollande, Merkel Face Fight Over Eurozone Bonds

German chancellor Angela Merkel and newly-elected French president François Hollande are bracing for their first proper fight. The debate between austerity and growth is expected to narrow to the question of whether countries in the eurozone should jointly issue sovereign bonds when leaders meet in Brussels on Wednesday.

Hollande, a socialist who became president this month, supports the creation of eurobonds. So did his predecessor, the conservative Nicolas Sarkozy, but he was willing to drop the issue to allow France and Germany to combat the continent’s debt crisis together.

There was no such Franco-German unity on display in Camp David this weekend where leaders of the G8 countries met to discuss the global economic crisis. Read more “Hollande, Merkel Face Fight Over Eurozone Bonds”

Europe’s Age of Austerity Drawing to a Close?

Shivers are running down the spines of Europe’s champions of austerity. If, as expected, socialist François Hollande wins France’s presidential election on Sunday and the Greeks return a parliament that is hopelessly divided on the same day, the pressure on Germany and its allies to surrender the push for budget restraint and allow for more deficit spending will increase.

Hollande has pledged to renegotiate the European fiscal compact that was signed in December — but has yet to be ratified in all eurozone states. The main conservative and socialists parties in Greece will likely fail to achieve a majority, forcing them to enter a coalition with third parties that mostly hostile to the austerity effort.

The Greeks have had to endure the worst of Europe’s debt crisis. In exchange for two international bailouts, totaling €240 billion, Athens has had to implement spending cuts and enact market reforms. Salaries in the private but especially the public sector were cut. So were pension payments and government subsidies. Read more “Europe’s Age of Austerity Drawing to a Close?”

Sarkozy’s Final Pitch: “We Don’t Want Socialism”

Facing an uphill battle to win Sunday’s presidential election, France’s Nicolas Sarkozy is trying desperately to cast his left-wing opponent as an old school socialist who will try to tax and spend his way out of the nation’s budget woes.

During an almost three hour televised debate on Wednesday night, the incumbent attacked his Socialist Party challenger François Hollande at length on economic policy, characterizing his plan as one of “crazy overspending.” He specifically cited Hollande’s pledge to hire 60,000 additional civil servants which Sarkozy lamented would only exacerbate France’s fiscal shortfall. Read more “Sarkozy’s Final Pitch: “We Don’t Want Socialism””

Hollande, Sarkozy Advance to Second Round

Incumbent French president Nicolas Sarkozy and his main, Socialist Party rival François Hollande advanced to the second round of the country’s presidential election on Sunday after winning 27 and 28.6 percent of the vote respectively. Official results were released on Monday.

The two were expected to enter a runoff but far-right candidate Marine Le Pen came in a surprisingly strong third with nearly 18 percent of the vote. Turnout was high at over 80 percent.

The incumbent had gained ground on his left-wing challenger in recent months but opinion polls continue to give Hollande a comfortable, double digit lead over the conservative for the second round in the election which is scheduled to take place on May 6.

Hollande notably tried to rally far-right voters to his cause in his victory speech on Sunday night when he ascribed the Front national‘s rise to President Sarkozy’s supposed squandering of France’s national pride. He also said that the conservative had “divided” the country with extremist right-wing rhetoric.

In an appeal to far-left voters whom he hopes will turn out for him in the second round, Hollande promised to put the national interest over “privilege.” Despite his call for “unity,” the Socialist Party candidate has vowed to fight “the world of finance” and proposed a punitive 75 percent income tax rates for millionaires.

Sarkozy reiterated his populist push in his election night speech. “I know that in this world which is moving so fast, the worry of our citizens to maintain their way of life is the central question in this election,” he said, adding that he alone had the “responsibility to protect the French people for the next five years.”

Sarkozy would be the second French president to lose reelection since Charles de Gaule founded the Fifth Republic in 1958. Hollande would be the first socialist to be elected to lead the nation since François Mitterrand defeated the centrist Valéry Giscard d’Estaing in 1981.

This post was updated with new information.

French Election, Proxy Battle Over Austerity

With conservative leaders lining up behind incumbent president Nicolas Sarkozy and socialist parties across Europe expressing their sympathy for his challenger, François Hollande, the upcoming French presidential election looks to be a proxy battle over economic policy.

German chancellor Angela Merkel, who leads a center-right coalition, has been the most vocal in her endorsement of the sitting French president among foreign right-wing leaders. “I support Nicolas Sarkozy in every manner because we belong to friendly parties,” she said in early February.

Merkel rightly fears that Hollande will imperil the fiscal compact that was signed by all European Union member states, except the Czech Republic and the United Kingdom, earlier this month.

Left-wing parties in Germany, the Netherlands and Spain have thrown their support behind Hollande’s call to renegotiate the treaty which requires that eurozone member states reduce their deficits to under 3 percent of gross domestic product in 2013.

Hollande, who is likely to defeat the conservative Sarkozy in the May 6 election, believes that the treaty should be revised to put a greater emphasis on growth and curbing unemployment. He welcomes the support from other European socialists.

“The fact that some have started to think about possibilities, renegotiations and annexes proves there is a growing awareness that this treaty is flawed,” Hollande said in Paris this week.

The leader of Germany’s Social Democratic Party, Frank-Walter Steinmeier, earlier told the Frankfurter Rundschau that “additional measures to promote economic growth” should be included in the fiscal pact. He also said to favor a financial transaction tax which both French presidential candidates support.

The secretary general of the Spanish socialists, who were thrown out of power late last year, also recommended a renegotiation of the treaty “so that there is growth in addition to austerity.”

In neither country, ratification of the text is in doubt because the ruling parties command majorities in their parliaments. In the Netherlands, however, the center-right minority government needs opposition votes to enact the budget charter. Diederik Samsom, who was elected Labor Party leader on Friday, has threatened to withdraw his support unless the treaty is revised to allow more room for fiscal stimulus.

The Dutch were among the staunchest proponents of sanctions for euro countries that break the budget rules and insisted that profligators be forced by the European Commission to rewrite their spending plans if they fail to rein in high deficits.

France had a €96 billion shortfall in 2011 which was equivalent to 7.1 percent of GDP. As a result, it lost its top credit rating from the Standard and Poor’s agency in January.

Both major party candidates for the French presidency have said that they will balance the budget before the end of their upcoming five year term in office.

Sarkozy’s conservatives, currently in government, raised taxes last year to mend the deficit. Hollande would raise them further. He has proposed to levy a 75 percent tax on incomes over €1 million and increase taxes on incomes over €150,000 from 40 to 45 percent. Sarkozy has criticized these plans as “tax policies that discourages work, that discourages initiative, isolate France from the rest of the world.”