The troubles of France's President Hollande

 
President Hollande visiting Tulle, 6 Apr 13 Opinion polls suggest Mr Hollande has lost much voter support since his election

France and its president are of major concern in Berlin and in Brussels. Some German officials say France is the country in the eurozone which worries them the most.

It is not about the recent scandal, which caught a French minister, Jerome Cahuzac, lying about his bank account in Switzerland. That certainly has embarrassed President Francois Hollande and has triggered the question of who knew what and may still lead to a government reshuffle or more.

It is not about another close ally of the president who had an account in the Caymans. Yes it sits uncomfortably with the rhetoric of the presidential election, during which Mr Hollande said "my true adversary is the world of finance". It revives the suspicion that the circle around Mr Hollande are "champagne socialists". Already the firebrand of the left, Jean-Luc Melenchon, is calling for a demonstration to "purify" the left.

It is the French economy that lies at the heart of the malaise. Sooner or later radical decisions will have to be taken. Mr Hollande campaigned on a growth ticket, but has watched the prospects of growth retreat.

He promised to challenge the German strategy for Europe of cutting deficits while restructuring economies. Mr Hollande does not believe the medicine is working. Indeed, recently he said "sticking with austerity would condemn Europe not just to recession but to an explosion". But it is the German narrative which prevails.

Deterioration

In the 11 months since President Hollande came to power, unemployment has risen in France to 3.2 million, the highest it has reached since 1997. Debt has gone above 90% of GDP. The promise to reduce the deficit this year to 3% of output has been discarded.

France is an important enough country to stand up to the European Commission, and there may well be further flexibility in reaching agreed targets for reducing the deficit.

But the core dilemma remains. France needs to find 60bn euros (£51bn; $78bn) of spending cuts by the end of 2017. The rich - many of whom have boarded the trains to London and Belgium - have been soaked. There is little alternative than to cut spending. Mr Hollande understands the challenge. Only recently he said that "public spending has reached 57% of national wealth. It was 52% five years ago. Do we live better for it? No."

Cutting the size of the French state would never be easy - particularly for a French Socialist. But cuts will have to be made at a time the economy is flat-lining. Consumer spending is in retreat. Car sales have collapsed.

President Hollande's appeal at the last election was that he was not Nicolas Sarkozy and that he would preserve the French way of life. It was a feel-good campaign - but reality has struck quickly. The challenge for the president is whether he will tell the French people that their social welfare model is not sustainable and that far-reaching reforms are necessary.

Some new rules have been adopted to loosen France's strict labour regulations. They are regarded as a start, but no more.

What so rattles the officials in Berlin and Brussels is the fear that France could slide into the category of those southern European countries in trouble. That has not happened yet, but the concern is of the markets losing faith in Paris.

On Monday President Hollande will have a working dinner with David Cameron. The British prime minister is looking for changes to the EU treaties as a means to winning some concessions for the UK. The French and the Germans (Mr Cameron will be in Berlin later in the week) may not oblige. They have cooled on treaty change, even if the eurozone crisis demands it.

In the case of President Hollande the last thing he would want is having to put a treaty change to the French people. In their current mood and faced with a stagnant economy they might well reject any referendum.

 
Gavin Hewitt Article written by Gavin Hewitt Gavin Hewitt Europe editor

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  • Comment number 134.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • rate this
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    Comment number 133.

    124 demo

    "Everyone must have their choices limited, must pay increasingly high taxes "for the sake of the system"

    You Swiss can sit on your high horse and preach tax choices when, through your country being a huge money laundering hub for every dictator in the world hiding his loot, makes your government rich enough to avoid taxing you as highly as other more honest Europeans.

  • rate this
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    Comment number 132.

    Its a tale of two sisters, France and Italy

    The real question of future of Euro will be answered
    when France and Italy hit rock bottom

    Its one thing to take 60% of savings from a small child
    Its another thing to take 60% of savings from a towering giant
    (especially when that giant is your best friend)

    France and Italy economies are the true test
    of whether the Euro will survive

  • rate this
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    Comment number 131.

    Some members of EU said that taking citizens savings to pay off debt like they did in Cyprus is the way they will do future bailouts

    How would the French react to EU taking 60% of all their savings?

    The rich French have already given up 75%

    They may create their own TEA (taxed enough already) Party movement in France
    like Revolutionary Days of Old
    minus the beheadings

  • rate this
    0

    Comment number 130.

    The difficulty with France needing bailed out is that it possibly for the Eurozone
    is too big to fail

    So far Greece, Portugal, Spain, Ireland, Cyprus, etc have all been bailed out (w/ Italy on its way)
    but they are all much smaller countries than France

    France's economy tanking further
    may be the final straw for the Euro

 

Comments 5 of 134

 

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