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, Europe editor Article written by Gavin Hewitt Gavin Hewitt Europe editor

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  • rate this
    +1

    Comment number 14.

    The scandal involving Cahuzac was not concerning his lies about his Swiss account. It involved his cheating the same tax laws he instigated on everyone else, including the poor.

    His lies betray a lack of character, but his tax cheating was the crime of fraud.

    He wont be prosecuted because people of his class do not get prosecuted. Their behaviour is not even reported accurately in the press.

  • rate this
    +5

    Comment number 13.

    The rigidity of the Euro is the main reason why so many European economies are struggling - and this impacts on every other trading country too, especially UK.
    Until this issue is tackled the downward spiral will continue. The politicians are too scared of losing face. The French will demonstrate on the streets before long.

  • rate this
    +1

    Comment number 12.

    this should be a stark warning to the anti-cuts brigade. in the UK we need a manageable level of spending also. austerity may not be much fun, but the consequences of not trimming back are far worse. a strategy of borrowing / spending and hoping for growth is far too risky especially when there is no money in the other EU economies

  • rate this
    +4

    Comment number 11.

    If the EU thinks that a socialist French Prime Minister is going to radically reduce public spending then they delusional.

    France will not change until forced to. It is an economic train crash waiting to happen. When it does, they will blame the banks, global economy, UK, EU, Germany or anyone apart from their profligate spending over the past decades.

  • rate this
    +3

    Comment number 10.

    In the old days when companies or governments stuffed up their finances they declared bankruptcy. This time that was prevented so we're now engaged in a can-kicking exercise propping up dodgy debt and overcommitted public finances which is crushing growth. You could default, guarantee small/medium holders, and yes some would lose, but you would have growth after a short recession, look at Iceland.

  • rate this
    +1

    Comment number 9.

    France could well become the next Greece if its not careful. They have lived way beyond their means for years.

  • rate this
    +1

    Comment number 8.

    The French have been overspending for years. We have helped to keep them afloat with the one-sided CAP. This is the time of reckoning though and severe austerity measures are unavoidable. Hollande must change or go.

  • rate this
    +3

    Comment number 7.

    It sounds like France has been heading for a dark financial place for quite a while - it has spent more than it can afford. That is the simple truth, and the French public don't seem to be able to grasp the idea that they must cut state spending to cut the debt. At the moment they seem to think it will disappear without cuts and go overnight. It won't. France won't pay off $2.4 trillion by magic!

  • rate this
    +6

    Comment number 6.

    Unlike most countries France didn't overspend in order to try and "improve" it's citizens lives. But to maintain "it's way of life" For decades it has had massive farminsubsidies for no good reason, strikes break out in all sectors at the drop of a hat at any threat to "the way of life" including lack of big annual pay rises.

    Successive govs have simply spent to keep the masses quiet(ish)

  • rate this
    -3

    Comment number 5.

    Would it be too much to hope that if the French workforce strike / demonstrate against any "austerity" cuts that some of their willingness to oppose authority will rub off on we British?

    It might make our own Govt sit up and realise that we're not all in this together & start them thinking about how their half-baked plans are affecting the majority

    Vive la Revolution!

  • rate this
    +8

    Comment number 4.

    The very wise Ed Miliband said of Hollande 'This new leadership is sorely needed as Europe seeks to escape from austerity' just over a year ago. No comment from Ed recently about the French success story. Surprise, surprise.

  • rate this
    +1

    Comment number 3.

    "... worries them the most."

    Who is in fact imposing the criteria? The figures show the reality inside the EU, and they will hardly ever change. Some of the members are thrifty and diligent like Germany, some are not, and that is the fact. So why would anyone try to change somebody's style of life? France to become like Germany? Was that the intention of the Treaty of Rome?

  • rate this
    +6

    Comment number 2.

    France has been the elephant in the room for some time. Its financial sector is in disarray and the government can't afford to do anything about it. Public spending is out of control and the fear of public reaction stops anything being done to curb it. All that was promised has led to no improvement in the economy in fact it is being said that things have got worse. could this be the straw .....

  • rate this
    +5

    Comment number 1.

    Hollande has done nothing at all to get France out of it's debt position. With public spending at over 56% of GDP, the huge and totally inefficient public sector is ripe for cutting, but they are such a huge part of the electorate he is afraid to start.

    However the French people do not want to change their lifestyles at all.

    France is a train crash waiting to happen.

 

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