By Wolf Richter, San Francisco based executive, entrepreneur, start up specialist, and author, with extensive international work experience. Cross posted from Testosterone Pit.
The Eurozone debt crisis has frayed a lot of nerves, particularly among Greek politicians, whose country is on the verge of bankruptcy, and German politicians, who no longer trust Greek politicians—they’d misrepresented deficits and debt in order to accede to the Eurozone, and had continued to do so up to insolvency. For that hair-raising debacle of Northern Europe vs. Greece, read…. Firewalls In Place, Markets Ready: Greece Can Go To Heck.
But now another confrontation, far bigger and at the very core of the Eurozone, is shaping up: France vs. Germany, or rather François Hollande vs. the German dictate.
President Nicolas Sarkozy, who’d held his nose and supported the debt-crisis remedies prescribed by German Chancellor Angela Merkel, is under siege. But his dominant opponent, socialist Hollande, has come out forcefully against every paragraph of the German dictate. He wants to push the ECB to buy sovereign bonds more aggressively. He wants to institute Eurobonds to spread risks. He rejects austerity policies and insists on stimulus. And he wants to renegotiate Merkel’s most recent oeuvre, the fiscal-union pact. But Germany is unlikely to compromise. Instead, a few northern Eurozone countries might form a bloc with Germany—a rift that might tear the Eurozone apart.
Though France squeaked by with a positive GDP in the last quarter, Sarkozy’s economic record is blemished. The number of unemployed in December rose by 29,700 from November and by 152,000 from prior year, to 2.87 million, or 4.27 million if the underemployed are included—the highest since September 1999. Youth unemployment is 23%. Job offers on the internet, which had been growing for 21 months straight, dropped in January. Auto registrations collapsed, down 21% in January year over year. Renault sold 25% fewer units and Peugeot-Citroen 15%. Layoffs and factory closures, though politically risky, might be next. France’s trade deficit of €70 billion was by far its highest ever (Germany had a record surplus). All-time high fuel prices are punishing consumers. And Sarkozy, who came to power on a law and order platform, had to watch burglaries jump by 17% in 2011.
Yet, he wasn’t even officially a candidate. Instead, he crisscrossed France as president, showed up at a nuclear power plant, chatted with gendarmes, visited a kindergarten … a mini-scandal because the kids were waving, unbeknownst to their parents. And in the middle of the night, he sought out some homeless people—however that was organized, given the media presence and security detail. His speeches spanned topics from dealing with the pressures on the healthcare system to holding a referendum on whether unemployment recipients should be allowed to turn down job offers. And always, he pointed at Germany as the model for how the French economy should be run.
But Wednesday evening, he sat in front of TF1’s cameras and declared that he would like to keep his job for another five years. It was a popular show, with 10.7 million viewers, the highest number for a TV show since DSK had tried to explain away the sordid allegations of New York.
While none of this helped him against Hollande, it helped him against number three, Marine Le Pen, president of the right-wing National Front, who’d outpolled him last summer. Her father, Jean-Marie le Pen, former president of the FN, keeps making unhelpful headlines. Today an appeals court condemned him to a three-month suspended sentence and a fine of €10,000 for “denying crimes against humanity”—he’d said that the German occupation of France hadn’t been “particularly inhumane.” Hence, Sarkozy’s elimination in the first round by Marine le Pen appears unlikely. But in the second round, as things stand now, Hollande is going to clean his clock.
Merkel’s nightmare. Her government is deeply worried that Hollande might actually try to implement his campaign platform after the election. They also fear that he will clean house at the finance ministry and other institutions and replace the people who have honed their skills during the debt crisis with people who haven’t learned the ropes yet—while the Eurozone is struggling to remain intact.
So Sarkozy and Merkel appear to have made a pact. In return for his support for all of her debt-crisis remedies, she would campaign for him to prevent Hollande from becoming the next President of France. Nothing brought that out more forcefully than their glamorous joint interview at the Elysée Palace, where both lambasted Hollande. Never before had a German chancellor campaigned so hard on French soil for a French president. Read…. Merkel’s Desperate Risky Gamble.