Wolf Richter: François Hollande Versus the German Dictate

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.

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  1. readerOfTeaLeaves

    Following this slightly from the Left Coast of the US has been intriguing; this gets more interesting by the week.

  2. EmilianoZ

    I don’t know why Merkel is fretting like this. Le Parti Socialiste is just the French version of the Democratic Party. What they say before the election has nothing to do with what they do if elected.

    Every western “democracy” has 2 corporate parties. The conservative party and one that pretends to be the opposition as long as it’s not in power. But if in power it will just do what the 1% wants, same as the conservative party. I don’t need to talk about the Labor party in the UK. But, if my memory is correct, Spain’s Zapatero is a socialist and he started austerity there.

    Anyways, I’m not sure the odds favor Francois Hollande. In about 55 years of 5th Republic, the left managed to win the presidency only twice. Both time with Mitterrand. That’s 14 years out of 55. The French are much more conservative than people think.

    1. Maju

      You are very right except in the detail that France is not Spain… in so many things. Where Spain (and all its leadership) folds and swallows almost blindly, France is much more likely to have a mind of its own.

      But critically, the Eurocrisis is already affecting France dramatically. France is not less affected by the loss of productivity caused (largely) by a rigid overvalued euro-mark than Spain or Italy: if the industrial production of Spain or Greece has decayed by 16%, and that of Italy by 11%, the IP of France has also fallen by 8% in the 2006-10 period (what is as much as Portugal’s).

      It has not been damaged as much as its southern neighbors but it is taking a big blow anyhow. And unlike in Spain and probably Italy, it’s possible that France might still produce some sort of statesman, even if mediocre, the same that it is still able to go on uninterrupted general strike for a week or so (Autumn 2010), something unheard of further south or anywhere in the EU for many many many decades.

      Finally Hollande will surely need alliances to be elected and govern, alliances that will necessarily come from the somewhat strong true-Left parties of the hexagon: communists (PCF) and ecologists/minorities (Europe Écologie). Together they mustered almost 23% of the vote in the EP elections of 2009.

      Of course I may be just being hopeful and in my other comment I did indeed ask for reassurances of this political line having become mainstream in the French PS.

    2. digi_owl

      This is because they all bow to the same economist doctrine, monetarism. Or some local adaptation of it. Even Norway has been doing this since the 90s, tho thanks at least some independence from the EU circus was able to apply stimulus (never mind the national oil/pention fund). You see this in the never ending drive to privatize anything and everything that was formerly government owned and operated.

  3. Lafayette


    WR: But his dominant opponent, socialist Hollande, has come out forcefully against every paragraph of the German dictate.

    Despite the present poll-gap between Sarkozy and Hollande favoring the latter, nothing is more uncertain than the victory of Hollande. He is a Socialist Apparatchik, with no real experience in either industry or political management (of either a city, or a region nonetheless a country). He is also a product of the Ecole National d’Administration (ENA). Better known as ENArches.

    He also has a business degree from one of the more prestigious Parisian business schools but has never spent a day in his life working in commerce or industry.

    The ENArques are what is most wrong with France, which has a bent for intellectualized politicians. Politics needs smarts more than intelligence. An ENArque can spend days talking about a problem’s complexity without finding a solution to it.

    It is by means of their internal networking that they have a tight control over France’s industry – and thus is its major weakness. They are not the most pragmatic bunch and pragmatism is a hallmark of good business decision making.

    Do not underestimate Sarkozy. He is disliked by most French, which does not make him any less an action-oriented president who does not wait for a problem to fester. He then fixes whatever problem arises on the fly, which allows him to get along with Merkel despite the fact that he never accepted German adamancy regarding the ECB as the lender of last resort.

    The Left in France and most of Europe is intellectually bankrupt, proposing unworkable nostrums. It does not understand that, in terms of Social Justice, France has its tank full. It is now time to look at how to replenish the Economic Cash Cow rather than milk it even more to provide Public Services to a nation that no longer needs.

    In its own way, France has been a profligate nation during a period of post-war economic expansion. Those days are long gone. France needs to get back to work.

    1. Lafayette


      France’s major problem is productivity. It’s number of hours worked annually (total hours worked on the job) is pitiful.

      No TopManagement, in their right mind, would set up a manufacturing or service-oriented business in France, where prevails the 35-hour week delivering 1453 hours of work annually. See here that result compared to other nations.

      Which is one of the major reasons why un- and semi-skilled jobs have drained out to the Far East or North Africa. France’s largest car maker just opened a plant in Morocco this week to build its smaller line of compact-cars, which are popular both in Europe and Africa.

      Its key problem therefore is internal productivity that it must get a handle on in order to reduce unemployment and thusly Unemployment Insurance that eats a tremendous hole in the National Budget.

      France has a robust industrial infrastructure that is like an 8-cylinder car working on 6 pistons.

      1. Maju

        Unemployment is big: job must be divided. It’s pointless that some work to exhaustion while so many others are idle at the margins of the economy and society. What we must do is to heavily tax imports from countries where working more than 40 hrs/week is allowed (or where free unions are not tolerated or where environmental guarantees are not good enough, etc.)

        Why should we compete with those who “cheat” (and I’m thinking in capitalists, not workers obviously, who are only victims): let’s close markets for those who destroy Earth by emitting too much CO2 or polluting in general.

        However France and EU should start by forbidding bottom-trawling and excess fishing (and in this specific aspect France has most guilt) as well as by gradually closing all nuclear reactors (an unbearable toxic risk).

        Anyhow I’ll tell you one thing: either EU is modelled on the French somewhat protectionist and somewhat social-democratic system… or there will be no EU at all. Similarly the euro must be conceptually closer to the old French franc (flexible) than to the German mark (rigid).

        “Which is one of the major reasons why un- and semi-skilled jobs have drained out to the Far East or North Africa”?

        Allow me to paraphrase you for a US context: “Which is one of the major reasons why un- and semi-skilled jobs have drained out to Mexico and China?” That living conditions, lack of human and social rights, destruction of the environment do not pay taxes. That’s the reason.

        Mind you that North Africa only competes with Europe that much, retaining also brutal unemployment and awful life standards. It is more the likes of Poland or Turkey who do actually compete because they are not constrained by an overvalued euro and yet are similar to Europe in most other aspects.

        1. Lafayette

          Anyhow I’ll tell you one thing: either EU is modelled on the French somewhat protectionist and somewhat social-democratic system… or there will be no EU at all.

          Protectionism was what led Europe, during the inter-war years, to WW2. So, Europeans (including the Brits) know it must absolutely be avoided.

          Historically, Europe has been the first successful example of well-entrenched Social Justice and Egalitarianism. In this respect, it remains a model for the world to follow. Certainly one to which America might aspire …

          If France is in its present mess, it is because no government wanted to tackle the root problems of labor productivity whilst the French people blindly and adamantly wanted to maintain their standard-of-living. They were and are still living beyond their means.

          A political party does not get elected into power by trying to shove reality down the craw of a profoundly naive people. The mainline French still think that they should get a job that pays well-enough and stay with that job for a lifetime. The older French would rather sit in a jobless hole rather than move a hundred kilometers to a new one. (Which is a recorded sociological fact.)

          It is the younger French who are learning that they must move about obtaining a variety of skills in order to stay employed. Europe does not yet have America’s labor flexibility.

          There is not only an economic transformation happening in France and Europe, but a cultural one as well. Which is, admittedly, a difficult lesson to learn throughout Europe – brought about by the present unfortunate economic circumstances.

          But it was clearly a necessary one. Twin phenomena have been happening.
          *The “old times”, under an expansionary post-war reconstruction economic-climate came to an end in the early 1990s. It’s taken 20 years since, but they are clearly are over and gone.
          *Concurrent with this has been the developed world that is also transiting from the Industrial Age paradigm to the Information Age.

          Let’s remember that most of the world’s civilizations were Agricultural Age (and many still are) up to the late 19th century. Primarily in the West, we’ve had an Industrial Age for a very short period of time, barely 100 years.

          And now, off we go into the Information Age with its very profound transformations both economic and cultural.

          We live in interesting times.

          1. Rotter

            You could have been taken seriously ,a little bit, until you ended with that “off to the information age” punch-line. Anyone who believes that the advertising they have been exposed to, is proper historical analysis, must not be taken seriously.

      2. j.grmwd

        This is simply factually incorrect. French GDP/worker is higher than any other country in Europe (with the possible exception of Luxembourg, but I hesitate to name a country in which financial services are such a large proportion of GDP as genuinely productive.) Hours on the job have nothing to do with productivity per se.

        1. Lafayette

          NUMBER GAMES

          Hours on the job have nothing to do with productivity per se.

          Wow! From which school of Economics did you graduate?

          Hours worked most certainly do have an impact and it is very important. France has a 35-hour work-week, the only country in Europe to do so. So, it also has a higher overall-productivity because the French are more productive per hour that they work? That does not make sense. (Besides, come to France and see for yourself. I live here …)

          French GDP/worker is higher than any other country in Europe (with the possible exception of Luxembourg, but I hesitate to name a country in which financial services are such a large proportion of GDP as genuinely productive.)

          I was going to rebut with GDP per capita figures, but have decided not to do so.

          I think such comparisons are quite possibly meaningless because of the great disparity between incomes of skilled and unskilled workers that distorts an “average”. And yet, both, in France, work about the same number of hours.

          So, shall we agree to disagree … ?

        1. Maju

          Good find, thanks. And ironically those who work most in all EU are the Greeks, even above the Czechs and other Central Europeans (also very exploited).

          I really envy the Dutch. 30 hrs!

          How come there is no stat for the USA?

          1. Maju

            I checked yearly hours and the USA is exactly like Italy, what means 37.8 hrs (in the Latin Europe or Austria-Hungary zone per my derived map). Gringos don’t work so much after all, they just pretend they do.

          2. different clue

            How is that 37.8hr/week average American workweek arrived at? By averaging the employed in with the unemployed? I work 40hr/week except those rare weeks where I do overtime. So do many of the people I know.

  4. Maju

    “He rejects austerity policies and insists on stimulus”.

    He comes two or three years a bit too late.

    Still, if that is true, I welcome that fresh air. Oddly enough he may find himself extremely isolated even among the European Socialists, and even the Socialdemocrats of Latin Europe (Italian PD is the main support of Monti, Spanish PSOE, even after losing 4.5 million votes continues immutable in favor of austerity and the International Bankster Mafia).

    But it is the kind of leadership that EU needs (within non-revolutionary parameters), assuming it’s not too late already.

    It is very ironic that this pan-European great decision is not being made at all at pan-European level but inside the borders of France (and separately inside Germany I guess). This only highlights the lack of democracy at EU level and the still long way towards true sociological and political integration.

    Still it was clear from almost the beginning that the buck stopped in Paris (where class and general political consciousness is much larger than almost anywhere else in the subcontinent). Sarko, because of his right wing ideas, has not been willing or even able to lead Europe nor France through and beyond this crisis and that’s why he’s going to be defeated.

    But I fear it’s all nothing but an electoral stunt. And that the day after voting the plundering will resume. I hope to be wrong, after all Miterrand, the last French socialdemocratic president, nationalized the banks and some key industries some 30 years ago in a context not too different from the current one (there was no euro yet but some monetary union did exist already).

  5. Fifi

    Right now, the big open question is whether or not Marine Le Pen will be able to stand for election at all.

    It’s not a given as of today because of a fairly arcane rule on sponsorships by so called “great electors” (city mayors, representatives, senators, etc) required to qualify as a candidate, a rule which is giving her a lot of trouble.

    Beyond that, Hollande’s presence in the run-off is mostly a given, just because of the way the field for the first round looks like on the left. No talent needed to get to the second round. The mummy of François Mitterand would get there.

    But it’s going to be pretty wild on the right, and I don’t give much of a chance to Sarkozy in a field of either two or three candidates, from center to right Bayrou, Sarkozy and (may be, may be not) Le Pen. Either Le Pen is running and internal polling is abominable for Sarkozy. Or she doesn’t and there is going to be an utterly mad scramble between Bayrou and Sarkozy to get those Le Pen voters, with Le Pen probably throwing oil in the fire-pit in favor of Bayrou.

    To compound the mess, there is an unprecedented level of rejection of the media and politicians among the public. No one has any idea how that will translate at the polls. And the official campaign has not started yet, with Hollande and above all Sarkozy getting very disproportionate coverage in the media. How it will shift once the campaign starts is also anyone’s guess.

    In any case, the French situation is extremely volatile right now (and Merkel would be wise to stay away).

  6. Middle Seaman

    Too many commenters confuse France with New Jersey. The complete projection of American politics to France makes little sense. Even the US today is not the US of the 90s when a new Democratic president came out of the gates with guns blazing. (Recall Clinotn’s health care and gays in the military just in the first months.)

    Europe still has real social democracies in Scandinavia. Those countries work well even with conservative governments despite claims that the left in Europe looks like Obama. (Nobody does except us.) Socially, Europe is way more advanced than our cannibalistic system.

    Merkel doesn’t believe in the negative comments about Hollande and the French socialists. I am sticking with the lady (just on this though).

  7. Hilary Barnes

    Hobson’s choice. Either the slumpication of the PIIGS by the progressive application of Merkel’s austerity programme breaks up the euro or Francois Holland’s attempt to turn the euro project into a viable system will do it. Lasciati ogni speranza voi ch’entrate.

  8. Hans Suter

    I think the partnership between the two of them is far more useful to Merkel because it shows that she isn’t isolated in Europe.

  9. Lafayette

    I think the Germans have enough to worry about when their President resigns – as happened today – on suspicions of favours he received before becoming head of state.

    1. groo

      nothing to worry here.
      This is about a general questions of nepotism between the rich and the powerful, and will -you guess- change basically nothing.

      The problem is this:
      77% Germans approve Merkel.
      19% disapprove.

      re Greece:
      austerity measures too harsh: 24%
      just about right: 28%
      not strong enough: 28%

      Contrast this with polls, that about 60%voters are left of the middle.

      What is ‘left’ in France is quite different from ‘left’ in Germany, which must not necessarily be a bad thing.
      One just have to notice.

      In Germany you have a significant ‘austeritarian’ (TM) leftism, which roots in protestant ethics or what have you.

      Merkel might seem rational on the surface, but inside she is an ideologue of Thatcherian proportions.

      Merkel on the couch is an order of magnitude more difficult to analyze than poor chap GWBush.

      The two, who kill the EU are
      FIRST: Merkel,
      SECOND: Cameron.

      Sarkozy is insignificant. He is Merkels poodle.
      Cameron is the city’s poodle.

      Hollande actually could change the balance of forces,and one has to wait until autumn 2013, the German elections.

      The best one can resonably expect is a center-‘pseudo’-left coalition in germany, and a left french president (Hollande).

      If the crisis heats up, rest assured that the authoritarians get the overhand.

      1. Lafayette

        The two, who kill the EU are
        FIRST: Merkel,
        SECOND: Cameron.

        And bollocks to this notion. Proof please.

        Merkel understands very well what the European “Union” means, in the German context. That is, working within the rules.

        Greece is part of the southern underbelly where the “rules” are arbitrary and daily rewritten. Which is anathema to most Germans who cannot possibly accept such political contexts.

        The EU was always known as difficult project to bring to fruition. And the Brussels Commission screwed it up royally with their lack of National Budget oversight. Which coincided with a major Global Recession brought about by Uncle Sam who committed all the errors originally – with his binging on cheap money and lack of oversight which spawned the SubPrime Mess and consequently the Great Recession of 2008/9.

        As for Cameron, he’s genuflected at the altar of British Conservativism that goes back far beyond WW2. It just wont go away, because the Brits cannot abide the fact that Britania no longer rules the waves yet wants to waive the rules (of the EuroZone).

        So, let’s behave like adults and apportion the blame where the blame belongs. And keep the spuriously unfounded comments such as the above to ourselves – where also they belong.

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