France's uncertain near future
What motivates a politician to strive for high office? Once the campaign is over and the office is secured, the sobering reality often is that not much can be done. Do the privileges of being the head of state really compensate for this frustration, especially for a person of honor and integrity?
François Hollande, the French president, is a perfect illustration of this. Elected about two and a half years ago, he has quickly become a lame duck even though the French president wields much more power nationally than his US counterpart.
Hollande was not an obvious choice; he won mostly because voters wanted to oust his predecessor. Nonetheless, when he got elected with a solid majority in parliament, hopes were high that he would shape France’s economic policy. He had two choices, both equally valid. The first would have been to make a true leftist policy, i.e. a U-turn in the way France behaved within the Eurozone, creating an opposition to the German-led austerity policy. This option could have hurt France’s credit rating but Hollande’s popularity would likely have suffered less than it actually has.
The second one would have been to practice a conservative economic policy, reforming the labor market, reducing unit labor costs, and bringing the public finances back into order; in brief, a sort of “agenda 2017” in the same vein as German Chancellor Gerhard Schroeder’s approach in the early 2000s.
Such a policy would have risked damaging the president’s popularity and might not have found support among his own parliamentarians. But then again, given Hollande’s current 17% approval rating, it couldn’t have been much worse.
For the two years of his mandate, Hollande instead took the middle path of doing nothing, betting that in some way growth would come back and mitigate the dramatic changes in the labor market and public finances. “Il faut laisser le temps au temps” (Let time take its course) was a favorite motto of Hollande’s mentor, former French President François Mitterrand. It was only after suffering losses in the municipal elections last spring that Hollande reluctantly took the second option of starting reforms by firing Prime Minister Jean-Marc Ayrault and replacing him with Manuel Valls, a “right-wing” socialist. However, it was too little too late. By then, Hollande’s popularity had already plunged to around 20% and he had to manage many discordant voices in his own party.
To appease them, he promoted one of their lot, Arnaud Montebourg, as Minister of Economy and Finance. However, this led to the untenable situation of having his own Minister of Economy criticizing the government’s economic orientation. After another round of criticisms last weekend, it was decided that enough was enough and a new more credible government without many heavyweights from the Socialist Party’s left wing, such as Montebourg, was inevitable.
This new “Valls II” government is more right-leaning and pro-reform. In my view, this is positive news for France and for the Eurozone. However, there is one caveat. This government does not have the full support of the Socialist Party, which holds the majority in parliament. The issue is not about personalities but about politics. As a large part of the Socialist Party might not agree with the political orientation of the new government, the new government might not get a supporting majority when presenting new laws to the parliament.
It thus will need to engage its confidence according to Article 49-3 of the French constitution and faces the non-negligible risk (perhaps around 30%) that one of the confidence votes might fail. If this happens, Hollande would have to dissolve the parliament and call for parliamentary elections.
The conservative party, UMP, could then get the majority in parliament, and France would face a “cohabitation,” meaning a socialist president and a conservative government. This is not unheard of. Under Mitterrand (1986-1988 and 1993-1995) and Jacques Chirac (1997-2002), France experienced cohabitation. The 1993-95 and 1997-2002 cohabitations were actually quite successful, with a lot of reforms implemented. But before this happens, we would have to swallow a lot of uncertainty and volatility from France.