Why The Outcome Of The French Election Next Month Really Doesn't Matter

Sarkozy Hollande

Photo: AP

The first round of presidential elections in France are already beginning to generate significant chatter, with Socialist candidate Francois Hollande poised to oust incumbent Nicolas Sarkozy.Analysts have feared that Hollande’s proposals could be radical—for example, he supports a 75 per cent tax on the highest French earners—however in regards to the eurozone crisis, Eurasia Group analyst Antonio Barroso writes, there’s really not much of a difference between the two candidates.

Regardless of what Hollande may say about renegotiating the fiscal pact struck between euro area countries in December and despite apparent tensions with German Chancellor Angela Merkel, Hollande’s agenda would diverge minimally from that of Sarkozy:

Regarding the European debt crisis, the socialist camp remains adamant about the renegotiation of the fiscal treaty. However, it is unlikely that Hollande would aim to change what is already in the agreement; rather, he would push for the addition of a “growth component” to the text (the exact manner by which this would be done remains unclear). While the PS is putting a lot of emphasis on the “failed” strategy of European austerity and wants to shift the focus to growth, Hollande seems to agree with the current content of the treaty and would not try to alter what has been already agreed.

Indeed, Hollande and Sarkozy both believe that France has remained relatively strong throughout the crisis. With market pressure off, investors are right not be concerned that neither candidate will risk compromising their political base to push through stronger initiatives to reduce France’s deficit or reform the labour market. Barroso continues:

Therefore, the biggest risk underpinning the upcoming presidential contest is the low likelihood of significant policy changes following the election. This also raises questions about the capacity of France to react to further crisis episodes in the near future. While both Hollande and Sarkozy would certainly adopt measures if market pressure hit France again, the potential for political turmoil in such a scenario should not be discarded.

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