In what may prove to be a watershed moment, France and Greece both go to the urns on Sunday for elections that will, whoever wins in either country, have a significant effect on the future of Europe’s approach to the economic crisis, writes Mediapart's Brussels correspondent, Ludovic Lamant.
Many Europeans will be eyeing the final play-off in the French presidential elections on May 6th with the hope that the result will provide a turning point for the received wisdom of using blanket austerity measures to nurse already strangled EU economies back to health.
The austerity dogma, championed by German Chancellor Angela Merkel and French President Nicolas Sarkozy, is causing increasing political crises across the continent. The Dutch government, once a model pupil of austerity policies and a precious EU ally for Merkel, resigned in April after failing to gain a parliamentary majority for its austerity programme, announcing early general elections for September.
In Romania, the two-month old centre-right government led by Mihai Razvan Ungureanu fell in April after failing to win a vote of confidence for its austerity measures, the latest in a series imposed over three years on one of the EU’s poorest nations. That same month, the Czech government narrowly survived a vote of confidence called after some 100,000 people demonstrated against austerity measures in the capital Prague. The Irish government, meanwhile, faces an uncertain outcome to its referendum on the EU budgetary pact, known as ‘the fiscal compact’, called for May 31st.
Illustrating a profound and growing social unease, the May Day parades that filled European cities last Tuesday all loudly called for an alternative to austerity. In Spain, where the turnout appeared the strongest, union officials claimed about one million took to the country’s streets. While foreign affairs minister José Manuel Garcia-Margallo said the country, heading into recession, was “plunged into an immense crisis”, conservative Prime Minister Mariano Rajoy vowed to continue on with his reforms regardless.
Enlargement : Illustration 1
Amid a highly tense economic and social context, the French election play-off is the focus of every attention within the European Commission (EC); in one corner stands Nicolas Sarkozy, loyal ally of Merkel and solid supporter of theEU fiscal compact, finalized in March and which is in the process of country-by country ratification, and who argues for even stricter austerity measures across member-states. In the opposite corner is Socialist Party candidate François Hollande, who has said he will renegotiate the fiscal compact, who stands opposed to blanket austerity policies and who has announced plans, albeit with a certain vagueness on the detail, to pump growth measures into the French economy.
The Greek legislative elections on Sunday will in effect decide whether the country is to remain within the eurozone, and the uncertain result has the financial markets on a knife-edge. The two main parties of the coalition government, the conservative New Democracy and the socialist Pasok, are tipped by opinion polls as the favourites, but their predicted scores are at a historically low level, and they are uncertain to be able to rule even in the situation that they together form a coalition.
Importantly, these two parties are the only ones supporting the debt bail-out deal signed between Greece, the EU and the International Monetray Fund (IMF) which set out the terms of structural reforms and a package of austerity measures the country must abide to in return. Thus the May 6th vote will serve as a referendum on the euro, with those who believe Greece should remain within the common currency bound to vote for either New Democracy or Pasok.
Merkel prepares for Hollande win
The Wall Street Journal, in an article published May 3rd, predicted that “France's presidential election on Sunday is likely to open a new chapter in Europe's handling of its economic crisis, shaking up a Franco-German alliance that has become increasingly dominated by Berlin.”
Although Europe’s right-wing governments will remain the majority whatever happens in France and Greece on May 6th, the Europe-wide debate on which policies should be adopted to tackle the economic crisis are set to evolve. On the one hand, some governments, like that of Germany, will continue to argue that a strict budgetary discipline is the absolute priority, while others will argue for a thinning-down of austerity measures with the introduction of more clearly growth-orientated policies.
If François Hollande is elected as French president, he could conceivably rally a majority in Europe behind him. Indeed, former EC President Romao Prodi envisaged as much when he commented last month: “If Germany remains convinced it can advance forward on its own, Italy must work with France and Spain to re-launch Europe.” Hollande even attracted unlikely support from former Italian finance minister Giulio Tremonti , who served under Sylvio Berlusconi, who declared: “I am a friend of Nicolas Sarkozy, but if I was French, I would vote for François Hollande because I share a good number of his ideas.”
Hollande’s economic approach has been met with favourable interest among France’s neighbours. While an editorial in Spanish daily El Pais found that “the ‘Hollande alternative’ is attractive to those countries that are the hardest hit by the crisis, the country’s other major daily, El Mundo, applauded what it called the “European lesson” provided by the Socialist Party candidate. Germany’s Süddeutsche Zeitung, referring to regional elections to be held this weekend in the state of Schleswig-Holstein, commented that “the most important vote this year for Germany is to be held at the end of the week – not in the Lander of Schleswig Holstein, but in France.” Britains’ Daily Telegraph, meanwhile, gleefully predicted that, if Hollande were to be elected Sunday, “Mrs Merkel is going to have to re-learn the art of compromise”.
A Hollande presidency -which every opinion poll has consistently predicted from the beginning of the official campaigning - is likely to put the Franco-German alliance under considerable strain between now and the summer. For that reason, Chancellor Merkel has recently begun a rapprochement with Italian Prime Minister Mario Monti in the hope of closing down the debate about new, growth-driven policies before Hollande’s eventual investiture mid-May.
Even Brussels readies for change
Ireland is the only country to have organized a referendum on its adherence to the EU’s fiscal compact out of the 25 who have signed up to it (the UK and the Czech Republic have not). Opinion polls forecast a 47% “yes” vote on May 31st, but the “no” camp appears to be gaining ground. A socialist victory in the French presidential elections is likely to increase that movement.
The Irish government has wheeled out the heavy artillery, warning that a rejection of the fiscal compact would compromise the emergency bail-out granted to Ireland in December 2010 by the EU and the IMF and lead to debt default. But even the threat of an economic Armageddon may not suffice to convince popular opinion. “There is a realistic chance of a ‘No’ vote because enough people are talking about this as a vote against austerity,” said Dr Jane Suiter, lecturer in government at University College Cork, in a report published in The Financial Times April 29th. “The government has not taken ownership of the campaign.”
The European Commission has declined to take a position on the elections among member states, but it has underlined that a number of François Hollande’s propositions, such as the tax on financial transactions, have already been the subject of study by the EC. “The Commission has already, and since a long time, an agenda for growth,” commented Pia Ahrenkilde, a spokeswoman for EC President Manuel Barroso. “There is no alternative to the budgetary consolidation that is underway. It’s complimentary. The question is not about one or the other. We say both are needed.”
That view is echoed by Mario Draghi, president of the European Central Bank, who now argues for the adoption of a growth pact as a complimentary tool to the fiscal compact so dear to Chancellor Merkel who, herself, has now timidly recognised the need to encourage growth. Similarly, European Council President Herman Van Rompuy has called for a ‘Dinner for Growth’ informal meeting this month of EU member state leaders to discuss the adoption of policy initiatives for economic growth.
If the outcome of the French presidential elections has attracted so much attention in Europe, it is above all because it comes just as the continent, trapped in austerity, shows increasing signs of exhaustion. With governing alliances beginning to split as nations find the harsh budgetary medicine concocted by Merkel and Sarkozy increasingly difficult to swallow, the results of Sunday’s elections in France and Greece may well announce a spring of change.
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English version: Graham Tearse