A pudding for president

A response to Merkozy´s political straightjacket?

By Sunday night, the usually infallible exit polls in France had called a winner. François Hollande, known to his many and varied detractors as a rather dangerous milk pudding, or a revolutionary eiderdown, will occupy the Elysée presidential palace. Out will go the incumbent, Nicolas Sarkozy, taking along with him his sullen mood and a set of memories that sits in the public mind like strange visitors from a different era, or a different life: victory banquets in Fouquet’s, holidays on yachts and relentless glops of showbiz, now all to be buried under the solemn tide of Socialism.

Clearly, there are many who acutely fear what Hollande will do. The list of alarmists starts with The Economist, stretches to the offices of German Chancellor Angela Merkel, who is reported to have termed the possibility of a Hollande presidency a “nightmare”, and extends into a good swathe of Europe’s finance and business community, for whom austerity has become the eleventh commandment since the euro panic of last year.

The bleak vision these critics conjure, to greater or lesser extent, is not without its grounds. French social welfare is extraordinarily generous, and Hollande shows little desire to cut the state’s share of gross domestic product, which at 56 percent is second only to Denmark’s in the EU. It seems hard to find in his programme any gesture towards reducing public debt, now bordering 90 percent of GDP, or to curing France’s pallor in global trade.

With his manifesto in hand, and with Hollande also promising to amend the new European fiscal accord limiting budget deficits, the possible steps on a ladder into hell can be spelled out. To start with, France tries to pump its economy into life with state largesse. The deficit spirals, and the markets choke off further credit to Paris. At the same time, yesterday’s elections in Greece raise the spectre of an extraordinarily weak coalition government in Athens, fighting for its parliamentary life every time it wishes to implement a fresh package of cuts ordained by the EU.

Doomsday proceeds as follows. France, as one of the vanguard powers of the EU, would turn inwards and shun the call to collective discipline. Greece, the principal weak spot in the eurozone, would lurch between elections and social meltdown, generating mounting exasperation in Brussels. Sensing contagion and disaster, the markets effectively ostracize Spain and Italy. The Portuguese economy disappears into fog somewhere off the Azores.

Elements of this tale already stand on Europe’s crisis radar. But the narrative of an irresponsible drift into economic disaster is a misrepresentation of reality, serving to console the deficit hawks and the dominant centre-right parties of Europe rather than portray the likely course of events. For it is not radicalization that will be the motif of President Hollande, or the new Greek government, but a long and arduous battle for each tiny piece of wiggle room. “There’s no margin for anything in Europe, and even less so in France,” declared one expert from the public debt investment fund, Pimco. “At the most, there’s the chance to change the lexicon so as to speak about growth without putting too much money into it.”

Events in Spain and Italy over recent months have shown the infinitesimal sensitivity of financial markets to every breath and sigh of a national economy. Hollande was himself a young official during the first government of François Mitterrand, whose presidential victory in 1981 marked a watershed for French Socialism after the brief flicker of the Popular Front way back in 1936. For two years, the then president swashbuckled through a recipe book of nationalization and Keynesian expansion, only to change tack as the economy tanked. Hollande would be lucky to get two days of life under such a programme; a few new words about growth comes a pretty feeble second best.

When top German and Spanish officials, both of them from centre-right governments, met last weekend in Santiago de Compostela, they performed the typical European establishment ritual of lamenting the dangers of democracy — home of delusional spendthrifts, liars, and xenophobes such as Greece’s Golden Dawn party. But it is tempting to respond that voters are only responding in a rational way to the political and economic straightjacket invented by Merkel and Sarkozy, and blessed by the EU and the markets.

If there is very little choice over what can be done by one’s government, then it is natural to support the politician who promises to do his or her fiscal duty as loosely as possible. The great rise of the European centre-left in the late 1990s coincided with the inflationary brake applied by the EU’s Exchange Rate Mechanism, forerunner to the euro. Now, in the wake of Hollande’s victory and the resurgence of Labour in local elections in Britain, it is not absurd to expect that the iron cage of European austerity, conceived and implemented by leaders of the centre-right, will result in a slew of largely powerless social democratic governments. Harvard economist Dan Rodrik has called this the globalization trilemma: you can’t have more than two things out of democracy, national self-determination and global economic integration. Hard choices like that are best handled by soft voices.

Alongside and against these moderates, of course, extremism is also flourishing. The run-up to Greece’s elections offered an unedifying example, with discussion on the terms of continuing membership of the euro occluded by scare stories about immigrants and prostitutes infected by HIV/AIDS. Effusions of indignation, paranoia and excoriation of elites are pouring into elections as never before; for if nothing can be done, then the protest vote will be against everything. Perhaps it is wise to hope that the pudding keeps his cool.