French socialist Francois Hollande won the country's Presidential elections by a small margin, polling just under 52 percent of the votes in Sunday's runoff. He will take over from current President Nicolas Sarkozy, who is the first French President since 1981 to have been ousted only after one term. France’s economic woes, Mr. Sarkozy’s brash character and his failure to lower unemployment rates to 10 percent are few of the reasons cited for his loss.
Implications of Hollande's Victory
For many, Mr. Hollande’s victory signals the end of austerity measures and debt-cutting, which have been the main responses to the economic and debt crisis consuming Europe. It also marks an end to 17 years of centre-right dominance in the French political scene, which will affect not only the rest of the continent, but also France’s relationship with other countries like the US. In his victory speech, Mr. Hollande remarked that he was “sure that in many European countries there is relief and hope at the idea that austerity does not have to be [their] only fate”.
Dr. Reuben Wong, SIIA Council Member and Associate Professor of Political Science at NUS has called Hollande's victory "potentially most significant change of government in the EU since the start of the euro zone crisis."
"It sends a strong signal that voters are tired of the austerity measures led by team Mekozy, and are willing to try less experienced personalities or parties with alternative ideas to solve deep-seated economic and immigration problems. But Hollande's room for maneouvre will be restricted. If he pushes ahead with some of his campaign promises, eg. to renegotiate agreements on a European fiscal compact and raise taxes for the top income earners, he risks spooking the markets and creating further uncertainty about the euro zone's recovery. France will also need to quickly establish a new modus vivendi working with Germany to regain market confidence in the euro, stimulate growth and reduce unemployment."
SIIA Council Member and EU Centre Director Dr. Yeo Lay Hwee agrees that change is to be expected, saying that "the election of Hollande as French President will hopefully bring about a more robust debate on the policy choices for the Eurozone - austerity at all costs or putting in place some kind of sustainable growth strategy which would require also painful structural reforms."
Mr. Hollande has promised to refocus EU fiscal efforts from austerity to growth, saying that it is his mission to provide “a European vision of growth, employment, prosperity”. In relation to this, he has also called for a renegotiation of the Europe’s budget responsibility treaty, which supports austerity measures as opposed to growth-boosting measures. There are concerns that Mr. Hollande’s stance may cause a rift between France and Germany, especially since German Chancellor Angela Merkel was a huge supporter of Mr. Sarkozy’s campaign and, like him, is in favor tackling the euro crisis with austerity.
In addition, Mr. Hollande intends to raise taxes on people earning more than 1m euros per year to 75%, and banks’ profit by 15%. Big corporations are also likely to fall under a new tax scheme. Other policy changes which Mr. Hollande hopes to oversee will be the raising of minimum wage, hiring 60000 more teachers, and lowering the retirement age from 62 to 60 for some workers. He is expected to include many young politicians and women in his government.
Greece Elections - A Vote Against Austerity?
In Greece, elections have left the country in chaos, with no party having sufficient votes to form a single government. The two conservative parties which currently form the current coalition government earned less than 50% of a total 300 parliamentary seats, largely due to the majority of voters being unhappy with the austerity measures the government has adopted since the euro crisis began two years ago.
Currently, 99 percent of votes have been counted, and results indicate that conservative party New Democracy is leading with 18.9 percent and 108 parliamentary seats. Still, this would mean that a new coalition government would have to be formed. According to political analysts, the election results, or lack thereof, has plunged the nation in further instability and could lead to Greece’s expulsion from the EU. It remains to be seen how the new political landscape in Greece is going to turn out.
According to Dr. Yeo Lay Hwee, "Any parties that form the coalition government will quickly realise that they would need the money from IMF and its EU neighbours just to keep the public service going. Tearing apart the agreement reached earlier with IMF and the EU is not going to help them at all."
In other EU-related news, the Eurogroup is expected to meet on Monday, 14 May, with ECOFIN scheduled on the day after. The meetings hope to agree on a proposal for new EU rules regarding capital requirements for banks.
Report: Short honeymoon for Hollande after French election win [AsiaOne, 7 May 2012]
Report: Loss of faith in Sarkozy lifted rival [Wall Street Journal, 6 May 2012]
Report: Socialist Hollande ousts Sarkozy as French leader [Reuters, 7 May 2012]
Report: Francois Hollande celebrates French presidential win [BBC, 7 May 2012]
Report: Greek elections leave political system in chaos [CNN, 7 May 2012]