When Hollande was elected, he was confronted with the following clear and fundamental choices about the future of France and its economy:
- Should France join Germany in promoting austerity, or align itself with the southern European states in supporting Keynesian policies within the EU?
- Should France emulate Germany in adopting reforms to make its economy more capitalist-friendly, or soak the rich and continue to protect labor insiders?
In the event, when he approached the fork in the road, he . . . took it. He supported German efforts to impose austerity on Greece, but offered to lighten the Greeks’ load a little bit. He ran deficits in excess of those permitted by the EU, but not by much, and fought the battle to do so not openly, but in a passive-aggressive way. He supported a supertax, and then backed off. Today, he is in a desperate struggle with the unions for labor market reforms that are too watered-down to make much of a difference in the French economy.
France has not performed badly over the last eight years relative to most of the countries in the EU. The problem is that the French compare themselves, not to Spain or Italy or Greece, but to Germany, and the German economy is growing much faster than theirs. No one takes France seriously as an equal partner to the Germans anymore. That is unacceptable to the French.
When it is all said and done, Hollande’s inability to make up his mind is likely to split his party and will put Le Pen into the second round of the election in 2017. At that point, anything can happen; do not assume that she has no chance of winning.