Presidential aftermath

François Hollande won the 2012 presidential elections, which was not a surprise.  As I anticipated in my previous blog, the score was much tighter than expected, 51.6% to 48.4%.  Also, people who had voted for the Front National in the first round largely voted for Mr. Sarkozy in the second.

I thought that, with a good debate performance, Mr. Sarkozy could squeak by.  Unfortunately for him, while he assumed the role of the underdog, he was too often on the defensive and his overly aggressive style grated on many.  Mr. Hollande held his own, looked more composed, and in my view won.

Indeed, Mr. Sarkozy may have lost his reelection on style rather than substance.  Many would acknowledge that he did his best to undo some of the anti-competitive measures that prevented France from keeping up with the likes of Germany – the infamous 35 hour week, retirement at 60, an ever growing public sector – and he tackled some other issues – such as wearing the burka in public – that risked poisoning social relations.  But his often rough tone, cavalier treatment of his cabinet, apparent fascination with billionaires and hyperactivity gained him many detractors and won him few allies.  When he needed the votes, supporters didn’t materialize and opponents felt energized.

Obviously, other factors were at play.  First, many felt that after 17 years of center right government, there was a need for change.  Second, the incumbent was penalized for the economic crisis which happened on his watch.

What next?  As Mr. Sarkozy steps out of politics (at least for now), the political debate will focus on issues.  It will be interesting to see what Mr. Hollande proposes, but as I pointed out in the past, the actor to watch is Italy: in my view the dual leadership of France and Germany is fading, to be replaced by a troika of France, Germany and Italy.  And while Italy is sympathetic to greater emphasis on growth, it is doing the heavy lifting in the area of reforms and will not support mere deficit spending, if it were proposed.  Besides, Italy doesn’t have the financial resources to fund such an EU-wide program.

Yes, difficult times lie ahead, but failure is far from being a foregone conclusion; on the contrary, there are elements in place to produce a sounder, better balanced EU.  Markets, for the time being, sense this and are giving European politicians the benefit of the doubt.