Quotes of the day

posted at 8:01 pm on May 6, 2012 by Allahpundit

Nicolas Sarkozy’s defeat in the French presidential election makes him the ninth European leader to be booted out since the region’s debt crisis began…

Sarkozy joins a long list of victims of the crisis, which began with subprime mortgages in the U.S. before causing government yields to diverge across Europe. Leaders in Ireland, Portugal, Greece, Italy, Spain, Slovenia, Slovakia and the Netherlands were elbowed out from their posts…

Sarkozy campaigned in 2007 promising to create jobs and boost purchasing power. The fallout from the financial crisis hit France through 2008, driving the unemployment rate from a 30-year low of 7.5 percent in early 2008 to almost 10 percent at the end of 2011.

***

Hollande inherits an economy that’s a driver of the European Union but is deep in debt. He wants more government stimulus, and more government spending in general, despite concerns in the markets that France needs to urgently trim its huge debt…

Hollande intends to modify one of Sarkozy’s key reforms, over the retirement age, to allow some people to retire at 60 instead of 62. He also plans to increase spending in a range of sectors and wants to ease France off its dependence on nuclear energy. He favors legalizing euthanasia and gay marriage…

“We’re going to call France the new Greece,” said Laetitia Barone, 19. “Hollande is now very dangerous.”

***

Wealthy French people are looking to London as a refuge from fresh taxes on high earners pledged by candidates in the country’s presidential elections.

The “soak the rich” rhetoric that has punctuated the presidential campaign has prompted a sharp rise in the numbers weighing a move across the Channel, according to London-based wealth managers, lawyers and property agents specialising in French clients…

Mr Blanc says some French clients were even contemplating acquiring British or other nationality in order to safeguard assets from fears that France could move to collect more tax from citizens overseas. “A lot of people are extremely worried,” he said.

***

Hollande’s election could have a major impact on the future course of the European Union. Hollande has said he would seek to renegotiate the painstakingly agreed fiscal pact in order to include a component to ensure growth — a demand that has ruffled feathers in Berlin. According to a report in the French daily Le Figaro, Hollande plans to hold a telephone conversation with German Chancellor Angela Merkel on Sunday night…

Hollande’s political platforms were radical compared to Sarkozy’s, but they also helped him to score points with voters. One proposal is to tax any earnings over €1 million at a rate of 75 percent… Hollande also said he would withdraw all French soldiers from Afghanistan by the end of the year if elected.

***

The crowd, many too young to remember Mitterrand’s triumph, spilled onto the steps of the Bastille Opera House – a modernist legacy of the Mitterrand era – clutching flags emblazoned with the Socialist logo of a clenched fist around a rose.

Some activists brandishing Communist Party flags and pink and purple balloons clambered up the base of a column erected on the site of the Bastille prison stormed during the 1789 French revolution…

In a flashback to the days after Mitterrand’s victory, when older conservatives feared France would turn Communist and lined up to withdraw their savings from banks, [a Hollande supporter] added: “I only hope the markets don’t attack us tomorrow.”

***

But Hollande’s ideas could be put to a concrete test very quickly — like, on Monday — by the financial markets that Hollande described during the campaign as “the enemy.” The elections in Greece, which also took place today, may make the markets even more jittery and speculators more aggressive. And France is going to have to borrow about €180 billion ($240 billion) before the end of the year. Under Sarkozy it already lost its AAA credit rating. If borrowing rates start to climb dramatically the hope of clawing out of the slump will fade very quickly.

So Hollande’s first move is to try to find a way to come to terms with Merkel, or persuade her to come to terms with him.

***

“Markets will not attack France right away,” said Jacob Funk Kirkegaard, a research fellow at the Peterson Institute for International Economics in Washington. “But there is a risk that if Mr. Hollande does not act early on, France will become the next sick man of Europe.”…

But many economists are skeptical that France will be able to move toward greater openness, especially in its rigid labor markets. High social charges that companies pay to help finance France’s generous welfare system, combined with lengthy hiring and firing processes, deter employers from adding significant numbers of new jobs…

What is more, while French labor unions have shrunk in membership over the years, they still wield outsize influence that employers say can paralyze companies that need to shed jobs or cut other expenses to adapt to worsening economic conditions.

***

Despite fears that he will pursue a “dangerous” economic policy featuring a return to Keynesian tax-and-spend practices, Hollande and his campaign team have told the Germans that this has been ruled out. “We can’t do Keynesianism twice in 10 years,” Michel Sapin, the former finance minister who wrote Hollande’s economic programme, told senior German diplomats, according to a confidential note obtained by the Guardian.

“Hollande is aware that right at the start of his term in office, he will have to spell out hard truths to the French,” says the eight-page memo from the German embassy in Paris to Angela Merkel’s office in Berlin. Hollande has vowed to launch his reform programme as soon as he takes office on 15 May, prioritising a rise in taxes for the wealthiest and curbing the state deficit…

“It is absolutely essential to generate growth but this can only be accomplished by supply-side measures and is no longer possible through state spending programmes,” the Hollande team told the German diplomats.

***

The United States needs France. Yes, that sounds like a joke, but France is the only country capable of leading Europe politically. However close a relationship with Germany that the United States requires, once beyond the realm of economic survival, the point of diminishing returns is quickly reached. Simply put, the United States cannot do anything of political consequence solely through a partnership with Germany. But with a real, live European-style socialist in Paris, U.S. President Barack Obama will face a Hobson’s choice: work closely with Hollande and incur the wrath of Republicans, or distance himself from Hollande and squander yet another opportunity to ensure that Europe’s future is as fully as possible in the hands of its greatest power…

The bigger picture, however, is that American life is made substantially more difficult by Hollande’s inevitable and foreshadowed refusal to lead Europe and make Europe a leading force in the world. The political inspiration that only France can provide Europe will have to be played once again by a United States that is historically tired of playing that role. A U.S. Treasury spokesperson has already declared that the United States has no intention of supplying more money to the IMF to substitute for an adequate eurozone firewall. America’s traditional desire not to squander its energies on managing European problems is poised to return with full force, and not just within a single major political party. A weak France led by a colorless holdover from a defunct past is not just bad news for France, no matter how frustrated voters have become with Sarkozy. It’s awful news for the United States and for any U.S. president obliged to figure out how to help Europe out of its current morass by doing anything other than writing checks.

***

By an irony of history, the electors have chosen a second Socialist president at the moment when the acceleration of the deconstruction of the welfare state is the only option.

While the agenda of the new term has not really been the subject of discussion, it involves a profound reform of the French social model.

Since the emergence of an absolute monarchy in the 16th century, France has been dominated by the idea of an omnipotent state. In France social crises take place when the state can no longer function because people does not know how operate in its absence.

The Left is taking on a momentous burden as it dismantles a social model designed to be irreplaceable.

***

Mr Hollande claimed that many voters in Europe would greet his election with relief.

‘Europe is watching us, austerity can no longer be the only option,’ he said…

He says he ‘dislikes the rich’ and has singled out ‘the world of finance’ as his principal enemy. Douglas McWilliams, of the Centre for Economics and Business Research, said that this ‘could be the week that starts the euro break-up’.


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