The Game To Scare French Voters Into Backing Sarkozy Begins !

http://www.marketwatch.com/story/francoise-hollande-will-spark-next-euro-crisis-2012-02-08?siteid=rss

In the upcoming French presidential election, the Socialist candidate Francois Hollande is virtually certain to take power from the incumbent, Nicolas Sarkozy.

The Merkozy double act that has been managing the euro-zone crisis will suddenly become the Merllande or the Hokel, or whatever the wags of the bond markets decide to call it. But Hollande’s only executive experience is eight years as mayor of the tiny town of Tulle.

As president, he will be a catastrophe for the European economy. He has no experience of running anything, he is pushing an old-fashioned borrow-and-spend policy, he will have a poisonous relationship with Germany’s Angela Merkel, and he has shown no sign of understanding the scale of structural change France needs.

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With a first round in April, and a second in early May, Hollande seems a near-certainty to be the next president. The latest polls show the Socialist candidate beating Sarkozy by 45% to 30% in the first round, with the rest of the votes going to the centrist Francois Bayrou and the far-right, anti-euro candidate Marine Le Pen. In the runoff, the polls show Hollande winning by 15 to 20 points.

True, there are still 10 weeks of campaigning before anyone actually votes, and plenty of people have still to make up their minds. And true as well, Sarkozy is a formidable campaigner, and a man with a thick skin, and a fierce determination to win.

But against that, he is a long way behind in the polls, he has few real achievements to show for his five years in office, and the country is heading into recession — and that is hardly a great platform for re-election. No euro-area leader has been re-elected since the crisis started. Sarkozy is unlikely to be the first.

On taking office, however, Hollande is going to step into an almighty crisis.

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Here’s why.

First, he has no experience of running anything. A career party official, he had dedicated his life to the arcane inner machinery of the French Socialist Party. For most of his career he was overshadowed by his more glamorous former partner, and the mother of his children, Segolene Royal, who was the Socialist presidential candidate last time around. Huge decisions will need to be made in his first few months in office. One or more countries may have to be jettisoned from the single currency. Banks could have to be rescued. Emergency aid schemes may need to be organized if Greece goes bust. Those would test the leadership skills of a De Gaulle or Napoleon — Hollande hardly seems in the same league.

Next, German Chancellor Angela Merkel has already said she will campaign for Sarkozy. Admittedly that is a very odd decision, given that he isn’t very likely to win. But whatever her motives — and they are hard to fathom — it is not going to make for a great relationship between the two most powerful politicians in the euro zone. Worse, Hollande has pledged himself to renegotiating the new fiscal treaty that Merkel has just imposed on the rest of Europe, demanding strict adherence to balanced budgets over the medium term — a decision that almost certainly means the treaty will not be passed. A strong Franco-German alliance has been the key to keeping the euro together so far, but these two will hate each other.

Thirdly, Hollande has pledged himself to an old-fashioned borrow-and-spend program. What’s on the agenda? An extra 60,000 teachers, at a cost of 20 billion euros. Another 150,000 state-aided jobs. Higher taxes on the rich, and a financial transactions tax on the banks (although surprisingly, banking is a relatively successful French industry). A reduction in the retirement age from 62 to 60, when every other developed country has decided that longer life expectancy means people need to work longer as well. France just lost its AAA rating. But it doesn’t look like anyone told Hollande yet.

Finally, France faces huge structural challenges. Public spending is now 56% of gross domestic product, a level at which it is impossible for a country to grow. Its trade deficit has grown to 2.7% of GDP, even though it ran a surplus before joining the euro. It has steadily lost competitiveness against Germany, with wages that rise steadily higher, while productivity stagnates. But Hollande is hardly the man to work out how to restore that.