The new Pres­i­dent of France

On Sat­ur­day, François Hol­lande defeated Nick­o­las Sarkozy in the French Pres­i­den­tial runoff elec­tion. This event promises to alter the tone of French pol­i­tics, and of the Euro­pean economy.

Hol­lande is a Social­ist. Unlike Amer­i­cans, Euro­peans do not fear the word “social­ism.” Euro­peans do not swoon in ter­ror at the term, like a del­i­cate South­ern belle.

The President-​​elect ran on a plat­form of decry­ing the “aus­ter­ity” mea­sures that have been hob­bling Euro­pean recov­ery from the Great Reces­sion. Rather than fur­ther cut pub­lic spend­ing and worker ben­e­fits — actions which appear to have led the Euro­pean econ­omy to con­tinue shrink­ing — Hol­lande wants to increase infra­struc­ture spend­ing and start once again to pro­tect France’s work­force. He even wants to (gasp!) increase taxes on the wealthy, rais­ing the top tax rate to 75 percent.

Across Europe, the cit­i­zenry may be reach­ing their limit with aus­ter­ity mea­sures that haven’t led to eco­nomic recov­ery, but have served to reduce worker ben­e­fits and stan­dard of liv­ing. Greek par­lia­men­tary elec­tions just brought to power two par­ties opposed to the extreme mea­sures that have been imposed upon their coun­try. It will likely be a mat­ter of weeks before a coali­tion gov­ern­ment is formed in Greece, but when one does, the world can expect Greece to reject the lat­est round of aus­ter­ity that’s been forc­ing the Greek peo­ple ever fur­ther into poverty.

What do these devel­op­ments mean for the Euro­pean econ­omy? And what do changes in Europe por­tend for America?

Hol­lande is expected to be sworn in on May 15, then fly to Berlin soon after to chal­lenge Ger­man chan­cel­lor Angela Merkel to help develop new pro-​​growth poli­cies for Europe, poli­cies that focus on stim­u­lus rather than aus­ter­ity. As Europe’s debt cri­sis has not been helped by belt-​​tightening — rather, the con­ti­nent is slip­ping into a new reces­sion — it may seem to be the right time for a dif­fer­ent path.

An eco­nom­i­cally resur­gent Europe would likely help America’s econ­omy as well. Hav­ing mar­kets for our goods and ser­vices — par­tic­u­larly for the newly-​​strengthened auto indus­try — could mean more Amer­i­can jobs. The more demand for prod­ucts, the bet­ter for nations that export prod­ucts to those demand­ing them. Since Amer­ica is now adding to its man­u­fac­tur­ing sec­tor for the first time since the 1990s, find­ing new con­sumers is a good thing.

Of course, the Euro­pean Union may pre­fer to con­sume its own goods instead, just as there is a “Buy Amer­i­can” push here. And one could hardly blame them for doing so. The worst-​​case alter­na­tive, how­ever, is fright­en­ing. If Europe is per­mit­ted to fall into yet another reces­sion — in some nations, this would mark the third major dip since the col­lapse of 2008–2009 — it could cause a global credit crunch, per­haps worse than we have ever seen before.

Banks and credit mar­kets are now global. If Europe col­lapses, it is vir­tu­ally cer­tain Wall Street will as well. With our recov­ery still frag­ile, the cliff from which we could fall could be steeper, with a much lower bot­tom, than any­thing Amer­ica has pre­vi­ously experienced.

There may be other impli­ca­tions for Amer­i­can pol­i­tics. One of the argu­ments Repub­li­cans have been using in their effort to push tax cuts and spend­ing cuts is the boogey­man of Euro­pean debt. “We don’t want Amer­ica to become another Greece!” If Hollande’s poli­cies prove suc­cess­ful, if stim­u­lus rather than aus­ter­ity brings Europe back from their lat­est cliff, this will rob that argu­ment of much of its power. This is unlikely to affect the Pres­i­den­tial elec­tion in the fall, but it could have an influ­ence as early as the 2014 midterms.

And what of Greece? What will the reac­tion of the EU be to an embold­ened Greece that has tired of the shack­les that have been placed upon it as a con­di­tion of finan­cial assis­tance? That’s hard to say. The investor class seems to be fret­ting over whether the Con­fi­dence Fairy will grace them with bless­ings. If Greece holds firm and demands a Keynesian-​​style recov­ery rather than the slow death of increas­ing star­va­tion to which they’ve been sub­jected, bond mar­kets might panic and make invest­ment cap­i­tal evaporate.

Greece could with­draw from the Euro and rein­state its own cur­rency. This would allow Greece to issue its own debt, instead of rely­ing on the kind­ness of strangers. To my mind, this would deal another crip­pling blow to the anti-​​government crowd, per­haps more severe than Hollande’s elec­tion in France. It’s a risky path; but if Greece makes it work and can pull out of its trou­bles on its own — par­tic­u­larly if it does so through a mas­sive Key­ne­sian injec­tion — then the right’s poster child argu­ment for get­ting tough on work­ers sim­ply vanishes.

If Greece pulls out, Spain is likely to fol­low, for many of the same rea­sons. As, then, would Ire­land, and maybe even Italy. That would leave France, Benelux, and Ger­many as the Euro countries.

The next few years will be telling. Any Amer­i­cans who haven’t been pay­ing atten­tion to Euro­pean economies need to start doing so. They’re hav­ing the same argu­ments we are — and are at dif­fer­ent stages on the path of try­ing out var­i­ous extremes of solutions.

Amer­ica used to be the place where peo­ple exper­i­mented, where the cit­i­zens had the courage to try new things. Per­haps we should learn some lessons from our friends across the ocean.

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