Le Changement, C’est Maintenant
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.
- Hollande v Sarkozy: voters explain their final choice (guardian.co.uk)
- Sarkozy Out; Socialist Wins French Presidency (abcnews.go.com)
- Hollande wins and the end of the euro draws nearer (blogs.telegraph.co.uk)
- Markets could stumble after France, Greece votes (sfgate.com)
About dcpetterson (194 posts)
D. C. Petterson is a novelist and a software consultant in Minnesota who has been writing science fiction since the age of six. He is the author of A Melancholy Humour, Rune Song and Still Life. He lives with his wife, two dogs, two cats, and a lizard, and insists that grandchildren are the reward for having survived teenagers. When not writing stories or software, he plays guitar and piano, engages in political debate, and reads a lot of history and physics texts—for fun. Follow on Twitter @dcpetterson