France’s tax-and-spend plan on the line
06 June 2012
Posted by: SAIT Technical
Brian Love (Business Report)
FRENCH President Francois Hollande’s Socialists are
not surfing towards a landslide win in parliamentary elections this month, yet
a lesser triumph should still allow France’s first left-wing leader in 17 years
to rule effectively.
The stakes are high in the contest on the next two
Sundays, as the 57-year-old social democrat can only hope to implement his
tax-and-spend plans if the left takes control of the lower-house National
Assembly, as polls predict.
But even a mix of hard leftists in a left-wing
majority should not upset Mr Hollande’s chances of passing laws to enforce
deficit-cutting and ratifying a European budget responsibility pact, given the
opposition right would struggle to oppose the measures.
The Socialist Party has no guarantee of winning
outright control of the lower house and may depend for a majority on the
support of the Greens, or the more radical left-wingers and communists of the
That would not hamstring Mr Hollande as long as the
Socialists win enough seats to limit the leverage of the Left Front, given the
Greens should prove a loyal parliamentary partner. Analysts see this as a
While the prospect of hardliners winning greater
influence may alarm some in the financial markets, the Socialists mastered such
a partnership with aplomb when last in power, and even kicked off the
privatisation of Air France under the tenure of a communist transport minister,
Jean-Claude Gayssot. That was part of a wave of privatisation launched under a
left-wing coalition the Socialists led between 1997 and 2002, under the
conservative presidency of Jacques Chirac, with the Greens and communists as
"It’s hard to think of anything as poisonous that
they’d be asked to swallow under Hollande,” said Paul Bacot, a professor at the
Institute of Political Studies in Lyon.
A week from the opening round of the election, the
only near certainty is that Mr Hollande, itching to start work in earnest, will
not be plunged into a paralysing "co-habitation” with the UMP party of his
conservative predecessor, Nicolas Sarkozy.
All polls show the UMP set to lose control after 10
years in charge. However, the result is unlikely to be a rout, even if it put s
the UMP at risk of a break-up due to internal power struggles and mounting
pressure from the far-right National Front.
Christophe Borgel, one of the Socialists’ chief election
strategists, hopes his party will replicate the voter shift that led to Mr
Hollande unseating Mr Sarkozy on May 6 with 51,6% of the vote, largely due to
frustration over Mr Sarkozy’s style and his failure to bring down unemployment.
Based on the number of constituencies that backed
Mr Hollande, that would give the left about 333 of the 577 seats, he says,
comfortably above the 289 seats that make a majority.
"The higher the number, the higher is the share
taken by the Socialists,” said Guillaume Bacheley, a party spokesman. In line
with party policy, he refuses to say anything that could alienate the
Socialists from the other left-wingers whose co-operation may be needed in the
A BVA poll published on Friday showed the
Socialists taking 33% of the vote versus 32% for the UMP, with the Greens and
Left Front taking 4% and 9% for a grand total of 46 % on the left. BVA
estimates the Socialist Party is in a slightly stronger position than when it
last took power in parliament in 1997, arguing its projected performance has
strengthened as poll day nears while that of all other groups has stagnated or
retreated from previous surveys.
If the Socialists land 289 or more seats, Mr
Hollande and his government will be able to proceed unfettered with a programme
mix ing targeted spending with a commitment to balance the public finances of
Europe’s second-largest economy by 2017.
If they fall short by a small margin, the first
port of call will be the Greens. The two parties have already agreed on an
election pact under which the Greens, who have two ministers in the interim
government, have Socialist backing in 60 constituencies, of which 20 or so are
seen as winnable.
Should that not prove sufficient, the Socialists
would be left counting on the backing of the Left Front coalition, which stands
far to the left of Mr Hollande, to the point where its leader, firebrand former
presidential candidate Jean-Luc Melenchon, says he would refuse any role in
government. The Left Front is likely to back the Socialists when they go to
parliament in the weeks ahead to repeal a last-minute law by Mr Sarkozy for an
October rise in VAT sales tax and to seek higher taxes on the wealthy and
Where the Socialists and the hardliners are most at
odds is over relations with the rest of Europe and Mr Hollande’s commitment to
steadily reduce the public deficit over his five-year term.
Mr Hollande is under pressure from his euro-zone
partners to pass a "super” law committing the government to steadily reduce the
deficit and also to ratify the fiscal pact agreed on by most European Union
leaders earlier this year.
That legislation is likely to be opposed in
parliament by hard leftists, but is assured safe passage as centrists and
conservatives are unlikely to vote against it.
Mr Sarkozy’s government and the UMP pilloried the
Socialists for months over Mr Hollande’s refusal to back the writing of a
budget balance rule into the French constitution.
That means the conservatives are unlikely, says Mr
Bacot, to trip Mr Hollande up on a bill that does much the same thing.