Although most Canadians have little or no interest in France's national elections, perhaps they should since there is far more riding on last Sunday's outcome than solely the governance of France. The world economy for the next few years, or decade, may very well hinge on the future direction of this European country and its place in the European Union.
Francois Hollande, Marine Le Pen, Jean-luc Melenchon, and Francois Bayrou were not exactly household names in Canada, but President Nicolas Sarkozy certainly was. Now that Sarkozy (centre-right) is gone and Francois Hollande (socialist left) has taken over (by a narrow victory) things may be very different.
Hollande capitalized on voter dissatisfaction and harsh austerity measures proposed by the "Merkozy alliance". France's new leader has vowed to take France in a completely new direction with government-sponsored stimulus packages to promote growth, higher taxes on banks and corporations, and punishing taxes on the super-rich. All of these are certain to produce a backlash.
Hollande's approach challenges the already-agreed-to European Union (EU) austerity plan for solving the Euro Crisis with deep cost-cutting in government to reduce debt and to reassure international markets of its stability. His method has been compared to poking a stick into wheel-spokes and has visibly upset Angela Merkel.
If France's new leader carries out his election promises, many agreements signed with Germany and the EU may be cancelled, setting adrift any hope of saving Greece, Spain, and Italy, all of which are teetering on bank collapse. Such a scenario would also have serious international repercussions and Canada would not be immune to the fallout.
The total effect Hollande's election victory will have on Canada is not exactly known but if France immediately withdraws its troops from Afghanistan, Canada almost assuredly will again be asked to pick up the slack. NATO has relied heavily on Canada in the past as a regular, faithful and reliable member and when the pressure is on, Canada has always gracefully complied.
As well, any bilateral governmental, trade and/or financial agreements with Canada may be reviewed and those without direct benefits to France will be in jeopardy. But, in the near future, France's direction will be made much clearer for everyone at the G-8 meeting (this Friday and Saturday) and the NATO meeting (this coming Sunday and Monday) in Chicago.
The sudden change in direction in both France and Greece is worrisome, putting in jeopardy all the hard-fought negotiations and agreements of the past few years, which finally established a commonsense approach to solving European debt. Such rumblings of discontent and the possibility of applying radical solutions to solve age-old economic problems are unnerving to financial markets worldwide.
Hollande's socialist approach of throwing more money during a debt-ridden economic recession to spur GDP growth defies our basic understanding of economics, especially in the case of the EU with many countries showing insurmountable debt. The Merkozy method of reigning in outstanding debt and slowly bringing those countries back to controllable debt limits is one that most economists would agree with.
Although most of us don't like to hear the words "austerity" and "belt-tightening", we are well aware of the fact that the "medicine" does not always taste sweet. If a family's spending is outstripping its income, strong measures have to be taken to redress the problem. Spending even more to fix the problem simply doesn't work, and the eventual result will undoubtedly be insolvency.
Although French voters may not have liked Sarkozy, his methods or his medicine, he probably had the correct prescription.
