Monday, October 08, 2012

Analysis - French search in vain for Hollande vision

By Mark John

PARIS (Reuters) - Just five months after bringing Francois Hollande to power, many French voters are already despairing that he can deliver on the vision they voted for.

French President Francois Hollande delivers a statement on the steps of the Elysee Palace, after a meeting with the heads of France's Jewish Associations, in Paris, October 7, 2012. REUTERS/Christian Hartmann

It was always going to be tough for the Socialist leader to get France's stagnating economy back on its feet, with much of the rest of Europe close to recession and struggling to resolve a three-year sovereign debt crisis.

But the freefall in his popularity ratings shows that many erstwhile supporters are already asking whether he has a plan at all, as his inexperienced ruling coalition is buffeted by events rather than shaping them.

"Hollande was voted in to secure an economic recovery while preserving our social model," said Stephane Rozes, head of political consultancy Cap, referring to France's generous welfare state and high level of labour protection.

"But he has been gradually driven off course," he said, bemoaning the government's "lack of communication, lack of coherence and lack of credibility".

So far, there is a gaping disconnect between Hollande's promises to create jobs and the stark reality of unemployment at 13-year highs above 3 million. More lay-offs are to come, and data point to economic growth stuck at zero.

In the latest setback for Hollande's push to revive France's industrial base, union sources revealed on Friday that carmaker Renault would build more than 70 percent of its Clio models in low-wage Turkey.

That came days after steel giant ArcelorMittal said it would close two furnaces in the north-eastern former industrial heartland of Lorraine despite a last-minute rescue dash to the region by Industry Minister Arnaud Montebourg.

The trip turned into a public relations own-goal for the government as Montebourg ended up having to explain to hundreds of workers, some weeping at the prospect of unemployment, that the plant would shut unless a buyer could be found.

"Somehow he (ArcelorMittal chief Lakshmi Mittal) managed to arrange it so it was the minister who had to announce the closure. Pretty fantastic!" Francois Chereque, head of the CFDT union, commented wryly of the outcome.

PIGEONS AND SUCKERS

Efforts to present the 2013 budget as a decisive step to knock public finances back in shape also came unstuck.

Grasping the nettle of budgetary rigour, Hollande unveiled on September 28 a public spending freeze and tax hikes to claw in 30 billion euros (24 billion pounds) and bring the public deficit down to 3 percent of output, as promised to euro zone partners.

But within days the government hurriedly toned down a rise in capital gains tax on equity sales after an Internet campaign by an anonymous group called "Les Pigeons" - "suckers" in French slang - attacked the move as a disincentive for entrepreneurs.

Equally damaging has been the widespread incredulity at its assertion that only the top 10 percent of earners would be worse off, as tax experts stripped apart the budget and argued that many in the middle classes would also feel the pinch.

"In general terms, the government's policies are seen as disadvantageous to most sections of the population," Gael Sliman, deputy head of pollster BVA, said of a survey showing 54 percent of French thought the budget was unfair.

Such perceptions have contributed to a plunge in Hollande's personal ratings to just 41 percent in early October - down from 55 percent just after his victory - and fed speculation that his Prime Minister Jean-Marc Ayrault could be sacrificed in a cabinet reshuffle.

SOMETHING MUST GIVE?

But more serious is a growing sense that Hollande's election promises on boosting jobs and growth are incompatible with the pledges of budget discipline made to European Union partners under conservative predecessor Nicolas Sarkozy.

Hollande's official line is that France can have both - a return to balanced budgets by the end of his term and the first shoots of an economic recovery mid-way through.

"I am not among those who have got it in for him," said Veronique Cook, a retired teacher and long-time Socialist voter in the southern Parisian suburb of Malakoff. "But I do feel that what is lacking at the moment is the growth part of the equation."

Most economists already doubt France will attain the 2013 growth target of 0.8 percent on which the budget is based, implying either a supplementary budget in early 2013 or the risk of missing the deficit goal altogether.

That leaves Hollande with an unenviable choice; either he must stray from the path of budgetary rigour, disappointing Germany's Angela Merkel and others, or make more fiscal savings that might push the economy into all-out recession.

For now, Hollande is focused on persuading his left-wing allies to back an EU pact enshrining budget discipline that was worked out in March by Sarkozy, Merkel and other leaders.

While the pact is due to pass in Tuesday's vote thanks to support from the right-wing opposition, Hollande's credibility at an EU summit later this month depends on him being able to show that the bulk of his own coalition also backs it.

But according to Cap's Rozes, the French are growing impatient for Hollande to come out and say whether the current EU policy of austerity will allow him to keep his promises to them, or whether he will have to challenge it.

"For the time being, Francois Hollande is not bringing the European subject up," said Rozes. "But I think that is a mistake. It is worrying the French and makes them think that, after all, this government is like the last one."

(Editing by Will Waterman)

News

Monday, October 08, 2012

Analysis - French search in vain for Hollande vision

By Mark John