Hollande’s victory means little for EU crisis management

By Antonio Barroso and Mujtaba Rahman

Francois Hollande’s May 6 victory in one of France’s tightest presidential elections ever will have few implications for the EU’s management of the eurozone crisis. Hollande is taking shape as a pragmatist who will follow reason on the European front, as signaled by the candidates he’s likely to put in important positions in France’s new government.

The president-elect claims he has already selected the new prime minister, who will be revealed on May 15 after Hollande takes office. Socialist Party (PS) leader Martine Aubry and long-time socialist politician Jean-Marc Ayrault are the most likely candidates, although a surprise choice (for example Hollande’s campaign director Pierre Moscovici) is not completely out of the running. Aubry’s selection — who the majority of the French left support, according to opinion polls — would hint at a more leftist course for Hollande’s government. Ayrault’s nomination, however, would imply policy pragmatism. The former minority leader in the National Assembly would likely be better able to build consensus among the many leftist factions in parliament, especially if the government must adjust policies to match the challenging economic situation.

Michel Sapin, a socialist, is frequently mentioned as the candidate most likely to take the crucial post of finance minister. Sapin, who has already served as finance minister, is a close ally of the president-elect and helped draft Hollande’s economic program. Another possible choice is Jerome Cahuzac, a socialist former president of parliament’s finance committee who actively supports austerity and deficit reduction. Both men would make a good finance minister, given their experience and their commitment to a balanced budget.

But Hollande’s victory will not fundamentally change how the EU is managing the ongoing eurozone crisis, though there will likely be some changes around the margins. Hollande’s desire to introduce some focus on growth in the fiscal compact is easy for German Chancellor Angela Merkel to accept and there are already tentative signs that Berlin will support such efforts. Hollande’s objective of securing a capital increase for the European Investment Bank (EIB) also is unlikely to prove controversial. But the biggest obstacle to growth — moving away from regressive agricultural payments toward greater use of structural adjustment funds in the EU budget — is actually more difficult for France to overcome than it is for Germany. Also, Hollande’s pledge to seek a change in the European Central Bank’s mandate is a non-starter. Such a change requires all 27 member states to agree, but it will face stiff opposition in Germany, where it is perceived as a French strategy to inflate away debt.

Antonio Barroso and Mujtaba Rahman are analysts in Eurasia Group’s Europe practice.