There are several important implications in Hollande’s convincing victory over bling-bling Sarkozy. It’s not just the first Socialist presidential win for 31 years, even more significantly it clearly marks a turning point in European politics, though a lot still depends on how forcefully and skilfully this wedge against the dominant Right is used.
But the signs of change are manifest. Ten out of the 17 Eurozone Heads of State have now been unceremoniously ditched since the financial crisis began 4 years ago. Merkel, the bulwark of the EU Right, is now more isolated than ever: her close ally, the fiscal disciplinarian Dutch PM Mark Rutte was ejected two weeks ago, now her most important ally Sarkozy, and in her German homeland her party has just been removed from office in the Schleswig-Holstein elections.
Coupled with that there is an outright rejection of ultra-austerity in Greece, Spain and Italy, and the Left has made big gains in Denmark and Slovakia and now of course in the UK. It begins to look as though the fixed rigidity of Right-wing economics won’t hold. But there are two other key implications too.
One is the message for Labour. This is that the mantra ‘the Tories are cutting too far, too fast’ simply won’t do any more. The answer to stagnation in the UK is not cutting less and cutting less quickly, it’s a full-hearted jobs and growth strategy. Nor is it plausible to suggest that the Ed Balls’ 5 points adequately represent the momentum required. They are certainly better than nothing, but nowhere near enough to turn around a double-dip recession, a collapse of business and consumer confidence, unemployment rising steadily to 3 million, or the most drastic hacking back of public expenditure for a century.
Instead it requires a National Infrastructure Bank to launch a big increase in capital investment including for house-building, a revival of the role of the State in reversing the vicious spiral of economic decline, and a major rebalancing of the economy from an over-cossetted banking system to a lean and hungry manufacturing industry.
The other implication of Hollande is how will economic expansion be paid for without leading to a strike in the bond markets, and will it cause an irreparable rift with Germany over the EU fiscal pact signed just two months ago? On the latter, an accommondation over including a clause on growth should not be beyond reach. On the former, any more printing of money by the ECB, over and above the €1 trillion it has already handed out to consolidate bank balance sheets, must now be channelled directly to industry. And the super-rich tax evaders in France and Greece (as well as the UK) must be made to pay their fair share after their colossal gains over the last 20 years.
However, all that still doesn’t answer the fundamental EU dilemma that the southern rim and East European States cannot, and never will under the current policy framework, be able to compete sustainably against the German industrial machine within a single currency…..