Unbeknownst to most Americans, there is another presidential incumbent on the proverbial hot seat, French President Nicolas Sarkozy, who recently almost accepted his own defeat in the upcoming April elections. The man leading in the polls since last July is François Hollande. Hollande has already started looking beyond the election, stating that his “true adversary” is the world of finance. The campaign dialogue and election result should matter to Americans for at least one reason, the euro zone debt crisis.
With its 27 nations, the European Union (EU), at a GDP of roughly $16 trillion, is arguably the world’s most important economic zone. The predominant currency of the EU, the Euro, is facing its greatest test since being introduced to world financial markets in 1999. The collapse or out-right end of the euro, the world’s second largest reserve currency, could be disastrous for the world economy. The appropriate reaction in a crisis should be to come together and push forward, not to recoil in a defensive and self-interested stance. The outcome of the French election will have a significant impact on whether the euro is saved or disbanded.
The European debt crisis has the same underlying causes as our debt condition and has triggered similar discussions about what the “haves” can and should do for the “have-nots.” In the U.S., we are struggling with the distribution of money between the richest 1% of citizens and the rest. In Europe, leaders are seeking to broker a sharing deal between the richest nations and those in debt. The crisis was triggered by small, debt-ridden countries such as Greece and Iceland but has spread to much larger nations, notably Italy. Leaders of competitive EU economies, such as Germany and France, have been put in the difficult situation of needing to drum up domestic support to bail out their uncompetitive euro partners. The bailouts and turmoil have caused a loss of market confidence and rising borrowing costs. The three leading candidates in the French election have differing takes on how to solve this crisis.
Sarkozy has teamed with the German Chancellor Angela Merkel to propose amending EU law to impose strict national debt limits and sanctions if those limits are violated. Hollande, the current poll leader, sees this as a violation of national sovereignty and the people of France seem to agree. Hollande has laid out a five-point plan that aims to expand bailout funding, buy up debt, and invest growth instead of rely on austerity and budget cuts. The third place candidate in opinion polling, Marine Le Pen, has proposed allowing the euro to “die its natural death” and stop bailing out the struggling economies of Western Europe.
Regardless of whether voters prefer Le Pen’s supervised implosion or Hollande’s strategy of investment and growth, Sarkozy faces a credibility problem. A recent opinion poll in the French newspaper, Le Parisen, shows Sarkozy not able to claim the title of “most credible” for any of the major election issues. On top of that, a poll published in the Journal du Dimanche last weekend puts Sarkozy’s dissatisfaction ratings at 68%. The initial election will take place on April 22, followed by a possible run-off election for the top two candidates. Watch for the potential upheaval of a one-term incumbent, and more importantly, for the way that will impact the future of the euro.
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