EDITORIAL: by Peter WestmoreNews Weekly
French election may decide future of the EU
, May 12, 2012
The second round of the French presidential election, between the incumbent President, Nicolas Sarkozy, and the Socialist Party’s François Hollande, is shaping up as a referendum on the future of the European Union (EU) and the austerity program that Sarkozy has adopted to rescue France from the European debt crisis.
The outcome may well decide the future direction of the common currency, the euro, and even the EU itself.
François Hollande has rejected the austerity program which has been championed by both Sarkozy and the German Chancellor Angela Merkel, and endorsed by other EU leaders.
This austerity program has already been imposed on Greece and Ireland, as a condition of European bailouts to stop the debt-ridden countries becoming insolvent.
Both countries faced financial collapse as a result of the failure of government bond auctions, which bankroll government debt. After the collapse of the banks in Iceland and Greece, the financial markets have refused to bankroll government debt without iron-clad guarantees of harsh economic reforms.
When Europe’s first rescue package was put together for Greece in 2010, it was valued at €110 billion, or about $140 billion. Since then, the sums dedicated to the rescue of failing European economies has risen to $1.6 trillion.
The European-funded bailouts have been conditional on government asset sales and unpopular cutbacks in public services and pensions, causing economic stagnation and rising unemployment.
Governments of other European countries which were experiencing budget shortfalls, including Italy, Spain, France, Portugal, Holland and Britain, also imposed austerity programs to cut their deficits and bring their budgets back into surplus, but have faced mounting public anger, characterised by mass protests and, in some cases, street violence.
This opposition is fuelled by a number of issues. Many people resent the fact that financial speculators and banks have been bailed out by taxpayers, following years of financial irresponsibility.
Others initially accepted that austerity was needed, but have become discouraged by the apparent failure of these programs to turn around faltering economies, which show no sign of recovery in the years ahead.
The French election is therefore a test of credibility for the European Union, as well as the European Central Bank and the International Monetary Fund which bankrolled the rescue packages.
The French election has already destabilised nearby Holland. The French Socialists’ strong showing contributed to the collapse of Netherlands’ governing coalition. One of Holland’s main parties, the anti-Islamic Freedom Party, led by Geert Wilders, stopped supporting the pro-EU government on account of the austerity program it was implementing.
France, however, is one of the largest and most prosperous nations in the European Union and, along with Germany, is central to Europe’s efforts to recover from the debt crisis.
François Hollande says France should be prepared to increase spending in an effort to stimulate economic activity and job creation.
Over 60 per cent of people voted for parties which reject Sarkozy’s austerity plan, and a majority are expected to vote for change.
Other countries facing financial crises are already reversing direction. Italy’s Mario Monti, appointed by the European Central Bank last year after the forced resignation of Silvio Berluscone, is backing away from his austerity program.
He said, “All the structural reforms and budgetary consolidation measures that we are now putting in place if anything are deflationary, not creating growth.”
The new conservative government in Spain, facing massive public opposition to its austerity program, has rejected the European Central Bank’s push for further cutbacks.
The head of the European Central Bank, Mario Draghi, has defended the austerity program, calling it “unavoidable”, but said there also needed to be a “growth compact”, without saying how the two policies could be reconciled.
If Mr Hollande is elected President of France, he has promised higher taxes on the wealthy, increased public sector employment and policies to encourage private sector business growth.
He has also announced that he wants a revision of the austerity treaty signed by 25 EU leaders last March.
The election of François Hollande will catapult the anti-austerity campaign into the heart of the European Union. What is lacking is a program for rebuilding European industry and agriculture — the foundations of Europe’s post-war prosperity — while strengthening the seriously-weakened family structure.
Without such a program, it is hard to imagine how the European Union can survive in the long run.
Peter Westmore is national president of the National Civic Council.