Can François Hollande Save Europe?

A blog about business and economics.
May 6 2012 3:06 PM

Can This Man Save The Eurozone Economy?

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As predicted by polls, it's now official that François Hollande will be the next president of France. Both the campaign and coverage of the campaign focused heavily on domestic issues and the Economist and other publications have been trying to sow fear about the Socialist Party candidate's views on taxes and pensions. But whatever you think of Hollande's economic policy ideas (my read on Europe is that mainstream parties there actually don't govern very differently on fiscal issues), the real question is whether he can inject some much-needed perestroika into Eurozone-wide economic governance.

There's ample reason to think that he simply can't. That the Eurozone is simply an unworkable enterprise and that European voters simply lack the sense of common identity and solidarity that are necessary for such a large and diverse place to share a single system of economic management.

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But what we do know right now is that putting in place a single system of economic management designed in Berlin to suit the agenda and sensibilities of German conservatives doesn't work. For Greece or even for Spain, the only practical alternative to doing what Angela Merkel wants is to ditch the Euro, default, watch the domestic banking system collapse, have everyone's savings wiped out, and start from scratch with a cheaper currency. But France is not Spain, and a president of France could conceivably push an alternative European-level policy agenda. Hollande might not succeed and he might not even try, but it's the only hope the project's got. Especially important, I think, is that Hollande is a social democrat. For European policy disputes to become more productive they really need to become more partisan, reflecting two different visions of a common European future rather than a bunch of different national agendas. The main reason the United States is able to support such large place-to-place transfers and fiscal buffers is that the political system processes them as person-to-person transfers and if it happens to be the case that there are a lot of poor people in Mississippi and a lot of elderly people in Arizona then that's just how it shakes out. European politics isn't like that. And it doesn't need to become like that overnight. But to succeed, the Eurozone needs to start moving in that direction, which means injecting a dose of ideological controversy into the Council of Europe rather than it simply serving as a venue for nation-vs-nation bargaining.

All that said, one very plausible story of what happens next is simply that the European Central Bank will decide it needs to bring the continent's newest leader to heel. If the ECB signals that it will only support the French banking system and the French economy if Hollande sticks with the status quo program, then Hollande may well have no choice. Elections in Europe aren't necessarily what they used to be. Nobody's crying over Silvio Berlusconi, but he was Italy's elected prime minister and he lost power not in an election but it a made-in-Frankfurt call by the central bank.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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