Belfast Telegraph

Friday 1 August 2014

Markets' warning bell as Francois Hollande ready for tough talking

President-elect Francois Hollande holds a bouquet of roses after delivering his victory speech in Tulle, central France (AP)
A massive crowd of supporters celebrate the victory of Socialist Party candidate Francois Hollande in the Bastille on May 6, 2012 in Paris
PARIS, FRANCE - MAY 06: People gather to celebrate at the Place de la Bastille after Francois Hollande won the French presidential elections on May 6, 2012 in Paris, France. Socialist Francois Hollande has defeated incumbent president and UMP candidate Nicolas Sarkozy, with a projected 52% of the vote in the second and final round of the French Presidential elections. (Photo by Patrick Aventurier/Getty Images)

The French President-elect, Francois Hollande, received a double warning from markets and Berlin yesterday after promising to end the “all-austerity” approach to the European financial crisis.

Mr Hollande scarcely had a chance to savour his victory in Sunday's presidential election before jittery markets and a seemingly inflexible statement from Germany reminded him of obstacles to his proposed new European agenda for “hope” and “growth”.

France's first Socialist President since 1995 will visit the German Chancellor Angela Merkel to outline his growth plans next Wednesday, the day after his inauguration in Paris.

Ms Merkel said yesterday that she expects to work “intensively and well” with Mr Hollande after he defeated her close ally Nicolas Sarkozy by 51.6% to 48.4% in the second round of the presidential election.

But Chancellor Merkel's spokesman appeared to slam the door to any “renegotiation” of the EU treaty on fiscal discipline finalised in Brussels in March.

A reopening of this treaty, to add a protocol on capital spending to promote growth, was one of the main planks of Mr Hollande's campaign.

The Chancellor's spokesman, Steffen Seibert, said: “It is not possible to renegotiate the budgetary pact which has already been signed by 25 out of 27 EU countries.”

A head-on collision between Ms Merkel and Mr Hollande on this point can probably be avoided.

The President-elect has already hinted that he might accept a compromise in which an untouched fiscal treaty would be balanced by a new text on policies to kick-start growth.

He will send a letter outlining his ideas to all EU leaders in the next few days. The true confrontation with Berlin may come over the contents of any new growth treaty. Ms Merkel's spokesman said yesterday that “growth-promotion” should mean labour-market reforms on the German model, not “deficit spending”.

Among other things, Mr Hollande wants the European Central Bank to issue new multibillion-euro loans — or euro bonds — to fund Keynesian-style infrastructure programmes, such as rail, road and renewable energy projects.

Several other European leaders favour this idea but Berlin is, so far, opposed.

The market jitters yesterday were, perhaps, more of an amber warning for Mr Hollande than an outright red light.

COMMENT RULES: Comments that are judged to be defamatory, abusive or in bad taste are not acceptable and contributors who consistently fall below certain criteria will be permanently blacklisted. The moderator will not enter into debate with individual contributors and the moderator’s decision is final. It is Belfast Telegraph policy to close comments on court cases, tribunals and active legal investigations. We may also close comments on articles which are being targeted for abuse. Problems with commenting? customercare@belfasttelegraph.co.uk

Latest News

Latest Sport

Latest Showbiz