The first round of the French presidential elections took place over the weekend, and
they came out more or less as expected, with Fran ois Hollande, who is the socialist candidate,
coming out on top; the second vote getter was the incumbent president, Nicolas Sarkozy,
who represents the center-right, and those two will go on to compete in a second round
on May 6th.
The bigger surprise of the day was that Marine Le Pen who represents the far right, garnered
about 18 percent of the vote, pretty high margin, strong showing for the far-right,
not inconsistent with what's been going on throughout other parts of Europe, where the
two main center-left and center-right parties have tended to converge towards the center,
leaving more room for parties on the far-right and far-left, and the far-right has generally
done better than the far-left because of concern about immigration and the intrusions of globalization.
I think there are three things to keep an eye on in the coming weeks, the second round
set for May 6th.
One is, what will happen to that large block of voters that went with Marine Le Pen; will
they all flock to Nicolas Sarkozy, which is what he would like?
The answer is probably not in sufficient numbers to carry him through as the victor.
The polls suggest that about 50% of those that voted for Le Pen will vote for Sarkozy.
About 20% will vote for Hollande and the others won't vote, and that's because there is a
strong anti-Sarkozy element in play now, and if you look at the numbers, that's not enough
to put Sarkozy ahead.
There will be at least one televised debate where Hollande and Sarkozy will go head-to-head;
that will be important, but at least for now, I would say that Hollande has the favorite,
he's the favorite to win.
Second thing to keep an eye on is foreign policy, the traditional issues of securityÑif
we do see an Hollande victory, is he going to expedite the departure from Afghanistan,
will be distance himself from Sarkozy's decision to move into NATO's integrated structure,
will there be increased transatlantic strain?
There, I think the answer is probably "not", simply because he doesn't have much room,
Hollande, nor would Sarkozy if he is to win; there will be pressure to keep France in lock-step
with NATO allies, particularly with the Chicago NATO summit looming at the end of May.
If Hollande does win, he will be in office only for a short time before that summit takes
place.
The third thing to keep an eye on is the Eurozone crisis, and here is where I think the real
issues are in play.
Hollande says he wants to increase spending instead of focusing so much on austerity,
he wants to revise the fiscal pact, he will put pressure on Chancellor Angela Merkle in
GermanyÉ it remains to be seen whether he succeeds in doing that.
But I think there are two outcomes: one is that Merkle is able to pressure Hollande back
into the same mold as Sarkozy, and that is generally doing-what-he-is-told-from-Berlin.
The other is that Hollande is able to ally with others who want to see more stimulus
and less austerity, and that would include a Spanish government that is looking to wiggle
out of their current austerity package; Mr. Monti, the technocratic Prime Minister in
Italy, who has already said, Europe needs more stimulus and less austerity; perhaps
the Dutch, whose government is now in trouble because of their austerity package.
This is where the interesting issues lie.
I think Obama would like Hollande to, assuming he is the president, to push for more for
more stimulus, because that may mean more growth in Europe.
The worst outcome would be a major rift between Merkle and Hollande, which could lead to political
crisis within the EU, and the markets would certainly not like that, and then one sees
a financial crisis on the other side of the Atlantic that could wash to this side of the
Atlantic, just as our presidential election gets into full swing.