Super Sunday (1) – It’s Hollande

Francois Hollande, as expected, has won the French presidential election run-off, with 52% of the vote.

In terms of first thoughts, I can’t agree with the Telegraph’s claim that this raises ‘fresh question marks over a eurozone break-up’.

The possibility of increased Franco-German divisions at the euro area’s top table are worrying some people. But the consensus seems to be that Hollande’s ‘renegotiation’ of the fiscal compact to favour growth can be done through compromises that don’t involve having to reopen the text of the treaty.

Indeed, I don’t fundamentally accept the claim that Franco-German divisions are a bad thing for Europe; diverse opinions can be a strength.

I still buy into Mark Leonard’s argument about Europe being a kind of modern-day political Hydra. To quote his example of how disagreements in Western Europe during the 90s led the post-communist countries to so radically reform their economies prior to their EU accession:

British and Nordic enthusiasm for enlargement in the East allowed the countries of Central and Eastern Europe to ‘keep faith’ as they embarked on painful processes of internal reform. At the same time, French doubts allowed the European Commission to exact concessions from them in the protracted negotiations for accession. The key feature of this ‘good cop, bad cop’ dynamic is that, even though the disagreements are genuine, the core objectives of all European countries tend to be the same […]

I think the euro area needs an equivalent dynamic to develop if it’s to convince the peripheral countries to reform their economies without dangerously eroding support for the euro among their voters and politicians – i.e. Hollande’s enthusiasm for growth, Eurobonds, etc, can allow the periphery to ‘keep faith’ in the single currency, at the same term as Merkel’s bailout scepticism extracts concessions from these countries to correct their fiscal imbalances and undertake needed economic reforms.

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