France prepares to integrate Europe

Over the weekend French Presidential candidate, and current front-runner, Francios Hollande gave a speech to his faithful. Although the speech was obviously full of the usual fanfare associate with political candidacy there were some very interesting things said that I think need to be highlighted in the context of Europe’s future path. For some background on this event please see my previous post relating to round one of the presidential election.

You can view  the entire event ( in French ) and read the speech here via google translate.

Hollande set up the speech based on his political position. He is riding high on the political wave against Sarkozy due to the European crisis, while attempting to sway those voters close to right-leaning third placed Le Pen:

Last Sunday’s election also reveals multiple anger, deep frustration, and competing demands of both mistrust towards politics. I am aware the first! And that is why even today I want to remove doubts, rally support, give meaning to what we do together! I’m not just a release candidate – he’s there – but I want to be an assertion of hope, of a project, a will! We all turn to a page that already too long of a five-year chess! But mostly we write together a new page, to continue the great, beautiful story of France we are here, not just here, porters, messengers.

Yes, we also build a hope, recovery, justice, hope of youth for which I fight in this campaign. Yes, I want to reconnect with the French dream, beautiful republican promise, the spirit of conquest. Not going to look elsewhere for our national identity! France does not form, constructed, built, accomplished on the fear of others, on the decline, the reluctance, on nostalgia. France, it is great since it carries a message of conquest, a universal message, a message of tolerance, a message of elevation. And that’s also going to be decided on May 6 by the French.

The French dream, this is not a chimera, an illusion, a prospect no tomorrow. No! The French dream, it is the Republican promise is our story, that’s what the generations before us have been able to build, to offer: the desire for promotion, fulfillment, to personal accomplishment in national success, nothing is done to one without it benefits the other, to have solidarity between us and at the same time an ability to give our country what it is best in itself, its wealth, its growth, its businesses, its work.

It is patriotism, which I oppose nationalism, sovereignty movement. Patriotism is service to a cause that is bigger than us. Patriotism is what allows us to surpass ourselves, to go beyond our borders! Patriotism is what is intended to seek the essential, it is worth carry information for ourselves and for others. Patriotism is first to love yourself to love others, and not be afraid of anything and fear nothing in the world competition in Europe which is being built.

Although the translation is a bit rough, the message is clear. Hollande is attempting to frame the future of France as a strong member of Europe but where its national identity is secured. That set the political context, now for the economic:

You French citizens of France, you will both carry a message for yourself confidence, recovery, justice, and at the same time say to Europe that it must be re-oriented growth, progress, the future. For months, the peoples of Europe look to France and as the returning officer shall give a certain direction, I feel the positions, including heads of government conservatives, evolve according to forecasts.


First recovery productive, because we need to fight against unemployment, companies that get better, industries that are stronger and also research, innovation, creating tomorrow’s growth . This is the first challenge!

The second is to initiate an effort, and it is necessary if we are to restore our public finances, control debt, but in justice, fair taxation, social justice, in territorial justice!Because I am the heir, so are you, a social model that was built after the war, the war even by the French Resistance through the program of the National Council of Resistance! Yes, also the challenge of preparing for the future, education will be the top priority, research, essential to the culture that is our common heritage, but also our language and our identity around the world.


This was the meaning of my 60 commitments. Many ambitious proposals, volunteers, as many major reforms that lie ahead: financial reform, banking reform, tax reform, education reform, housing reform, health reform – yes, all that we have to do and requires the will and courage as well. 60 proposals but also credible because it would be useless to promise if it was to deny then! And the message I received throughout the last few months of those who encouraged me today as you were: above all, above all, do not disappoint us, do what you promised and stand firm! Do not repeat the mistakes of the five-year term ending, the moral failures, dead ends! Give pride and honor in politics! It is our duty.

And in the context of broader European economic policy:

The word growth, which had disappeared from official statements, is now assumed. I am even told that there would be texts that already circulate among the various chancelleries and governments to take a number of initiatives for growth. Good! And so I myself have committed in the aftermath of the presidential election, send a memorandum to all European governments, so there may already implementing measures that are taken to growth and renegotiation which can engage with the creation of Euro-bonds, with the tax on financial transactions with the European Investment Bank that will support SMEs and large work, with the mobilization of funds structural, with a dialogue with the European Central Bank, rather than lending to banks so they do not lend to states, could still lend directly to States to fight against speculation!

In other words Hollande wants to re-shape Europe’s response to the economic crisis. He wants the ECB to step up and become the lender of last resort for Eurozone nations while also adjusting policy towards more citizen focussed outcomes which may, initially, mean further government expenditure .

Obviously these are two enormous leaps away from the current Franco-Germany economic relationship. Last week, before this speech, Angela Merkel made strong comment on these ideas:

With the dark clouds of the ongoing euro crisis thickening over Spain this spring, German Chancellor Angela Merkel on Thursday staunchly defended her focus on euro-zone austerity and once again insisted that the EU fiscal pact, signed in March, would not be revisited.

In comments clearly aimed at French presidential candidate François Hollande, Merkel told Germany’s WAZ media group that the pact “cannot be renegotiated.” The Socialist Hollande has suggested that, if he emerges victorious over French President Nicolas Sarkozy in the second round of elections on May 6, he would ask for changes to the agreement. The fiscal pact, which imposes strict new rules governing budget deficits and sovereign debt, was signed by 25 of the 27 European Union member states. The UK and Czech Republic declined to join.

But Hollande was very clear in his reply:

Speaking to broadcaster France 2 on Thursday evening, he said: “It is not Germany that will decide for the entirety of Europe.” When asked what he plans to say to Merkel should he win the election, he said: “I will tell her that the French people had made a decision that envisages a renegotiation of the pact.”

It may appear that core Europe is at war, but the reality of the situation is very different. This is not a situation where either party can turn their back on one another. France and Germany are so closely linked economically that this is a near impossibility. In fact, if you look closely at what Hollande is suggesting he is actually talking about closer integration between euro nations in the context of economics.

That suggests to me  that the election of Francois Hollande on May 6 may mean a change in European policy towards tighter political integration, not weaker. It seems clear from very recent rhetoric from many of the Eurocrats that they are aligning themselves with this idea, even if at this point they are only paying lip service to a ‘growth pact’ and what it would mean in both a political and economic context.

I noted this morning that FT had a report on further recent bearishness by hedge funds on Europe based on the idea that Mr Hollande’s election would create a further destabilisation in European bond markets. That may be the case in the short term, but if Mr Hollande ends up getting his way then the hedgies could end up being on the wrong end of that call.

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  1. I’m not sure who Leap2020 is, but they have had some success for in forecasting outcomes – the rise of the Socialist’s in France they predicted in 2010, I think. Their view is that this election outcome will be of more importance geopolitically than the US ELECTION:

    Italy: “The most interesting fact from the documentary for me was learning how the City of Milan agreed to be on the hook financially to a bank in the event of a debt default by Italy (the nation state).”

    “Are there any other municipalities which have contractually guaranteed the debt of a sovereign state?”

  2. United States of Europe here we come. I have no idea what will happen, but whatever it is it will be painful. IMO it matter little what Hollande wants, the bigger question is how can he create growth, and employment? Bearing in mind that LTRO’s are being used to finance CAD’s just how is the balance sheet going to be adjusted? All I can see coming is LTRO3. I’m in a cheery mood today 🙂