Financial News

France changes focus from austerity towards growth

By electing Francois Hollande as their first socialist president in decades, the French people have made a clear decision to put growth strategies over Sarkozy’s austerity measures. With 51.62% of the vote, it was a narrow victory, but Hollande is taking up his new position with confidence.

The economy was a key issue in the run up to the election. Former president Sarkozy had presented himself as the only person who was capable of steering France through the economic crisis. But voters had become fed up of his austerity measures, which were perceived to have failed by the outside world looking in – given the country’s downgrading from its AAA rating.

A decade ago, freshly elected European leaders might have hoped to enjoy a honeymoon period. But Hollande does not have this luxury. The problems he faces are grave and urgent, and must be started on before he has unpacked his suitcases. In just over a week’s time he has the meeting that will shape his economic policy – round one with Germany’s Chancellor Merkel.

During his election campaign, Hollande claimed that he would be seeking to renegotiate the recent financial deal with the others in the Eurozone – effectively seeking to soften the austerity package that France is committed to.

But whilst Merkel has given Monsiuer Hollande a diplomatic welcome to his new position, she has already indicated in no uncertain terms that the pact cannot be renegotiated.

So what else does Hollande plan for his time in office? Sarkozy had taken the unpopular step of raising the state retirement age from 60 to 62. Hollande intends to reverse that change as soon as possible.

Another headline grabbing plan of Hollande’s is to impose a tax bracket of 75% on people earning more than a million euros per annum.

Unemployment is also a major problem, with nearly 10% of people of working age out of work. The new president intends to add 60,000 to the payroll in the next few years by hiring this many teachers.

Frustratingly for him, it is the outcome of Hollande’s meeting with Chancellor Merkel that may influence where or when he can get his hands on the money to finance his planned spending spree.

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