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Economic Daily News: Hollande's win challenges European integration

2012/05/08 19:11:51

The election of leftist Francois Hollande as French president is in part a vote against the German-led drive for austerity and indicates the solution to unemployment has become a key issue to further European integration.

With 51.62 percent of the vote, Hollande defeated Nicolas Sarkozy in Sunday's runoff election, becoming the first Socialist candidate to win France's top job in 17 years.

Hollande's victory marks a vote of no confidence against the administration of the incumbent, who drew public ire for his inability to temper soaring unemployment and his support of the Franco-German partnership that has steered Europe's belt-tightening drive.

During the five years under Sarkozy, the jobless rate soared to 9.3 percent, budget deficits accounted for more than 7 percent of national output and current account deficits rose to US$117.7 billion.

In a clear departure from the right-wing conservative, who advocated government spending cuts, Hollande supports government-funded stimulus programs and has proposed the idea of renegotiating the fiscal pact introduced to address the European debt crisis that began in late 2009.

The strive for European integration, championed by France and Germany, has seen European countries march from the adoption of equal import taxes to a single currency.

However, the single currency has resulted in disparity in trade figures, with Germany posting more than US$200 billion in trade surplus each year as opposed to huge trade deficits in Greece, Italy, Portugal and Spain.

Unable to employ monetary measures under the single currency policy, the huge deficits have pushed countries to borrow from other nations, contributing partially to the debt crisis in the debt-ridden countries.

The key to Hollande's proposal is reforming the fiscal pact to also focus on growth by issuing euro bonds to finance infrastructure projects. However, the idea has previously been rejected by German Chancellor Angela Merkel.

Since the proposal is tantamount to being the first step on the path toward fiscal integration, unlike the 'Melkozy' approach of bringing government finance back to order under the Maastricht Treaty, Germany's decision now becomes crucial in the development of the integration of Europe. (Editorial abstract--May 8, 2012)

(By Scully Hsiao)