France and Europe with François Hollande

At a time of ongoing crisis and turmoil in much of Europe, Francois Hollande has been elected the next president of France. Despite a record vote for the extreme right in the first round of the presidential elections, French voters rallied behind the center-left candidate. France’s choice has tremendous significance for Europe. It is a clear rejection of the “austerity-only” economic strategy that has been advocated and partially implemented as the cure for the problems of the eurozone. France has a size and weight in Europe that will give Francois Hollande a voice that others will not be able to ignore. The new French government will find allies throughout Europe, including among German Social-Democrats and Greens. It has become clear that economic policies that simply push Southern Europe into a deflationary spiral cannot be a solution to the challenges of sovereign debt worries and high unemployment that the region faces. Not just France, but much of Europe is looking for a better way.

And yet, in France and elsewhere, there are serious fiscal problems, as well as weaknesses in competitiveness that translate into difficult to sustain current account deficits. Comprehensive structural reforms are needed to enhance productivity and flexibility throughout the economy. Under Francois Hollande, these reforms will not attempt to dismantle the fundamental European system of strong social solidarity, social balance and environmental protection that has evolved over decades and allows a quality of life that ranks very high in the world. The center-left in Europe must, however, reinvent that model of social solidarity and adapt it to the new world of much stronger competition from emerging markets, large demographic changes and pressures coming from powerful financial markets focused on the very short term.

The large majority of French citizens know that deep reforms are needed. Francois Hollande will have the great advantage of being able to embark on these reforms not as a representative of privilege, but as a man very close to the people— a “normal” president, as he likes to say— a man whose moves will not be suspect from the start. The sacrifices he will have to demand as well as the opportunities he will offer will have to be equitably distributed. He has the potential to unite, rather than divide; to bring along the labor unions behind reforms that are unavoidable but have to be gradual, well explained and creative in design. Both work and learning new skills can be structured throughout longer lifetimes in a way that the older yet healthier populations need not be just a burden on society. Flexibility, choice, private-public partnerships in social work and an overall commitment to solidarity can lead to a feeling of human security that, far from diminishing productivity, can on the contrary enhance it by allowing everyone to perform at the peak of their capacity.

Francois Hollande, and with him the center-left in Europe, faces a huge challenge. Productivity and equity will have to be linked and become mutually self-reinforcing at every step. The European economies are so intertwined, that the reforms will have to become Europe-wide advances. France and Germany will have to continue to work together, but more weight will have to be given to the European institutions, for the sake of legitimacy and inclusiveness. Francois Hollande takes power at an incredibly difficult moment in European history.

There is a thirst, however, in progressives to demonstrate that societies with more balanced income distributions, societies where the weaker and more vulnerable are protected while the stronger and most talented excel without expecting outsized rewards, and societies where solidarity is a strong and shared value can be in the long run economically more successful, than fragmented and less cohesive societies. If Francois Hollande can harness that thirst and explain the reforms in that framework, he might be able to move through the narrow limits of the possible and show how equity and solidarity can go hand in hand with growth and greater prosperity.