No honeymoon for Hollande

PARIS, France – France’s president-elect Francois Hollande was plunged straight into the European economic debate Monday, May 7, as doubts over his plans and turmoil in Greece threatened to tip the eurozone back into crisis.

The 57-year-old Socialist won power on Sunday, ousting right-wing leader Nicolas Sarkozy, and is due to take office formally on May 15 before embarking on a packed calendar of major international summits.

First on his agenda will be Europe’s debt crisis, where he is on a collision course with fellow EU leaders over his plan to renegotiate the bloc’s fiscal pact which many credit with saving the eurozone from meltdown.

Hollande, who is to reveal his choice of prime minister upon his inauguration, promised cheering supporters Sunday that he would reopen talks in order that the pact focus on growth rather than simply imposing deficit-cutting austerity rules, an idea opposed by Berlin.

“This is the mission that is now mine: to give the European project a dimension of growth, employment, prosperity — in short, a future,” he said.

“This is what I will say as soon as possible to our European partners and first of all to Germany,” he declared. “We are not just any country on the planet, just any nation in the world, we are France.”

Germany is France’s traditional partner in Europe, but Chancellor Angela Merkel’s government warned once again that reopening talks on the pact — endorsed by 25 of 27 EU governments in March — would be impossible.

Berlin meeting

She nevertheless said she would welcome Hollande to Berlin next week “with open arms” and said they had agreed during a telephone call on Sunday to work “well and intensively” together.

Hollande’s campaign director Pierre Moscovici confirmed that Merkel had been the first head of government to contact the new French leader after his win and that Berlin would be his first visit after inauguration.

The White House has described the eurozone crisis as among “headwinds” for the US economy, but said Monday that the alliance between France and the United States was just as strong as before Hollande’s victory.

White House spokesman Jay Carney said President Barack Obama, who congratulated Hollande on Sunday, looked forward to welcoming the new French leader to NATO and G8 summits in the United States later this month.

“As for the situation in Europe, as the president said just the other day, our economy continues to face some headwinds, and the eurozone crisis is one of them,” Carney said.

The uncertainty generated by Hollande’s election and the political turmoil in Greece, where election gains by hard-left and extreme-right parties stripped the ruling coalition of its majority, perturbed the markets.

Stocks tumbled in Asia and opened down sharply in France before recovering, the euro took a new battering but later also bounced back and the spread in yields between French and German bonds widened, as markets eyed developments in the eurozone warily.

Japan’s Finance Minister Jun Azumi said the election results in France and Greece could have a “destabilizing” effect on the markets, as he warned traders against speculative currency moves.

Traders voiced fears of a backlash against austerity measures designed to slash eurozone public deficits.

The single currency dropped to $1.2998, down from $1.3082 on Friday in New York, but then rose to 1.3066, while in Tokyo stocks closed 2.78% lower, Sydney finished 2.15% down while Hong Kong ended 2.61 percent off.

The Paris CAC 40 opened 1.57%lower, but recovered to gain 1.06% by the afternoon. US stocks also opened slightly weaker.

Despite the concerns, France raised 7.98 billion euros ($9.1 billion) in short-term debt on Monday, with lower interest rates paid to investors for two of the three maturities offered.

And Fitch ratings agency said Hollande’s victory would not have an immediate impact on France’s top triple-A rating.

Higher taxes

Hollande plans to replace some of Sarkozy’s cost-cutting with higher taxes on the wealthy while balancing the French budget by 2017, despite a hiring spree in education and a return to retirement at 60 for some workers.

After seeing Merkel shortly after his inauguration, Hollande will travel to the United States for the G8 summit on May 18 and 19 and a NATO gathering on May 20 and 21.

Hollande’s communications director Manuel Valls confirmed Monday that France would use the summit to “announce the withdrawal of its forces from Afghanistan between now and the end of the year”.

Obama invited Hollande for talks at the White House amid concerns about this pledge to hasten the exit of France’s 3,300-strong contingent from the NATO-led force in Afghanistan.

And a spokeswoman for NATO chief Anders Fogh Rasmussen said any decision on an early French pullout would have to be agreed with the other allies at the NATO summit in Chicago.

Defence officials in Kabul doubted this was even feasible, but Afghan commanders insisted they were ready to take responsibility for their own fate.

Hollande’s party must set off on the campaign trail again in short order for France’s June parliamentary election, when he will hope to secure a ruling majority.

Sarkozy, still only 57, congratulated Hollande on the win and signalled that he intends to step back from frontline politics.

Official final results of Sunday’s second-round run-off showed that Hollande had won 51.62 percent of the vote to Sarkozy’s 48.38. – Agence France-Presse