As was pointed out in Monday's Opinion section of the Wall Street Journal, new French president Francois Hollande has the outcome he wanted from Sunday's election: the Socialist Party is in power. With more than 300 of the 577 seats in lower parliament from his own party, Hollande is in a position to keep his promises to turn the French economy around with little resistance from opposing points of view.
That should be any politician's dream. But those promises include a new 75% top-marginal income tax and a civil-servant hiring spree to swell the public payroll by 12,000 heads a year. It's an agenda France can't afford. The economy expects zero GDP growth this year, its public debt is 90% of GDP, and bond markets have left little doubt about their patience with reckless European spending.
Will Francois Hollande's plan work? I will be shocked if it does. If the age of austerity is dead in France (assuming it had been alive in the first place), then let's welcome a new era of government spending designed to stimulate growth. The disease is the cure.
Will the patient survive?
Time to buy CDSs on their sovereign debt.
Well at least david cameron said what he had to say about france during the G20 summit :)
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