Francois Hollande changes his spots

In The Leopard, his great novel of 19th century Sicily, Giuseppe di Lampedusa writes about “that highly profitably grey area of the extreme left of the extreme right.” It seems that Francois Hollande, the Socialist President of France, hopes to profit in the area of the extreme right of the extreme left.

As Steve noted, Hollande has dissolved his government and appointed a new cabinet. Most notably, Hollande has named Emmanuel Macron, a 36-year-old ex-Rothschild banker, as economy minister.

During the 2012 election campaign, Hollande declared that his “real enemy is the world of finance.” Now, he has named a leading member of that enemy world to guide his economic policy.

Macron, for his part, reportedly said of Hollande’s signature election pledge to impose a 75 per cent marginal income tax rate, “It’s Cuba without the sun.” As France tries to move forward with its centrist ex-banker economy minister, there probably will be little economic sun, but at least it won’t be Cuba.

Macron has developed decent ties with French business leaders while serving as Hollande’s economic adviser. They appreciate the fact that he is that rare Socialist official with experience in the private sector.

Bruno Cavalier, chief economist at French broker Oddo Securities and major critic of Hollande, immediately praised Macron’s appointment. “It shows that the economic policy designed to be favorable for business is not negotiable,” he said.

In truth, as his supporters on the left have found out, everything is negotiable with Hollande — this leopard changes his spots. In fact, many of Hollande’s supporters on the left may be well on the way to becoming former supporters.

Therein lies the danger of Hollande’s move. He is, of course, unpopular on the right; now he will be unpopular on the left. It’s questionable whether he could survive a vote of confidence/no-confidence. However, as I understand it, he probably won’t face one because he has retained his Prime Minister, Manuel Walls (also a non-leftist).

What will be the economic policy of the Hollande-Macron team? It will consist primarily of tax cuts for business (with no shifting of the burden to households), spending cuts, and attempts to break up monopolies.

Will Hollande profit in this area of “the extreme right of the extreme left”? I doubt it. The French economy seems stuck for the foreseeable future.

But Hollande’s move to the center, Bill Clinton style, probably makes better political sense than a move back to the left, Barack Obama style. Hollande lacks Obama’s political skills and is considerably less popular than Obama, even now. Hollande’s move also has the virtue of improving policy.

Hollande can cling to power until the 2017 elections and hope that, somehow, the French economy improves considerably before then. If it does, he will receive credit for having moved boldly.

Walls, his up-and-coming Prime Minister, will be seen, correctly, as peripheral. Macron will be a hero, but he is too young to challenge Hollande in 2017.


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