Changes in Paris may better fit economic conditions in the US
WASHINGTON — With the victory of the Socialist candidate, Francois Hollande, in the French presidential election, the White House has lost one of its closest allies on the Continent, but perhaps gained one with economic policy beliefs more closely aligned with its own.
Hollande is virtually unknown in Washington, and his policy positions on both domestic and international affairs remain only lightly sketched out. That is in stark contrast to the departing president, Nicolas Sarkozy, whose frequent discussions with and ardent defense of the White House earned him the nickname “Sarko the American” back home.
But in the past few months, Sarkozy has parted from the White House in his support of the German-led austerity project in the debt-soaked eurozone, a project the White House objects to on the grounds that cutting budgets too soon will lead to sluggish growth and high unemployment across Europe without satisfying the demands of skittish bond investors.
Hollande, in contrast, ran on a promise of rebalancing Europe away from austerity and toward growth, and his narrow victory is seen in Washington as a public rejection of governments imposing strict cuts on battered economies.
“Austerity need not be Europe’s fate,” Hollande said shortly after his victory. To that end, he has said he plans to renegotiate the fiscal pact Europe struck this winter to allow for more budgetary breathing room for countries that can still borrow money to support themselves at reasonable rates on the debt markets. He also supports measures to aid growth by, for instance, boosting infrastructure spending.
The Obama administration had pushed for such pro-growth policy changes even as Sarkozy joined Chancellor Angela Merkel of Germany in calling for deep spending cuts.
“If every time economic growth disappoints governments are forced to cut spending or raise taxes immediately to make up for the impact of weaker growth on deficits, this would risk a self-reinforcing negative spiral of growth-killing austerity,” Treasury Secretary Timothy F. Geithner told a congressional committee in March, comments echoed since then in his statements at many international forums.
“The administration hopes, in broad terms, that this election will change the conversation,” said Edwin M. Truman, a senior fellow at the Peter G. Peterson Institute for International Economics. “In principle, you’d be saying ‘Don’t tighten your belt!’ to the countries with the scope to do so,” Truman said.
Hollande seems “naturally more palatable to the administration,” said Justin Vaisse, the director of research for the Center on the United States and Europe at the Brookings Institution.