May 8, 2012

'When Paris sneezes, Europe catches cold."

No sooner results of French elections were announced, the markets went volatile. The new President, Francois Hollande, who loves calling himself 'Mr Normal', has already caused enough panic. With France losing its AAA credit rating, and also promising a socialist turn, the mood is certainly down. The reason is obvious. While the French see the emergence of the socialist Francois Hollande as a bacon of hope, the financial markets are upset. And once the financial markets are upset, you can be sure the mainline media and mainline economists will stand depressed.

Writes The Times of India in its balanced editorial, captioned French Evolution (May 8, 2012): "Hollande paints a roseate vision of the French economy -- promising thousands of new public sector jobs, lowering the retirement age, boosting social services -- but is yet to explain exactly how it will all happen. France's fiscal deficit is huge, causing Standard and Poor's to have downgraded its credit rating. Hollande promises closing this deficit by taxing the super-rich, a plan that may just lead to a flight of the panicked capital." Giving workers to right to retire (and earn pension) at the age of 60, if they had begun to work at 18, investing in French schools, and creating 1,50,000 new jobs besides pulling the French troops out of Afghanistan before the year end are some of the promises he has made.

Well, I am not an expert in foreign affairs nor am I am a keen follower of European politics. But over the last few years, the economic collapse of 2009 followed by the Eurozone crisis, has made me sit back and understand what is going wrong. I always thought Germany's misplaced emphasis on budget-tightening measures, better called austerity measures, were planned and promoted by the financial markets. The idea was to bring more money into the hands of rich, turn them into super-rich, and then believe some of it will trickle down to the poor. This is what Noam Chomsky had once termed as 'tough love' -- tough for you and me, and love for the rich.

I am not sure whether mainline economists and the mainline media will let Hollande wear his surgical gloves, and undertake some radical reforms that turns French economy for the benefit of its majority population. After all, US President Obama's rant of "a change you can believe in" remained a hollow promise. Corporate America didn't let me him perform the surgery he needed to. In the process, America has been left bleeding. It therefore relies more on 'quantitative easing' -- printing of currency notes, and bullying developing economies and other developing countries to open up for American products. It will not last long. We all know.

French President Hollande doesn't have to follow the stock markets to know what he is doing is right or wrong. The moment he disconnects with the financial markets, I can see a bright future for France. And as an Austrian statesman, Klemens Wenzel von Metternich, once said: "When Paris sneezes, Europe catches cold," I can only hope the cold Europe catches spreads like a virus across the globe. All that Hollande needs to focus on is how to convert his poll promises into action. Forget about fiscal reforms and rebuilding French competitiveness, as economists will go on suggesting, focus more on social turnaround. France needs to create mass employment, and spread the benefits of economic growth equitably among the masses. It needs a radical overhaul of the macro-economic policies that have brought the world to a brink. Hollande can surely lead the world out of dark woods. He has the mandate to do so. He cannot waste this opportunity.

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