Bloomberg News

Hollande Confronts Mounting French Unemployment as Reality Bites

May 31, 2012

French President Francois Hollande, who pledged to “respect” taxpayers, warned about the tough measures to meet his promise to reduce the nation’s public deficit to 3 percent from 4.2 percent this year. Photographer: Michele Tantussi/Bloomberg

French President Francois Hollande, who pledged to “respect” taxpayers, warned about the tough measures to meet his promise to reduce the nation’s public deficit to 3 percent from 4.2 percent this year. Photographer: Michele Tantussi/Bloomberg

French President Francois Hollande ended his first two weeks in office with a thud.

Home after travels to three summits and on three continents, Hollande faces job-cut plans at some of the country’s biggest companies and pressure from the European Union to hold to budget-deficit targets as the euro-area crisis threatens to swamp neighboring Spain. His government yesterday reported jobless claims in April rose to the highest in 13 years as his Socialists campaign to take control of the Parliament.

“That’s that the first of many reality checks ahead for Hollande,” said Bruno Cautres, a political analyst at Cevipof, a political research center in Paris. “We’re getting in the core now. Next are the compromises in Europe he’ll be forced to make because just advocating growth isn’t enough. France’s crippling economy will clip his wings and a failure in the legislative elections could limit him room to move.”

Hollande took over May 15 after pledging to revive France’s economy. Still, gross domestic product growth is set to stall this quarter and the European Commission demanded “significant” steps to meet the deficit target of 3 percent of GDP next year. Hollande now says he’ll ask taxpayers “to make efforts” to meet the EU’s rules.

All that points to a honeymoon gone in a blink. Last week France drew the strongest auction demand since the European debt crisis began in 2009 at record-low borrowing costs. Consumer confidence unexpectedly climbed for a third month as households anticipated an easing of austerity measures.

‘Respect’

Hollande, who pledged to “respect” taxpayers, warned about the tough measures to meet his promise to reduce the nation’s public deficit to 3 percent from 4.2 percent this year.

The Paris-based Organisation for Economic cooperation and Development predicts growth will slow to 0.6 percent this year from 1.3 percent in 2011. Hollande said he banked on 0.5 percent growth in 2012 and 1.7 percent in 2013.

Hollande won office promising more government spending than Nicolas Sarkozy, including the hiring of 60,000 teachers. He also promised to tax income of more than 1 million euros ($1.26 million) at a rate of 75 percent, an increase in the minimum wage, a rollback in the retirement age for some workers and a reversal of Sarkozy’s sales-tax increase.

Holding fast is key to a Socialist victory in the two-round legislative elections June 10 and June 17. If he fails to gain an absolute majority, Hollande will struggle with lawmakers to pass his program.

As he campaigned, Hollande said in his first televised interview, he’s intent on “acting simple.”

‘Acting Simple’

“Acting simple, it’s not being mediocre,” he said on France 2 television May 29. “On the contrary, it’s respecting French people and acting with exemplariness.” Hollande said he took the train to Brussels for an EU summit last week, rather than “mobilizing two planes -- yes two planes,” as Sarkozy did.

His “not-like-Sarkozy” approach may not be enough when France passes the 3 million jobseekers bar likely in the fall, Cautres says.

“Maybe this time he can justify that the economic turmoil is not his fault but his predecessor’s,” Cautres said. “French voters will not hear that argument beyond the legislative elections. Then he will be in charge of France.”

France has lost more industrial jobs than any other European country over the past decade and labor unions expect companies including Arcelor, Carrefour, PSA and EON France to cut as many as 45,000 jobs in the months ahead. Labor Minister Michel Sapin told RTL radio the estimate was “realistic.”

As electioneering ends on June 17 with the final legislative round, Hollande may find it difficult to block corporate job cuts as he pledged during his own campaign.

‘Parade of Firings’

“I won’t allow a parade of firings that have been postponed,” he said April 26, adding that “there needs to be a sense of responsibility in executive boardrooms. The day after the election, before irrevocable decisions are taken, I will have to intervene.”

The same labor unions that backed his candidacy may become Hollande’s main obstacle, as they demand action to prevent job losses.

“Dialogue in first weeks is always fine,” said Francois Chereque, head of the CFDT, France’s biggest union. “It’s after that it’ll get tricky.”

Hollande began his mandate with an approval rating of 61 percent, according to an Ifop May 26 survey for Journal du Dimanche. Sarkozy started at 69 percent and was at 61 percent after August 2007, when the financial crisis first flared.

With the crisis now threatening to force Greece out of the euro, Hollande is challenging German Chancellor Angela Merkel’s calls for austerity while expressing sympathy for Greece’s recession. Greek citizens should be given more “hope” and “prospects for growth” rather than only austerity that he says breeds “populism.”

For all that, the Socialist leader says that he was never going to win everything he wanted from his European partners.

“We must discuss, put everything on the table,” he told France 2. “We are on path to a certain number of compromises.”

To contact the reporter on this story: Helene Fouquet in Paris at hfouquet1@bloomberg.net Mark Deen in Paris at markdeen@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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