Tuesday, April 24, 2012

Economic Impact of Possibility of Francois Hollande Becoming Next President of France

With French President Nicholas Sarkozy coming in a close second to socialist candidate Francois Hollande in France’s first round of Presidential elections questions are being raised as to what the effect will be on financial markets.

On Monday April 23rd the CAC 40 index which contains the stocks of the forty largest French corporations was down close to 2%. The Euro was also down a bit as were French bonds.

However, many analysts attributed at least part of these declines to other bad economic news from other parts of Europe as that continent continue to struggle with ongoing economic problems arising from the decline of the failing welfare state economies, a decline which has been accelerating over the past year.

A couple of other factors to consider include the fact that Hollande will not be the first socialist President in France’s Fifth Republic coupled with the fact that Sarkozy, like other West European leaders claiming to be on the political right, has done little during the past five years to put France on a stronger free market footing.

From as far back as King Louis XIV, French leaders of all political stripes have favored a highly centralized government that has exercised strong control over the economy. So a win by Francois Hollande is liable to result in policies not much different than the present welfare state policies of Sarkozy.

While serious free market reforms would be great for the French economy and the stock market, neither candidate appears to be willing or able to offer this.

As for the third place winner, Marine Le Pen and her Front National party, who, despite her capturing nearly 20% of the vote, offers no promise economically. While labeled right wing, the party and its leader, in the words of Tim Stanley in a piece in the April 24, 2012 edition of The Telegraph, is neither right nor left but simply a hate group.

And, despite her capturing 20% of the vote overall, the bulk of her support came from just one Department, Gard, which was the only Department she placed first in. This is hardly a sign of widespread support for Le Pen and her party.

Overall, regardless who wins the final round, France will continue to stagnate economically until the nation’s politicians are ready to institute some serious free market reforms and replace the failing welfare state.