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08 May 2012

FT: Hollande at odds with key partners on structural reform


Hollande's emphasis at the European level is on boosting investment and employment in new energy technology, infrastructure and small businesses, through the use of project bonds and institutions such as the European Investment Bank and EU structural funds.

Locked in his  battle for the Elysée palace with Nicolas Sarkozy, the socialist leader wasted no time in pointing out that his demand for Europe to shift the emphasis from austerity to growth was being echoed at the European Central Bank, an institution that embodies the stern doctrine of fiscal rectitude.

What got less attention was Mr Hollande’s revealing admission that he did not share Mr Draghi’s vision, quickly endorsed by Angela Merkel, the German chancellor, that such a growth plan should be focused on structural reforms, such as increasing labour market flexibility.

Mr Hollande’s team insists he is not simply calling for a Keynesian injection of public money to boost the economy. The new president is adamant he will stick to tough targets on France’s own debt-laden public finances, which will inevitably mean a dose of austerity. But his programme falls well short of embracing the sort of structural reforms called for by Mr Draghi and Ms Merkel, which are currently being introduced in Italy and Spain and are seen by many as essential to revitalising France’s economy.

Mr Hollande may well get a deal of some kind on measures to boost investment in Europe when EU leaders meet in two weeks’ time, which he can present as an early victory to his electorate. But it will not disguise the divide on more fundamental reform that exists between the new president and some of his European partners.

Full article (FT subscription required)



© Financial Times


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