The French Elections

Next week we will know who will be responsible for running France for the next five years. If we are to believe the polls, Angela Merkel will have a new partner in the German-French axis, with which she will need to start doing business. At the next French-German-Italian summit, there will be two leaders out of three that are leaning towards a growth strategy, even if nuanced. If until now Monti has politely reminded Sarkozy and especially Merkel, that the problems that Europe is facing cannot be resolved by cuts alone, now he will be joined by an Hollande who has practically ignored the needs for fiscal prudence in his campaign, and has basically insisted on the need to keep and actually reinforce the French welfare state that costs about half of GDP.

Of course Merkel has been there and seen this already, and as the Economist reminds us, all chancellors end up ‘convincing’ French presidents over time. The problem is this time there isn’t much time, and the markets tend to like to test new paradigms or leaders sooner rather than later.