François Hollande’s election to the French presidency last spring was widely interpreted as an emphatic rejection of what until then had been a relative consensus among larger E.U. economies on the need for fiscal restraint and budget-cutting after the 2007-08 global economic collapse. Hollande promised to tweak a 2011 austerity treaty — dubbed “Merkozy” after its chief proponents, Hollande’s predecessor Nicolas Sarkozy and German Chancellor Angela Merkel — but, as so many politicians do, changed his mind once in office.
While the scandal surrounding his disgraced budget minister and other PR flops have no doubt damaged his standing, his mushiness on the central question permeating European politics — austerity, and whether it’s helping or hurting economic growth — has fed a growing body of dissenters in his own Socialist Party, further eroding his ability to govern. Those frustrations were made plain in a leaked memo late last week that cited Merkel’s “egotistical intransigence” as a chief impediment to a broader recovery. Ultimately, the document was softened at the urging of French P.M. Jean-Marc Ayrault to vaguely fault “the German right wing’s market-oriented policies,” but, really, we all know exactly who the subject of austerity foes’ ire is.
That unemployment has topped 11 percent in France and Italy and is north of 27 percent (!) in Spain suggests there might be room for a shift in the broader regional approach to the economy. But in Germany, where Merkel is said to be cruising to re-election this September, the jobless rate is hovering at about five percent, which helps explain the appeal of austerity there: work is plentiful and additional public spending is presumed to go towards undeserving “others” elsewhere in the E.U. who haven’t properly managed their finances. So long as Germany remains the continent’s economic superpower and Merkel is electorally secure from domestic opponents of austerity (which so far consist of a few dozen academics and business figures), she will continue to insist on belt-tightening over new spending. And unless Hollande faces an outright revolt from the Socialist ranks, he (and the rest of Europe’s political leaders) seem unlikely to publicly challenge her. Of course, the bitter tone of the Socialist memo suggests that such a revolt is plausible, especially with forecasters suggesting it may not be until 2015 that unemployment in the eurozone starts to come down to normal levels. But Merkel remains a villain on the street more than in the parliaments of Europe, where currying favor with the continent’s central banker remains a top priority of most pols — leaked memos notwithstanding.