In good news for both France and the EU, right winger Nicolas Sarkozy has won the French presidential election. Why is this good news? Because the alternative, Sergolene Royal, is a Socialist – the last thing France needs. France, like Germany, suffers from chronic economic stagnation and massive unemployment. In my mind, in both countries this can be attributed to massive welfare and over regulated labour markets. Judging from Sarkozy’s statements it would appear that he intends to address at least some of the problems at hand. While I have to confess I don’t follow French politics, one thing is very clear to me – France needs a Socialist presidents like a kick in the balls. At best a Socialist leader will maintain the status quo. At worst they will further entrench the antiquated system currently in place. On the other hand, there are parallels to be drawn with Germany, which is in a very similar socio-economic situation. In the German case, the conservative leader Angela Merkel, who promised sweeping reforms, thus far seems to have failed to make any significant changes, with only marginal economic improvements, which may or may not be the result of her policy. I hope Sarkozy doesn’t follow this path.
P.S: Let’s also hope he strengthens the military
There are some people in the UMP who seem genuinely committed to economic reform (this is the impression I got from Jean-François Copé at least, and I think Alain Madelin is similar), but protectionism runs very strong in France, and is part of Sarkozy’s makeup – see, eg, here.
My overall impression is that the foreign media have exaggerated how reformist Sarkozy is.
Angela’s Germany (or better the Germany of combined social democracy and conservatism): substantial reduction in the rate of unemployment, significant improvements in economic growth, as high or higher than in some countries with less protectionist policies! Reasons: reduction in taxes, generally greater optimism.
> Reasons: reduction in taxes, generally greater optimism.
To my knowledge Merkel has not significantly reduced taxes. In fact she intended to increase both consumer taxes and high end income taxes, although I’m not sure on the current status of these policies.
I think it’s definitely true that greater optimism plays and important role. Indices measuring consumer and investor confidence are generally much higher now than a few years ago, which in turn affects consumption and investment.
However, all of this needs to be seen in a long term perspective. Germany for many years was in recession and suffered very high unemployment (and still does, even if it’s slightly better than previously). A year or two of improvement hardly justifies the claim that Germany has emerged from its long term problems. Given that there has been very little change in tax, welfare and industrial relations policy, it would be perfectly reasonable to expect that Germany’s slightly improved situation may not last in the long term.