When France's Hollande talks growth is Europe listening?
Just two days after the election of Socialist François Hollande to the French presidency on a pro-growth policy there are signs of change sweeping through the European Union. And other European leaders may be ready to back his call for a turn away from austerity.
The central theme of Hollande’s campaign was that austerity can no longer be the only option and, after an initial reluctance to back his call, other countries in Europe now seem to be coming round.
On Tuesday, EU President Herman Van Rompuy announced on Twitter that there will be an informal dinner on 23 May for EU leaders to focus on how to boost growth.
The meeting comes as the European Commission also refreshed it bid to increase spending on growth measures.
"While the return to lasting growth will take time, a turnaround can be achieved by the end of this year if the necessary decisions are taken now," said commission president Jose Manuel Barroso
Meanwhile in Italy, Silvio Berluconi’s People of Freedom party suffered massive losses on Tuesday in an apparent vote against austerity and the establishment.
Similarly, in elections in Greece over the weekend, the conservative New Democracy party and centre-left Pasok registered a big defeat in a sign ordinary citizens are fed up with the string of harsh cuts the government has made to get the economy back on track.
Leftist Alexis Tsipras, head of Greece's second party Syriza who was given on Tuesday a mandate to form a government, said the new cabinet should reject all austerity measures imposed under an EU-IMF bailout deal.
Portugal’s former Socialist president Mario Soares also joined the fray and said his party should stop supporting the austerity measures introduced by the centre-right government of Pedro Passos Coelho.
Back in May 2011, austerity was the key word used by the EU and IMF when agreeing to loan Portugal 78 billion euros.
“We accepted this obligation a year ago, but it is now coming to an end,” Soares said in an interview with the Portuguese daily i. “Austerity has its limits.”
No-one denies the Franco-German relationship is crucial to any successful attempt to solve the eurozone’s financial crisis.
German Chancellor Angela Merkel has been the main advocate of the austerity policy and prior to Hollande’s election she refused to counter any renegotiation of the new fiscal pact she had agreed with his predecessor Nicolas Sarkozy
But she knows she cannot become isolated within Europe and lost no time after his election in inviting the new French president to Berlin.
Part of the sea-change in opinion could be due to Europe’s changing situation.
past few weeks, 12 European countries have gone into recession and the leaders of Italy and Spain had already asked for a balance between fiscal measures and growth.
The danger facing Hollande and other European leaders is that measures to stimulate the economy could plunge the eurozone deeper into debt.
Hollande says he has the answers – the creation of a financial transactions tax, increasing the lending capacity of the European Central Bank through the European Stability Mechanism, issuing Eurobonds for infrastructure projects to name a few.
But before he can set about persuading others to adopt these measures, Hollande has challenges closer to home.
If he loses legislative elections in France in June, he will have to put up with cohabitation with political opponents, which could leave the country largely paralysed and severely hamper his efforts in the eurozone.
Interestingly, Hollande's victory has not so far sparked the financial chaos that Sarkozy warned of during the election campaign.
France raised 7.98 billion euros in short-term debt on Monday with lower interest rates paid to investors for two of the three maturities offered.