By DAVID GAUTHIER-VILLARS And GABRIELE PARUSSINI
PARIS—President François Hollande secured the parliamentary majority he says he needs to revive France’s economy and help repair the euro zone, after voters gave his Socialist Party a commanding lead in Sunday’s legislative elections.
Because a Socialist-led coalition already controls the Senate, the upper house, Mr. Hollande will now have a supportive Parliament to back his policies.
But with a stalling economy at home, and uncertainties in Greece over whether a coalition government may emerge from Sunday’s legislative elections, Mr. Hollande may have to shelve some of his costly proposals—such as hiring 12,000 civil servants a year—and instead resort to an unpopular mix of spending cuts and tax increases.
Mr. Hollande’s government has hinted that tough measures would be necessary but has stopped short of detailing how it would achieve its goal of reducing France’s budget deficit to 3% of gross domestic product in 2013 from an expected gap of 4.5% this year.
More at the link. It seems that your Editor anticipated some of the problems that a Socialist government in France will face, and has caused:
Paris | June 11, 2012
FRANCE’S new socialist President François Hollande will come under heavy pressure to abandon his anti-austerity platform, used to chase votes in the country’s general elections overnight.
As the first round of voting in France’s parliamentary elections took place, Mr Hollande’s tax-and-spend stance was expected to help his Socialist Party and its left-wing allies win a majority in the National Assembly. The President, who ousted Nicolas Sarkozy last month, has made good on promises to cut the retirement age in France to 60 from 62 for people who started work at 18, a move that goes against austerity efforts across the Western world.
Meanwhile, his Labour Minister, Michel Sapin, responded to a rise in the French unemployment rate to 10 per cent, with a pledge to “make layoffs so expensive for companies that they are not worth it”. The latest opinion polls indicated that Mr Hollande and his allies would gain the 289 seats needed to take control of France’s lower house after a second round of voting next Sunday.
More at the link. The obvious question is: if a company is losing money, and reducing the workforce is the only way they can survive, doesn’t a government policy to “make layoffs so expensive for companies that they are not worth it” mean that it will be the Socialist government’s policy that such companies simply fail? If, for example, the French people simply cease buying as many Peugeots as they had been buying before, PSA Peugeot Citroen would need to reduce production of cars which were not selling well. Yet, Monsieur Sapin would increase the costs of reducing production so greatly that the company would lose money; eventually the company would go out of business, and all of its workers would lose their jobs.
But France is a free country, with a democratic representative republic, and the public have every right to vote for whomever they wish.
The Greeks, on the other hand, staring down the maw of default and bankruptcy, decided — just barely — to be sensible:
By ALKMAN GRANITSAS
ATHENS—Greece’s conservative New Democracy party eked out a slim victory in Sunday’s elections and will seek to form a pro-austerity coalition government with other parties to take the immediate steps needed to comply with strict financial targets set by its international lenders.
The outcome is likely to ease fears—at least temporarily—of a Greek exit from the 17-nation euro zone, but political uncertainty is likely to continue as parties embark on contentious coalition talks, which, even if successful, may not result in a lasting government.
New Democracy leader Antonis Samaras vowed to respect the country’s commitments under a €173 billion ($218.6 billion) bailout agreement with the European Union and the International Monetary Fund, and invited all parties supporting euro membership to participate in a national “salvation” coalition government—a call promptly rejected by radical leftist leader Alexis Tsipras.
“Today the Greek people have expressed their will to stay anchored with the euro,” Mr. Samaras told a packed news conference at Greece’s Zappeio Hall, where Greek party leaders traditionally head to claim victory after national elections. “We will respect our signature and the country’s obligations.”
More at the link. Mr Samaras still has to form a coalition government, but the Pasok party, led by Evangelos Venizelos, supports the bailout plans as well, and with a projected 33 seats, just those two parties would have 161 seats in the 300 seat parliament, a majority. Mr Samaras had attempted to make the election a referendum on staying in the eurozone, or leaving it, as he characterized votes for the radical left.
Monday could be a very good morning on the United States and European stock exchanges.