France has voted for change in their national elections, removing Nicolas Sarkozy from his top spot and replacing him with Francois Hollande. He takes the role at a time when the eurozone is facing a host of problems, with the obstacle requiring the most urgent attention being the economy.
Much of the concern over the eurozone is due to the chaos that has engulfed Greece, but there are doubts over the new president’s plans with and worries that his policies could send the eurozone back into debt crisis. The effects of a slumping eurozone economy have hit the UK economy hard, causing stock market upheaval and thwarting attempts to get the UK out of recession.
57-year old Hollande has put the Socialist party in control, ousting the right-wing Sarkozy. He will not be taking up the role until May 15, but when he does he will juggling a packed calendar and numerous international summits.
The news of the new president saw stocks fall in Asia; they opened lower in France before recovering later in the day. With the developments in the eurozone being watched warily, the euro also took a beating while the gap between French and German bonds yields widened.
Traders had big concerns that wins for Hollande in France and the opposition party in Greece could begin a backlash against austerity measures, which were originally designed to cut public deficits in the eurozone.
The worry for those focused on dealing with the eurozone crisis has stemmed from a remark made by Hollande early in his campaign, where he said that the world of finance was France’s enemy. However, very quickly after he was victorious he started consultations with his allies in Europe. This even included a telephone conversation with Angela Merkel, Germany’s Chancellor.
Hollande has promised to slow the pace of public spending that existed while Sarkozy was in charge, and will be renegotiating the EU fiscal pact. It was under this very pact that signatories agreed to negotiate measures in order to reduce their deficits.
While they are offering to negotiate a separate deal on growth, Germany will not be making any alterations to the original agreement, clearly signifying that the French president is looking at some tough negotiations before his Government is even in place.
The economic strategy put forward by Hollande will replace many of Sarkozy’s cost-cutting plans with higher taxes on the wealthy. He is still planning on providing a balanced budget by 2017, even including a increase in education-related hiring and a return to a retirement age of 60.