France’s President-elect François Hollande faced an immediate economic challenge yesterday as turmoil in Greece and doubts about his own plans threatened to plunge the eurozone back into a debt crisis.
The 57-year-old Socialist won power on Sunday, ousting France’s right-wing leader Nicolas Sarkozy, and he is due to take power formally on May 15 before being plunged into a packed calendar of major international summits.
Stocks tumbled in Asia and opened down sharply in France before recovering, the euro took a new battering and the spread in yields between French and German bonds widened, as markets eyed developments in the eurozone warily.
Traders said there were concerns that victories for Mr Hollande in France and for opposition parties in Greece marked the start of a backlash against austerity measures designed to slash eurozone public deficits.
But Mr Hollande − who said early in his campaign that the world of finance was France’s “enemy” − quickly began consultations with European allies, including telephone talks with Germany’s Chancellor Angela Merkel.
Mr Hollande, while no radical, has vowed to slow the pace of Mr Sarkozy’s public spending cuts and renegotiate the EU fiscal pact, under which signatories agreed tough measures to cut their deficits.
But Germany, while offering to negotiate a separate deal on growth, has ruled out changing the original agreement and the new French leader faces tough negotiations even before his government is in place.
“It is not possible to renegotiate the fiscal pact,” German government spokesman Steffen Seibert told a regular news conference.
Debt-wracked Greece is facing turmoil after parties opposed to its EU and IMF-led austerity programme stripped the coalition government of its majority.
In France, Mr Hollande’s economic plan replaces some of Mr Sarkozy’s cost-cutting with higher taxes on the wealthy but still foresees a balanced budget by 2017, despite a hiring spree in education and a return to retirement at 60.
Bond markets have had six months to get used to the idea of a return to Socialist rule and panic is not expected but if concerns over Paris lead to higher borrowing costs, then the deficit target will be harder to meet.
In his victory speech on Sunday, Mr Hollande admitted that the eyes of Europe and the world were on France but promised to carry through on his promise to revise the hard-won EU stability pact to focus more on growth than cuts.
“You are much more than a people who want change. You are already a movement that is rising across all of Europe and maybe the world,” he told the cheering masses celebrating his victory in Paris’ iconic Bastille Square.
“This is the mission that is now mine: To give the European project a dimension of growth, employment, prosperity − in short, a future,” he had said earlier, at another speech in his electoral stronghold of Tulle.
“This is what I will say as soon as possible to our European partners and first of all to Germany,” he said.“We are not just any country on the planet, just any nation in the world, we are France.”
Ms Merkel had made no secret during the campaign of her support for fellow right-wing and EU fiscal pact architect Mr Sarkozy but she wasted no time in inviting Mr Hollande to Berlin for talks.
After seeing Ms Merkel shortly after his inauguration Mr Hollande will attend several international meetings, including a G8 summit in the US on May 18 and 19 and a Nato gathering in Chicago on May 20 and 21.
Mr Hollande’s communications director Manuel Valls yesterday confirmed that France would use the summit to “announce the withdrawal of its forces from Afghanistan between now and the end of the year”.
US President Barack Obama invited Mr Hollande for talks at the White House, amid concerns about this pledge to hasten the exit of France’s 3,300-strong contingent from the Nato-led force in Afghanistan.
Spain’s conservative Prime Minister Mariano Rajoy said he felt “obliged” to work with his northern neighbour.
Mr Hollande will have to complete the task of casting his new government in the coming days, before his party sets off on the campaign trail for France’s June parliamentary election, when he will hope to secure a ruling majority.
Mr Sarkozy, still only 57, congratulated Mr Hollande on the win and signalled he intends to step back from frontline politics. Official final results of Sunday’s second round run-off showed that Mr Hollande had won 51.62 per cent of the vote to Nicolas Sarkozy’s 48.38.