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Wednesday, January 18, 2012

Which candidate has the most to gain from France's downgrade?

The race to the Elysee took another turn on Friday when Standard & Poor’s downgraded French debt. The decision had been widely anticipated by the markets since December, when the ratings agency conducted a review of Eurozone finances. Although all three French parties called for reforms of the ratings agencies – Nicolas Sarkozy’s UMP called for central banks to establish rating criteria, while Socialist candidate Francois Hollande mooted the possibility of a European agency – some candidates reacted better to the downgrade than others.

However, what is the likely effect of the downgrade on the presidential race? A LH2 poll conducted on Friday and Saturday in partnership with Yahoo! and published on Sunday shows that, compared to a month ago, Sarkozy and Hollande saw their ratings slip while the Front National's Marine Le Pen saw her third-place position behind Hollande and Sarkozy boosted. Sarkozy's share of first round voting intentions fell to 23.5% from 26%, Hollande's fell to 30% from 31.5%, while Le Pen gained 3.5% points to 17%.

Le Pen – whom 26% of voters wish to see in the second round according to a separate TNF poll published Friday – used the announcement as an opportunity to justify her policies, which include a return to the franc and protectionist measures such as a 3% import tax to finance her proposed minimum wage and social spending increases. During a jubilant press conference at the weekend, she argued that S&P’s ruling was “validation of the analysis [she] had carried out for the last two years” and that Nicolas Sarkozy’s “boomerang of lies” would soon come flying back to hit him in the face.

Hollande was quick to blame Sarkozy’s economic record. During a conference in French Antilles on Saturday the Socialist candidate remarked that “it’s not France that was downgraded but a certain policy…a certain president”. But his pointedly delayed response to Moody’s decision to maintain its French AAA rating was seized upon by UMP officials as proof that he was rejoicing in France’s downgrade. “Is the Socialist Party more cheered up by bad news for France than good news?” asked the UMP secretary Jean-François Copé.

Hollande also appears aware of the limitations the new downgrade sets for his presidential programme, conceding at the weekend that “not everything will be possible” and his pledge to “re-enchant the French dream” at the beginning of his campaign has itself been downgraded to one of offering “lucid hope”. Hollande has announced that he will propose strong measures to combat France’s ailing economy by the end of the month, a move which commentators have – perhaps rather too quickly - likened to Sarkozy’s 2007 muscular campaign of economic reform.

Sarkozy was the candidate most exposed to the downgrade for obvious reasons. Having brought the question of the country’s debt rating to the forefront of the national consciousness during his campaign to reform pensions (justified on the basis that they would reduce public debt and therefore maintain France’s triple A) he had the most to lose. As he reportedly confided to allies in December, “si la France perd son triple A, je suis mort” (if France loses her triple A rating, I’m dead).

In a conference in Madrid yesterday, Sarkozy downplayed the relevance of the S&P judgment, refusing to answer journalists’ questions because “what happened Friday, is Friday”. Today Prime Minister François Fillon denounced the left’s “small media tsunami which was at times almost as indecent as it was irrelevant”. Sarkozy has instead preferred to focus on employment ahead of the election, organising a ‘social summit’ tomorrow, where he will unveil long-overdue plans to reform France’s labour market, less than one hundred days before the election.

Sarkozy looks like the biggest victim of the downgrade, but Francois Hollande shouldn’t count himself lucky just yet. The Socialist candidate has insisted that he – unlike Sarkozy - never pledged any specific debt rating for France (an admission of pessimism unlikely to win over many additional French voters one would suspect). His pledged reforms to be “tough on the dominance of finance, tough on growth policies, tough on new instruments…tough on tax” don’t appear to have convinced voters either. Le Pen should be able to benefit the most off the back of the downgrade, but her weak performance during a televised interview on Sunday exposed her shoddy grasp of basic macroeconomics (and maths) which has left her poll standing stagnate at 18% today.

In sum, none of the three leading candidates have been able to use the downgrade to their benefit just yet but the race still looks open with only three months before the polls start for real.


Rollo said...

Obviously Le Pen will be the one that gains from the collapse of the Euro and the dream of the European superstate. It is a pity that there is not a reasonable non racist non fascist candidate who backs France above the nightmare of the EU.

Sheona said...

Every French politician backs France above the nightmare of the EU. Just look at the CAP and France's disregard of any EU regulation or decision that does not suit it. Without the EU France would have to stand on its own two feet instead of on Germany's.

Denis Cooper said...

If this Le Pen woman wants France to return to the franc then her victory would mean that the present eurozone would not be preserved intact; so obviously the German political elite and its tools in Brussels will do whatever it takes, ethical or unethical, legal or illegal, to make damn sure that she doesn't win.

And if she did win, they'd start thinking about how to remove her.

ojfltx said...

How is it no one comments on te fact president Sarkozy wanted to reform France's labor market only to be stopped by the sicialists and the unions? He cowered, that is true but if France had grown at the same or higher rate than Germany it could have escaped the downgrade. And do the French really think a socialist government will improve the fiscal situation of France by increasing spending and taxes?