Of all the external factors that might affect the presidential race, I doubt many people saw President Obama being hurt by an honest-to-goodness European Socialist. But the intention of Francois Hollande, the French Socialist challenger to President Nicolas Sarkozy, to renegotiate the painstakingly struck European bailout could send shivers through economies over there and here.
From an interview Hollande gave German news site Der Spiegel:
I want to renegotiate it. Not all of it — some things seem reasonable to me. I’ve already committed myself to a balanced budget and better economic governance. But what bothers me most is that there is nothing about growth in the fiscal pact. And then there is some uncertainty with regard to the automatic sanctions — that is, what is expected of countries to reduce their deficits.
Hollande is right in a very narrow sense, that growth is key to balancing budgets in Europe (and here as well). But his proposal to attain that growth by issuing euro bonds as “a tool against speculation” and to pay for “big industrial projects” is an ominous one. First, because it’s clearly a ploy to get Germany to pay out more money in parts of Europe that are tightening their own budgetary belts — a ploy that isn’t going to pass muster with exasperated German taxpayers.
Second — and this is where the relevance to our election comes in — any renegotiation is going to restart the roller coaster that bond and stock markets rode for the better part of a year while European pols worked out the current terms. The French elections will be held April 22 (with a potential run-off on May 6) and Hollande is currently leading the polls by double digits with a clear majority.
If he wins and begins agitating to re-open the pact, Katrina bar the door.
And if that happens just as gas prices are approaching their peak, it could put Obama in a real economic bind. Not one to be wished for after a few years of rocky markets, but certainly one that could complicate our economic and political pictures.
– By Kyle Wingfield