France: difficulties bubbling under surface for Holland

France’s president Francois Holland who swept to power on the back of a growing turn against austerity is already starting to let his voters down. The CWI has always said if you do not break with capitalism you will be forced to meet its calls which call for austerity. France’s economy is not performing well and trouble may be ahead for Holland and the French economy very soon indeed. Hollande, who returned from a 15-day summer break last week, faces an economy that hasn’t grown in three quarters, rising joblessness, a ballooning trade deficit and the task of coming up with a plan in the next few weeks to plug a budget hole of more than 30 billion euros ($37 billion) for next year. The challenges ahead may undermine the rally in French bonds that has allowed the country to sell bills at negative yields for the first time. During Hollande’s first 100 days in office, the premium demanded to hold French 10-year debt rather than comparable German securities fell to the lowest in more than a year. That trend may be reversing. “France’s fundamentals -- rising unemployment, widening current account deficit and budget deficit -- would not support its bonds,” said Jamie Stuttard, head of international bond investments at Fidelity Investments in London, Sovereign debt from France, which was stripped of its AAA rating by Standard & Poor’s in January, got more expensive throughout 2012 -- notably since Hollande’s victory. The rally came as the European Central Bank cut its main interest rate to a record low and reduced its deposit rate to zero as the euro area teetered on the verge of recession and Spanish and Italian 10-year bond yields climbed above 6 percent. Whether or not European leaders manage to reassure investors, Hollande also knows he has an uphill task ahead at home. According to the national auditor, he will have to find about 33 billion euros in new tax revenue or savings by the time his government sets out its 2013 budget on Sept. 24. The budget hole will be larger if the finance ministry is forced to lower its 2013 growth forecast of 1.2 percent. That’s looking likely after France posted a third consecutive quarter without expansion in the three months through June. French jobless claims rose to the highest in 13 years in July as stalling growth prompted companies to trim payrolls, a Labor Ministry report yesterday showed. Prime Minister Jean-Marc Ayrault declined to repeat next year’s growth forecast in a radio interview on Aug. 22. For the first time since Hollande took office on May 15, a majority of French voters lack confidence in his ability to run France, pollster CSA said Aug. 23. Only 49 percent of the French said Hollande has the capabilities to steer the country, down from 58 percent in May, according to the CSA poll for Les Echoes newspaper carried out Aug. 21 and 22. His predecessor Nicolas Sarkozy had a rating of 55 percent at the three-month mark in 2007. Clearly a lot of the optimism Holland swept to power with from many sections of the left and the liberal left is starting to wain. Holland will be forced to make huge cuts to jobs and services which will bring him into conflict with the mighty French working class who have been somewhat quiet of late compared to their usual militancy they are so well known for. What is clear though is that France will not be immune to outside risks and the chickens of Hollands failure to break with the market and capitalism may come back to haunt him. What is needed though is a mass party of the French working class. The left front in France if it keeps up its upward curve of support and highlight Hollands misgivings I am sure we will start to see the left gain ground in France and hopefully move into action. Let’s hope the French working class remember their famous revolutionary traditions and show Europe how to struggle later this year. I look forward to sharing solidarity with the French workers who certainly know how to strike leading to a near revolution in 1968. Workers must learn the lessons from 1968 and lay the ground for bigger and more explosive struggles on the horizon. With extracts taken from Bloomberg