French Front-Runner Says He’d Seek to Renegotiate Fiscal Treaty if Elected

The front-runner for the French presidency, the Socialist candidate François Hollande, said on Wednesday that if elected he would ask other European leaders to renegotiate a fiscal treaty in order to promote growth.

French Socialist Party (PS) candidate for the upcoming Presidential Election Francois Hollande addresses the audience during a campaign meeting at Le Bourget on January 22, 2012 in Paris, France.
Samuel Dietz
French Socialist Party (PS) candidate for the upcoming Presidential Election Francois Hollande addresses the audience during a campaign meeting at Le Bourget on January 22, 2012 in Paris, France.

Mr. Hollande also praised the position taken in Brussels on Wednesday by the head of the European Central Bank , Mario Draghi, who said he favored “a growth compact” of structural reforms in parallel with the fiscal treaty limiting budget deficits and national debt .

But there was little indication that Germany, the driving force behind the austerity-driven fiscal treatyagreed to last month, was warming to his ideas.

In the first news conference of his campaign, Mr. Hollande said that he would propose four modifications to the European Union treaty, favored by Germany and approved in March but not yet ratified. Most significant, perhaps, he called for the creation of collective euro bonds, but to be used to finance industrial infrastructure projects, not to consolidate debt, which the Germans oppose.

He said he would also call for a financial transaction tax, as his rival, President Nicolas Sarkozy has done, and for loosening up regulations to allow unused European Union structural funds to be spent on growth. Finally, he urged the European Investment Bank to place a greater emphasis on job creation in its allocation of financing.

The main risk to Europe now, Mr. Hollande said, “is that the European economy remains in a recession because not enough credit is provided to companies.” He said that increased growth would help shrink debt, and that other European leaders were coming closer to his argument that increased growth is “ultimately a more effective way of reaching the same goal of controlling the debt and reducing deficits.”

Mr. Hollande continues to lead Mr. Sarkozy in opinion polls for the second round of the presidential election on May 6.

Germany’s chancellor, Angela Merkel, supported by Mr. Sarkozy, led the push for Europe’s budget treaty, which would require nations to limit their annual budget deficits to 3 percent of gross domestic product by 2013 and gradually reduce their total national debt to 60 percent of G.D.P.

Mr. Hollande said Wednesday that he was “ready to open this discussion with Madame Merkel,” who has urged Mr. Sarkozy’s re-election. If he becomes president, Mr. Hollande will make his first visit to Berlin. He will be “firm and friendly” with Ms. Merkel, he said. “There’s no need to create a conflict, even if we’re not here to hide our divergences.”

Ms. Merkel supported Mr. Draghi’s comments on Wednesday, telling her Christian Democratic Party in Berlin that Europe needed growth “in the way that Mario Draghi said it today, that is in the form of structural reforms,” she said.

But if he were expecting a new receptivity in Berlin to growth policies, Mr. Hollande seemed to be heading for disappointment. Ms. Merkel’s stance on austerity as the cure for the sovereign-debt crisis in Europe stems from a mix of domestic politics, strategic maneuvering and deeply held conviction that analysts say is unlikely to change anytime soon.

“Ms. Merkel wants to be re-elected in 2013, and that would be strongly endangered if she supported debt-financed growth in other countries,” said Heribert Dieter, a senior fellow in the global issues research group at the German Institute for International and Security Affairs in Berlin. “You can’t sell that here.”

Taxpayers in the former West Germany have already spent more than two decades sending funds to the former East Germany, by some estimates as much as $2 trillion. On pay stubs, workers can still see deductions for the “solidarity tax” for the east and are adamantly opposed to shipping any of their money abroad.

“For Ms. Merkel, European politics is very much being based on domestic politics,” said Timo Grunden, a political scientist at the University of Giessen. “At the moment, her hard line toward European partners is being interpreted as a strength.”

Germany has never opposed structural reforms or the use of European Union money to promote them. But with two important state elections coming up next month — in particular, a vote in North Rhine-Westphalia, Germany’s most populous state, and considered a bellwether for federal elections — it is considered unlikely that Ms. Merkel will bend very far on assistance for struggling European countries.

But the German emphasis on austerity is becoming increasingly unpopular, with opponents saying it creates a self-defeating cycle of economic stagnationleading to lower tax receipts. It has been denounced in large rallies in Greece, Spain and the Czech Republic recently, and has proved to be a losing plank in any recent European election where it was tested.

In foreign affairs, Mr. Hollande repeated his intention to begin removing French combat troops from Afghanistan as soon as he takes office, promising that France would halt combat operations there by the end of the year. That is a year earlier than Mr. Sarkozy had pledged to NATO, which has agreed to hand over combat to Afghan forces by the end of 2014.

Mr. Hollande said that France is a strong ally of Washington.

“Even if we should have several differences of approach with the United States on NATO and Afghanistan, we are aware that we are allies and partners,” he said. And he pointed out that Mr. Sarkozy had also accelerated the timetable, saying that he would stop combat at the end of 2013.

On Syria and Iran, Mr. Hollande said, he supported France’s current positions of solidarity with Washington and with the Syrian opposition. On Iran, France has pushed hard for increased sanctions to stop any Iranian program to build a nuclear weapon, which Iran denies it is trying to do. France is a key part of the negotiations with Iranto ensure that its nuclear program is a peaceful one and to prevent a military attack by Israel.

Mr. Hollande’s chief defense adviser, Jean-Yves Le Drian, said in an interview that the Socialist position on Iran remained “very firm” and “the same” as now, and he pointed out that on Afghanistan, French troops would remain after this year to train Afghan soldiers and police officers, and Paris would keep its commitments to its allies and the Afghan people.

While praising the press, Mr. Hollande also poked fun at the pro-Sarkozy newspaper Le Figaro, saying that if he won the presidency, Le Figaro would have a front-page headline the next day reading, “François Hollande, President of the Republic, Embarrassment at the Socialist Party.”