The president's woes matter outside France. The failure of his anti-austerity pledge has left the balance of power with Germany
It is just 11 months since France elected François Hollande as its first Socialist president since 1995, spurring a wave of expectation on the European left that he would lead a pro-growth offensive against the cheerleaders of austerity. When his party and its allies won an absolute majority in the national assembly, it seemed Europe might be acquiring a real challenger to the Berlin-Brussels-London consensus.
It has not turned out like that, of course, evoking inevitable reminders of the last Socialist presidency, that of François Mitterrand. He came to office in 1981 on a reflationary platform declaring that there was nothing wrong with dreaming; the trouble was that waking up proved very jarring, as the Hollande administration is now discovering.
Growth under the would-be expansionary champion has not risen; in fact, it has positively slumped. Finance minister Pierre Moscovici says it might total 0.1% this year compared with the official forecast of 0.8%. The economy contracted by 0.3% in the last quarter of 2012. France will miss the target of reducing its deficit to 3% of national output in 2013. Unemployment is at 10.6%, and much higher among young people.
France has been running a monthly trade deficit of €5 billion and its falling competitiveness in costs is widely acknowledged. The structural reforms the economy needs have been held back by vested interests, largely in the public sector. Hollande is the first president of the Fifth Republic who is a creature of his own party rather than its progenitor, limiting his authority, while his attempt to be a "normal" president sits ill with the quasi-monarchical character of the post crafted by Charles de Gaulle for himself.
What's more, the political crisis that has blown up over a former French budget minister's secret foreign bank deposits, and the revelation by the Guardian and other newspapers that Hollande's presidential campaign treasurer has off-shore accounts in the Cayman Islands, gave the head of state his toughest test to date, exacerbated by his harping on the evils of money.
Already scoring the lowest opinion poll ratings of any president (27% in the latest survey), Hollande seems caught in a downward spiral. In a big television interview last week, he was earnest and spoke sense, but offered nothing to galvanise a jaundiced nation. At the weekend, the Elysée palace played down talk of a government reshuffle, but the prime minister, Jean-Marc Ayrault, cuts a lacklustre figure and some Socialists are calling for a referendum on public morality. The National Front's Marine le Pen thunders about national decline and the hard-left leader Jean-Luc Mélenchon is mobilising his troops against "an intrinsically rotten system".
Hollande's woes matter outside France's frontiers. The way the country is stumbling economically has shown just how hard it is for the European left to craft policies to redress the continent. Ed Miliband is likely to be rather more circumspect in his embrace of the beleaguered figure in the Elysée than he was in the first flush of Hollande-mania.
That leaves the field to belt-tighteners and bond markets. The chaotic outcome of the election in Italy reinforces this; having saved his country from a Greece-style crisis, the prophet of austerity, Mario Monti, trailed in fourth place, but the Socialists have been unable to form a government. The Five Star Movement of comedian Beppe Grillo is a recipe for chaos and, incredibly, Silvio Berlusconi still lurks on the fringes of power. The crisis of authority across southern Europe has been exacerbated by scandal allegations against the government in Spain while Greece remains mired in the morass of dodgy accounting. The terms of the bailout of Cyprus introduce a whole new level of uncertainty.
The wider effect of all this and, in particular, of Hollande's troubles, is to reinforce Germany ahead of the federal elections in September. Berlin would prefer not to find itself in increasingly lonely leadership. But there is nothing Angela Merkel can do. Though her Christian Democrats have suffered setbacks at state elections and the polls show the CDU short of an overall majority – opening up the possibility of an alliance with the Greens against the Social Democrats – Merkel is personally popular. She enjoys support for her European policies. But the context is shifting.
Her country's relationship with France has provided the backbone for the construction of Europe since the Franco-German friendship treaty signed by de Gaulle and Konrad Adenauer in 1963, but it is now in questionable shape. Merkel and Nicolas Sarkozy did not get on well, but the Frenchman knew better than to get out of step with the chancellor in public. Paris and Berlin can agree on some things, such as their rejection of David Cameron's plan for a new European treaty to pacify his euro-sceptics. But Hollande's proclamation of a pro-growth agenda in his election campaign widened the division; the Germans regard the pace of French structural reforms as too slow and take a dim view of France's sympathy for critics of austerity in southern Europe.
If Hollande had been able to set out a strong pro-growth stall there might have been an equilibrium between the two big continental states, even if this discomforted Merkel. But his weakness makes that a remote prospect, with no serious alternative policies in sight to those put forward by the chancellor, despite popular resentment at austerity and the inner contradiction of expecting spending reductions to breed growth.
This means that a two-speed eurozone, divided between northern and southern states, becomes more likely, with Brussels and Berlin incurring rising unpopularity in the latter as anti-austerity election results underline the EU's democratic deficit. France risks being caught in the middle, its heart with the south, its economic prospects tied to the north, while Cameron's search for a fudge on Europe increasingly irritates leaders with more serious matters on their minds. Europe's politicians have been adept at kicking the can down the road in this crisis, but the nature of the road is changing, abetted by the storm swirling round the Elysée.
Jonathan Fenby is author of The General: Charles de Gaulle and the France He Saved
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