After triumphing in the first round of the French presidential elections, Francois Hollande is now favourite to move into the Elysee Palace. Channel 4 News looks at what he stands for.
Francois Hollande is hoping to follow in the footsteps of Francois Mitterrand, the last socialist to oust a right-of-centre president in France. That was three decades ago in 1981, but Mr Mitterrand held on to power until 1995, a fact that will not be lost on Mr Hollande as he contemplates victory over President Nicolas Sarkozy.
He has attracted opprobrium in financial and business circles because of his plans to tax the rich, and President Sarkozy's government colleague Alain Juppe claimed on Monday that "France will go to the wall" if Mr Hollande is elected in May.
But Tony Dolphin, chief economist at the left-of-centre Institute for Public Policy Research, told Channel 4 News that the tax and spending plans of France's two biggest parties were not radically different, and the reaction of the markets to a Hollande presidency "might tell us something about what would happen here if the government followed Labour's advice and slowed the pace of deficit reduction".
Raoul Ruparel, head of economic research at the pro-market think tank openeurope, said high taxes on the wealthy would be a "big departure from the norm", while Simon Tilford, chief economist at the pro-European Centre for European Reform, said: "I don't see how it is going to be politically possible for tax rates on the wealthy to remain at their current level. There will need to be a debate about appropriate tax rates for the wealthy and super-wealthy."
What Mr Hollande is proposing would not just affect France. There would also be implications for the rest of the eurozone as it struggles to reduce debt.
The markets' reaction to Hollande's plans, if implemented, might tell us something about what would happen here if the government followed Labour's advice and slowed the pace of deficit reduction. Tony Dolphin, IPPR
President Sarkozy and German Chancellor Angela Merkel agreed a so-called "fiscal compact" in December that should make it harder for countries to build up big budget deficits - the difference between what they spend and raise in taxes.
But Mr Hollande wants the compact to be renegotiated - never an easy feat in the 17-nation eurozone - with a new emphasis on jobs and growth.
Like President Sarkozy, and much to David Cameron's chagrin, he would champion a Europe-wide financial transactions tax that would have ramifications for the City of London.
Tax the rich
Within France, Mr Hollande proposes to balance the budget by 2017, a year later than President Sarkozy.
The rich would pay more tax if he were in charge, with a 75 per cent rate on those earning more than 1m euros a year and a 45 per cent rate for those earning above 150,000 euros. The 75p rate would be the highest in Europe.
There would be a cap on executive pay, with top earners unable to make more than 20 times as much as the average wage, along with 20bn euros of new spending on tackling youth unemployment and creating jobs in education and the police.
The right to retire at 60 would be restored for those who began work at 18.
Concerns about French indebtedness led the ratings agency Standard & Poor's to downgrade the country's AAA rating in January. Mr Hollande's focus is on tax rises, rather than spending cuts, and some investors believe French borrowing costs could rise as a result. This is what happened on Monday after his success in the first round.
"He is also proposing a top rate of tax of 75 per cent, which puts the debate here over the 45/50 per cent rate in the shade."
Mr Dolphin said that while Mr Hollande's attempt to "reopen the debate on the EU fiscal pact" was a "sensible move", the markets "might react badly to it if they think tensions between France and Germany could delay a deal to sort out the eurozone crisis".
Raoul Ruparel told Channel 4 News that he did not believe Mr Hollande would be able to secure big changes to the "fiscal compact" because of German resistance. He said: "I am sceptical he will be able to make substantial changes. I would expect him to water down his approach compared with his rhetoric.
" I don't think that Germany will go for it at the moment. I'm not sure what leverage he has with Germany, what his past experience is with Merkel. He's not bringing much to the table in terms of what he has to offer. He may be able to secure a paragraph in the treaty about growth."
Mr Ruparel said the proposed 75 per cent tax rate was a "big departure from the norm", adding: "Only a couple of months ago the French government was talking about harmonising tax with Germany. There will be a stark change of approach if Hollande gets in.
"In terms of the broad approach in Europe, competitiveness and appeasing the markets, this massive increase in tax does not quite fit that description. It will be interesting to see how the markets respond."
Speaking to Channel 4 News, Simon Tilford said that while Mr Hollande's policies on labour market reform and the retirement age were "antediluvian", some of his other ideas were reasonable.
"He is right to allude to the risks of excessive fiscal austerity," he said. "When he argues that fiscal austerity will do nothing on its own to address the eurozone crisis, he is on very strong ground.
I don't see how it is going to be politically possible for tax rates on the wealthy to remain at their current level. Simon Tilford, Centre for European Reform
"I don't think it would be wise for France to raise tax rates on the wealthy to that extent. But if we continue to see sluggish growth and rising inequality, the issue of tax rates will become steadily more divisive. I don't see how it is going to be politically possible for tax rates on the wealthy to remain at their current level. There will need to be a debate about appropriate tax rates for the wealthy and super-wealthy."
Mr Tilford said Mr Hollande was unlikely to implement all of his policies. With Mr Hollande appealing to the left and President Sarkozy to the right, "we're going to hear both candidates say things they would be highly unlikely to pursue if elected".
Tony Dolphin said Mr Hollande had pledged to spend an extra 20bn euros over five years, not a great deal more than President Sarkozy. "In this sense, there is a direct comparison with the debate in the UK between the government and opposition, so the markets' reaction to Hollande's plans, if implemented, might tell us something about what would happen here if the government followed Labour's advice and slowed the pace of deficit reduction.
23 April 2012
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