Over the weekend, the citizens of France elected a Francois Hollande, a socialist, to be their president. Here in the United States, attempts to comprehend this may be futile, given national confusion over whether or not our own president is a socialist,* but there’s no need to panic over this particular European specter. In fact, Hollande’s election may be exactly what Europe needs.
The key issue in Europe right now is hashing out the financial crisis that has already brought low governments in Greece, Spain, and Italy. A simplified version of the story is that most European countries got together under one currency, like the U.S. dollar, but didn’t put the bulk of their government spending under one organ, like the U.S. Congress. Without those two tools unified, some European countries ran up more debt than they could manage and now find themselves in danger of losing access to funding for public spending while their banks teeter, drying up credit that entrepreneurs need.
While these countries might benefit from breaking free of the Euro and returning to their own currencies, it’s a radical step, and no one is quite sure how well it would turn out. Instead, there's been a nearly continent-wide austerity policy—attempts to freeze and cut government spending wherever possible while raising taxes—orchestrated by European heavyweights Germany and France and backed up by bailout money. Essentially, troubled countries cut spending, stable ones make sure they don’t go under, and everyone stumbles to their feet together.
The people in countries facing austerity measures aren’t happy to see their welfare spending, pensions, and health care cut, nor their increased tax bills. Citizens of the richer countries funding the bailouts aren’t happy about supporting people they see as a bunch of lazy, profligate spenders. What’s worse, austerity isn’t working. Most of these countries are facing recessions, which makes paying off their high debt loads more difficult: Economic growth is the only way to pay off your bills.
Now Hollande is in charge in France, a social democrat replacing the more conservative Nicolas Sarkozy. Some, particularly folks who lent money to European countries, worry that Hollande, who generally opposes austerity, will blow up the shaky European consensus or upend France’s role in the European union.
Those people don’t need to worry. Hollande is a socialist, but he’s no firebrand—he’s known as something of a dull figure in his native land. Hollande won’t blow up Europe, but he’s said he will push for European-wide policies that include measures to stimulate economies, not just balance the books in the short term—much the same way that taxpayers in New York and California help support their poorer neighbors in Alabama and West Virginia.
In Europe, this kind of argument has been missing, but pairing Hollande with Germany’s center-right Angela Merkel could bring much needed balance to the continent’s crisis management plan. While today's approach is failing and looks likely to lead to the end of the Euro, the right expansionary policies could encourage countries to grow and pay down debt, not just suffer under its weight.