The ethical deal

The cusp of change? The impact of the French presidential election

Arriving back in Australia after a three week trip to Europe brings to the fore the tyranny of distance.

The choice of The Australian this morning to give prominence to an opinion piece by the Wall Street Journal’s Bret Stephens highlights the risk of under-estimating the scale of change in Europe.

The caustic dismissal by Stephens of the forces propelling the Socialist contender to the Elysee Palace as the result of the conceited embedding of ‘crazy’ ideas underplays the significance of both the French presidential election and wider continent-wide discontent over the failure of the politics of austerity.

Not only has the pursuit of such strategies failed to generate the savings required to appease bond markets across the European Union. It has also exposed deep fissures within the European core over what constitutes political and societal obligation.

The socialist front-runner, Francois Hollande, pointed out in Paris last night that support for a refashioning of political purpose that extends beyond French borders. He cited Italy and Spain as examples of countries determined to base legitimacy on more than capacity to withstand austerity. It is a message resonating across the periphery.

A notable case in point is Ireland.

The country is under the economic stewardship of a troika comprising the European Commission, the European Central Bank and the International Monetary Fund. Notwithstanding the fact that it has received plaudits from the troika for institutionalising restraint, the savings have made little impact on the scale of indebtedness. To do so will require even more savage cuts to already diminished stores of social capital.

The most recent opinion poll shows a steep decrease in the popularity of the government of national unity. The junior partner, the Irish Labour party, has seen its support free fall.

The primary beneficiary has been Sinn Fein, a party traditionally linked to the IRA and hostile to the fiscal compact negotiated by European Union leaders in March. The compact, which copper-fastens the politics of austerity, is subject to a referendum later this month.

A no vote will not torpedo the compact. It may, however, limit Ireland’s access to continued funding, an unsubtle threat that dominates political discourse on the island.

Notwithstanding the pleas of the Government that the compact is best seen as an insurance policy, a positive return is by no means assured. Even in Ireland, bruised by the total collapse of its economy and humbled by its reliance on European funding, there is a limit to capacity to endure.

Events in France do not necessarily give a rationale or justification for an Irish rejection of the compact. They do, however, provide a basis for a more balanced approach to the management of the debt crisis.

In his news conference, Francois Hollande committed to sending written proposals to European leaders the day after the election on May 6th that focus on growth strategies.

These, he claimed, would include plans to generate continent-wide infrastructural spending through the introduction of joint bonds, boost educational and youth spending initiatives through the introduction of a financial transactions tax and facilitate greater structural investment initiatives financed by the European Investment Bank.

None of these proposals necessarily negate either the fiscal compact or the need to aspire to balanced budgets over the medium and longer term. What they do highlight, however, is a determination to transcend the limitations of a political logic that has done little to stimulate moribund economies.

The real impact of the French election is not as Stephens’ points out the elevation of the politics of conceit. Rather it is the signal to sends out that faith in market forces to solve political questions is both limited and limiting.