Tuesday, 8 May 2012

The economic outlook for Europe after Hollande´s victory

 Socialist François Hollande´s victory in the French presidential election has led to lots of speculation about the future of the German-French relationship and the euro. 

This is the most likely outcome: 

But analysts believe Ms. Merkel and Mr. Hollande will find some common ground, pointing to the long history of compromise in the Franco-German relationship, often between leaders of differing political colors. "It's absolutely crucial for France to remain as close as possible to Germany and to continue the euro," said Eric Chaney, chief economist at AXA Group.
He said Mr. Hollande will push for adding a paragraph to the fiscal treaty on growth. "The Germans will be happy if it is only saying the word growth, everybody wants growth," said Mr. Chaney. "So a compromise is possible, but not on the fiscal part of the treaty."
However, neither this expected "compromise" or any other hitherto agreed approach will solve the euro crisis. No matter how much Hollande, van Rompuy  and all the others - even Merkel - now talk about growth, the reality is that the failed euro project will still be there as an effective barrier to economic recovery in Europe. A French-German "compromise" will only add to the problems. 

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