France and the Euro Crisis

Abstract

The euro crisis, little discussed, profoundly affected the elections in France and the policy options available to candidates. Hollande appeared conscious of this and constrained his campaign promises accordingly. The nations in the Eurozone sacrificed a major component of sovereignty when they abandoned their ability to control their currencies to a European Central Bank itself run under conditions of stringent anti-inflationary policies. The Eurozone, created at a time of anti-inflationary consensus in Europe in the 1990s, imposes a kind of obligatory austerity on its members by requiring budgets balanced to within 3? of GDP and national debt limits under 60? of GDP. Socialist economists offered copious recommendations in reaction to the depression that began in 2008 and that manifested itself in the Eurozone in the sovereign debt crisis. They backed Hollande and counseled him to rethink the role of the state, reorder labor relations, and introduce German and Scandinavian-type “flexicurity” in employment. Thomas Piketty’s work revealed the deleterious effects of growing inequality and advocated aggressive policies of taxation and redistribution to mitigate its effects. But few questioned the Eurozone or its policies of austerity, least of all Hollande.