Next Sunday’s first round of the French presidential elections open the election season in Europe.

Up till some weeks ago, we used to consider the Greek elections to be the most important issue of the coming months, but the French presidential elections in two rounds (the second is on 6 May) followed by a general election in June, now outshine the rest.

The most recent polls show Nicolas Sarkozy now head to head with François Hollande but the latter seems to have a much better showing for 6 May, something like six points ahead of the incumbent.

One can feel all Europe standing motionless, awaiting the outcome and, whatever platitudes may be expressed, things will change if the Socialists take over the presidency from Sarkozy’s centre-right.

There were some scary days this past week regarding the stability of the euro as the spreads in Spain and Italy rose beyond danger point. But the worst may still happen if, as expected, Hollande wins the election and proceeds, as he promised, to tear up the European Fiscal Compact even before it is ratified by the euro nations.

The Compact was agreed to last year, on Germany’s insistence, to head off the euro crisis by committing the euro members to legally-binding sovereign debt levels in order to bring stability and peace to the euro area. David Cameron, to Germany’s disgust, had opted out of this.

At first, in the first months of this year, this Fiscal Compact seemed to have worked. The European Central Bank, on its own initiative, lent money to all who wanted it, and the big debtors – Spain, Italy and Portugal – found they could borrow more cheaply. But the euro nations were warned that if the markets awoke again, this still unratified Fiscal Compact would not survive.

Hollande comes through as a rather vapid person. He has never had government experience and his partner of 20 years, Ségolène Royal, Sarkozy’s challenger at the 2007 elections, said, after he left her for a younger woman, that she could not remember any remarkable thing he did.

Yet he is tenacious – there is no doubt about that. He was secretary of the French Socialist Party for 11 years under François Mitterand, and he knows well the corridors of power. He was never the prime candidate the Socialists had in mind – that was Dominique Strauss-Kahn, until scandal struck in a posh hotel in New York. But Hollande is nothing if not dogged, even though he looks, as people quipped, “like a bank manager”.

In a way, this unexceptional persona may be the antidote the French need after the high jinks of Sarkozy and his initiative a day, hyperactive presidency. The French had a typical French phrase to describe him – Bling, bling – which can perhaps be translated as ‘kitch’, frequenting the rich, with a trophy wife, and frequent instances of showing, like Berlusconi used to do, higher heels to look taller than he actually is. Compared to this, Hollande has a surreal normalcy to offer.

However, in these pre-electoral weeks, he has shifted sharply towards the Left. As soon as he was nominated, he said his “enemies” were “big business”. He has proposed a 75 per cent top tax rate, to engage 60,000 new teachers, and to pull out of Afghanistan. It was calculated all the promises in the Socialist manifesto will cost more than €20 billion and yet he inexplicably promised a balanced budget by 2017.

Even this, however, did not save him. Against all expectations, he has been undermined by a candidate on his Left, Jean-Luc Mélenchon, a Trotskyite, with a far higher rhetorical flair and flamboyance, who, for instance by organising a march on the Bastille, has revitalized a largely depressed Left and Communist hardliners. This firebrand has now pushed Marine Le Pen and her Far Right xenophobic party into fourth place. He promises a “civic insurrection”, withdrawal from Nato, a 20 per cent rise in the minimum wage, a 100 per cent top tax rate and retirement for all at 60.

Even though, as stated, Hollande still stands to get a majority in the second round, to do so he needs the support of the hard Left and he cannot allow his support to be whittled away by stay-at-homes Far Lefts.

On the morning of 7 May, Angela Merkel in Berlin may take a phone call from President Hollande discussing his demand for a renegotiation of the fiscal compact. The Germans are already prepared for this – they have privately suggested that instead of renegotiation, add-ons may be considered, especially promoting growth instead of just austerity.

Hollande could use this renegotiation to persuade Germany to agree to the European Investment Bank selling Eurobonds to finance massive infrastructure projects across Europe, including Project Helios, a €20 billion plan to build a 200-sq km solar power farm in Greece, thus helping Europe and Greece at the same time.

Why would Merkel agree to this? The Fiscal Compact requires a two-thirds majority vote in the Bundestag and the German Socialists have been delaying ratification hoping Hollande will win in France.

But this hope can evaporate in no time at all. The last time an untried Socialist became president in France was Mitterand in 1981. As a member of Mitterand’s team, Hollande may well remember how things turned out: having nationalized large parts of industry, he was made to devalue the Franc twice and the markets punished the French economy really hard. Mitterand was then forced to reverse his policies.

This time round, Hollande says he is more of a pragmatist and that his policies will not be so radical. His pension roll-back would only affect a small minority and his 75 per cent tax a tiny minority. But his policies denote antagonism to business and enterprises as well as wealth creation and it would seem that the French Socialists have not realised the world has changed since 1981 when capital controls were in place, the single market did not exist and young workers did not have today’s mobility.

He may find that within weeks of his election, investors will start to flee the bond market and the young and the well-off start to cross over to Britain with its 45 per cent top income tax rate.

At the same time, if he loses the election, Nicolas Sarkozy has only himself to blame. He won the 2007 election with the support of voters from the Left or Right, who broke with tradition because they were attracted by his pledges of change (‘rupture’) and “work more to earn more”. His promises to raise spending power and create more jobs are thrown back in his face today as broken promises. Unemployment and wages are top of the voters’ concerns, along with health and education, underscoring the threat felt by voters to France’s cherished social model. Immigration and security, about which Sarkozy mostly speaks, are further down the list of priorities.

In 2007, 52 per cent of working class people voted for Sarkozy in the run-off and 48 per cent voted for Royal. Now polls show that 60 per cent of the working class would back Hollande and only 40 per cent Sarkozy.

Over the past years, as Sarkozy micromanaged everything and waged war in Libya, France has been slipping while Germany, which under Schroeder made very important reforms, rose higher and higher. At some point in the campaign, Sarkozy underscored this and said France should be more like Germany, until it was pointed out to him this was counter-productive and angering the country. While Germany is comforted by its triple-A rating, France has seen its ratings starting to decline.

The irony of it all is that while it was under Sarkozy that France fell back, if Hollande wins, France can only slide further down. The crisis in euro land that seemed to have subsided over the past weeks may re-ignite possibly for reasons independent of France, but the process may become even more traumatic because of the outcome in France.

[email protected]