Socialist presidential candidate François Hollande's high-spending manifesto could rock the rest of Europe
Three decades after its greatest postwar political triumph, the French left is shaping up for an epic battle with the economic orthodoxy that has seen the eurozone – and Britain – pursue austerity as the answer to the financial crisis. With the polls pointing to his victory in the presidential election this spring, François Hollande, the Socialist candidate, has set up a major clash not only with his opponent, President Nicolas Sarkozy, but also with France's increasingly dominant partner, Germany, and other European governments pledged to slash spending and walk the path of rigour.
The highly ambitious programme he unveiled on Thursday provides the first real response from the left to the policies Europe has pursued in reaction to the crisis which has engulfed it. If Hollande wins the thumping presidential majority indicated by the polls and implements the programme he announced last week, France will be the scene of a far-reaching confrontation between electoral democracy in one country and the powers of finance and a German-led eurozone
Hollande, a man who has spent most of his career as a backroom party manager, became the Socialist candidate by default when the popular Dominique Strauss-Kahn had to step down after his sexual imbroglio in a New York hotel. He won the Socialist party primary last year and has been grooming himself as a figure fit to fill the quasi-monarchical role of the French presidency.
His manifesto presses all the buttons for an electorate deeply worried about the prospect of national decline epitomised by this month's loss of its triple A status from the ratings agency, Standard & Poor's. The Socialist party, which has never gone through a New Labour moment, rejoiced, especially since it has not tasted national power since 2002.
Hollande promised to boost state spending by €20bn by 2017, create 60,000 teaching posts and 150,000 subsidised jobs for young people. That is to be paid for by higher taxes for the wealthy, a tax on financial transactions and a 15% rise in taxes on bank profits, a ban on stock options and trading in "toxic" financial instruments, plus caps on bonuses. By the end of a five-year term in the Elysée presidential palace, Hollande says he could bring France's budget deficit back on target as the economy booms and austerity is replaced by expansion.
There is a decidedly moralistic strand to all this that goes beyond conventional banker bashing. Hollande is on record as saying that he does not like rich people and that "my real adversary in this campaign is the world of finance". That will go down well in a country that has fallen decidedly out of love with its president and has never been comfortable with the world of finance. Sarkozy insists that France has to ape Germany, but his compatriots yearn to be spared the austerity offered by its president and will watch critically as he repeats his message in a television broadcast tonight.
But if Hollande is riding high, a spectre from the past looms – and one must never ignore Sarkozy's campaigning skills as he fights to pull himself back from the brink.
In 1981, the French left enjoyed its epiphany with the election of François Mitterrand as president. That balmy May night, my French brother-in-law popped the champagne corks in his suburban Paris home to celebrate the end of 23 years of rightwing domination of politics since Charles de Gaulle founded the Fifth Republic in 1958. Driving back to our home near the Socialist party headquarters in Paris, we had to abandon our car because of the jubilant throng in the streets of the Left Bank.
Declaring that there was nothing wrong with dreaming, the Mitterrand administration declared war on finance, nationalising banks as well as big companies, state spending was boosted. Wages went up. Capital flowed abroad. Though some social measures such as the abolition of the death penalty brought lasting reform, the experiment ended in economic disaster as inflation soared, the franc was devalued and unemployment rose after the president was obliged to change tack, adopting policies that increased unemployment, slowed growth and lowered France's status vis-a-vis Germany.
The danger for Hollande is that, like Mitterrand in 1981, he is carried to power on the back of a radical ideological programme that then proves impossible to implement and throws France into an even worse crisis. The country's economy is not in good shape. The budget has not been balanced for almost four decades. Many local authorities are deeply in debt. At 2.8 million, unemployment is at a 12-year high. State spending amounts to 54% of GDP. State debt stands at 85% of GDP and some analysts forecast that it could rise to 95% by 2014.
Sarkozy's promised measures to liberalise the economy and shake up the state sector have had only partial success and have aroused widespread opposition. Surveys show that up to 15 million French people have trouble making ends meet at the end of the month. The trade surplus has evaporated. The IMF forecasts growth of only 0.2% and 1% in the next two years. Banks are heavily exposed to Greek, Italian and Spanish government debt. The gap between German and French government borrowing rates have widened sharply; the price of longer-term insurance on French government debt exceeds the rate of most developing economies, as the World Bank has noted.
France is very far from being the only European nation in trouble, but it is big, both politically and economically, and what happens there is of key importance for the rest of the continent – and will be closely watched by both David Cameron and Ed Miliband. The question Hollande poses is similar to the one Mitterrand confronted after the oil shock and stock market crash of the mid-1970s.
Does the path to salvation lie through belt-tightening, which risks curbing growth indefinitely, or should governments go for expansion, whatever the risks? Hollande leaves no doubt – he pledges to renegotiate the European fiscal treaty due to be signed this week and to favour growth and employment instead. He wants EU taxpayers to fund "great projects", an integrated energy policy and an "ambitious agricultural budget" plus measures to counter unfair trade competition.
That evokes the dreams of which Mitterrand spoke as the Socialist red rose became the symbol of a new era that never materialised. How long will it be before the markets turn on the prospect of a France that will kick over the traces under Hollande and how will Sarkozy react to that? Would France be able to pursue socialism in one country? One is tempted to say that we have been here before. One hopes not. But the gauntlet is down at last.