So, last night the President fielded an interview on the economy ahead of an EU Summit today where the Eurozone economy is going to be the big elephant in the room under discussion.
On his part, Sarkozy spelled out some potentially risky steps that he will take to buttress France from the continued effects of a struggling regional economy – an upward hike in sales tax by 1,6 points to 21,2%; A ‘Robin Hood’ tax on financial transactions that would come into effect around August. He also spoke on reducing working hours and more apprenticeships for young people (big topics especially given that unemployment is at one of its highest points – one would also add here that the logic behind the hike in sales tax is ostensibly to shift the responsibility of paying for social welfare to consumers. Therefore, employees would use the extra money to employ more people)
He also struck an optimistic note, suggesting that the public deficit would turn out to be lower than predicted by about 0,4 percentage points.
He also hoped that the rest of the Eurozone’s leaders would follow his bold moves on taxation.
However, the potential fall outs could be that the risk he is taking may lower consumer demand and spending, and may cost him re-election. Socialist candidate, François Hollande is already performing quite well at the polls and is projected to win a second round of voting in the presidential election come May 2012.
In the interim, between now and the election, there is still quite a bit of electioneering to do – and word has it that Angela Merkel is going to join Sarkozy on the campaign trail to boost his electoral prospects. Word has it from one of my sources that Merkel’s administration has even been participating in the crafting of a reelection strategy for Sarkozy’s right leaning party, the UMP. There is a clear interest in doing so : A socialist government may not be work well as a partner in Merkel’s drive for financial austerity in the Eurozone.
It is going to be an interesting electoral season to observe, this is for sure. And, I hope to keep a close eye on how all of this ends. Some of my colleagues argue that it does not matter who wins in the end, all the politicians are essentially the same. Well, it’s going to be interesting to follow this as it unfolds!