president François Hollande’s Socialist party has won an absolute majority in
parliament, reinforcing his policy to pursue a policy of growth and counter the
German-led austerity drive within the eurozone.
However, the French parliamentary results were undermined by a record low
turnout of only 44% by voters.
The result nonetheless reinforces the
authority of Hollande, freeing him from dependence on both the Greens, who
secured 17 seats, and the left-wing Front de Gauche, led by Jean-Luc Mélenchon,
which won only 10. The majority exceeds that obtained by the Socialist Party in
1988 and in 1997 and is exceeded only by the result in 1981 when François
Mitterrand, France’s last Socialist president, was first elected.
The result was welcomed by French prime
minister Jean-Marc Ayrault, who commented: “The goal is to shift Europe towards
growth and protect the eurozone from speculation. The task before us is
The right-wing Union pour un Mouvement
Populaire (UMP) party headed by ex-president Nicolas Sarkozy, which dominated
the assembly for a decade, suffered heavy losses to win 212 seats and now faces
the prospect of an internal leadership battle. The party was riven by a fierce
debate over whether to forge alliances with the far-Right during the
President Hollande’s policies include a
pledge to maintain France’s commitment to reduce its budget deficit to 3% next
year, although it remains unclear on how this will be achieved. The European
Commission (EC) says that the deficit will remain at 4.3% without further savings,
and other policies include reducing the minimum retirement age from 62 years to
60 for those who started work young, creating 60,000 new teaching jobs over five years and
increasing tax rates for top earners.
However, finance minister, Pierre
Moscovici, last week reiterated that the government would do whatever was
necessary to reach the targets. “France has made commitments to its partners to
reduce its deficit – we will keep to those commitments,” he said. Moscovici
added that government would pass a revised 2012 budget bill next month to
increase tax receipts and make some spending cuts in the 2013 budget.
President Hollande has also campaigned within
the eurozone for a shift in policy away from austerity towards growth-stimulating
measures. According to reports, ahead of the EU summit on 28-29 June, France has sent other leaders a proposed “growth pact” for discussion,
which identifies €120bn of extra spending within Europe. The total includes
existing sources of finance, such as €55bn of unused EU structural funds, and
partly new loans, such as creating €4.5bn of ‘project bonds’ for infrastructure
government currently forecasts that the French economy will grow by no more
than 0.5% this year, before edging higher to 1.7% in 2013.
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The country is expected to survive the review, which it must do to retain its place in the European Central Bank’s asset purchase programme.
The bank believes that the battered UK currency, recently only just holding above the US$1.20 level, could be trading at US$1.36 by this time next year.