Professor Randall Germain comments on financial governance in Eurozone
“If Hollande, who promises to significantly increase government spending, wins the runoff vote, he will become France’s first Socialist president since Francois Mitterand. What would that mean for the Franco-German alliance on financial governance?
“‘I think that would certainly rebalance the relationship,’ says Randall Germain, professor and chair of the political science department at Carleton University. ‘Sarkozy has really bent a lot toward Merkel’s austerity view of how to work their way out of the crisis,’ notes Germain, author of the 2008 book Global Politics and Financial Governance.
“He predicts that a Hollande victory would ‘introduce a much stronger demand for growth-oriented policies in the major northern European states’ of the eurozone. ‘The resistance to pure austerity is gathering steam everywhere you look.’
“That the coalition government in The Netherlands collapsed last week doesn’t bode well for the future of the eurozone’s fiscal compact. Germain describes the Netherlands as one of the few countries that was ‘completely on board’ with the fiscal austerity pact, but even they ‘can’t get their act together.’
“The IMF economic report clearly states that government spending cuts ‘alone cannot treat the economic malaise in the major advanced economies.’ Germain agrees, noting that austerity policies didn’t resolve the debt crisis in Latin America. Economic growth is the only way to end the euro debt crisis, he says.
“Last week, an increasingly desperate Sarkozy appeared to abandon his tough fiscal stance, pledging to hold a national referendum on the country’s austerity plan if re-elected. However, if Hollande wins the runoff, he might have greater success in executing an economic reform agenda. Historically, says Germain, the country’s Socialists have tended to advance economic liberalization. For example, Mitterand liberalized capital controls in the early 1980s and jump-started the drive for the establishment of the euro.
“What will the eurozone look like a year from now? Germain thinks it will be ‘remarkably similar’ to the monetary union of today. “When I look at the history of the euro, I see this tremendous determination across the entire political spectrum to have it not crack apart.”
“And he’s not sure that even a single country could leave the eurozone without destroying the whole thing. ‘It really is, in a way, all or nothing. They’re going to be putting tremendous political and economic resources into maintaining it.’”
(Geoffrey Johnston, “How the euro crisis could undermine growth and investment in Canada,” www.thewhig.com)