Europe's Grand New Bargain

Roger LiddleLord Roger Liddle is a Labour Whip and a frontbench spokesperson on Europe and Foreign Affairs in the House of Lords

Francois Hollande’s victory will greatly cheer the European Left. It is the first left wing victory in one of the European Union’s big six since the Spanish Socialists won re-election under Zapatero in March 2008. The French Socialists have not won a Presidential election since 1988, nor a National Assembly election since 1997.

The French Left have now scored a famous victory, despite suffering years of disdain as the most unreconstructed party of the left in Europe. This is in contrast to the various brands of social democratic modernisation that in the past five years have gone down to a succession of big defeats in Britain, Germany, Italy, the Netherlands, Spain and Sweden. But what in truth is Hollande’s success a victory for?

Cynics will say it is no more than a victory against incumbency. In austerity Europe, no government can survive the social consequences of its policies. The collapse in the PASOK vote, the former majority socialists, in the same day’s Greek elections tends to bear out this thesis, as did the record swing that ejected PSOE from government in Spain in November 2011.

Yet I think Hollande’s victory represents more than that. Sarkozy not only lost in France: Hollande won. For Hollande it was a double victory. First he revived the French Socialists as the principal standard bearers of the Left, thereby ensuring a convincing victory in the first round. Hollande’s candidacy gained enormously in legitimacy as a result of the fact that he was elected in an open primary of French Socialist supporters in which nearly three million French citizens participated. This is the new frontier of party modernisation and open democracy which the Labour leadership has now to embrace in party selections, just as in the 1990s John Smith and Tony Blair risked their position to force through One Member One Vote and a new Clause Four.

Secondly against Sarkozy, Hollande was the candidate of decency and common sense whereas Sarkozy was the glitzy, hyperactive populist. In the last six weeks Sarkozy threw everything at Hollande in a desperate attempt to win over the voters of the National Front, appealing to all the voters’ worst instincts: Hollande appealed to their best.

 What does it mean for European social democracy? Some in Britain may be tempted to see Hollande’s advocacy of a 75% top rate tax and his positioning of himself as the enemy of high finance as proof that swinging to the Left can be electorally successful. But in my view this would be a profound misreading of Hollande’s position. Hollande is a genuine egalitarian: this is in keeping with the mood of the times. Like Ed Miliband, he wants a new reformed model of capitalism that curbs the excesses of an out of control financial sector.

His victory however is no repeat of Francois Mitterrand’s turn to the Left in 1981. That was an attempt to build French ‘socialism in one country’ on the back of a programme of mass nationalisation and high public spending. Hollande by contrast, stresses the need to bring down the French deficit and debt. This was an issue on which he consistently attacked Sarkozy for political failure. He is a fiscal conservative advocating an ‘in the black’ Labour position: his difference with Sarkozy on the future is that the French deficit reduction plan should be phased over an additional year. He knows that at the level of the nation state, his new government will have precious little room for economic manoeuvre.

Hollande’s main effort will be to construct a new grand bargain for Europe. His immediate priority will be economic: a plan for growth to put alongside national deficit limits, not be a substitute for them. I expect the outcome to be a new economic framework more favourable to growth enhancing investments, which will require  a big increase in resources for the European Investment Bank, better use of EU structural funds and a modification, not a scrapping of the fiscal rules. At the same time he will press for a tougher approach to financial regulation, including a financial transactions tax.

Politically Hollande will be more open to further European integration: Sarkozy always preferred intergovernmental solutions in keeping with his Gaullist heritage. In my view Hollande’s election will in time strengthen the Franco-German partnership in Europe, not weaken it. I do not underestimate the difficulties in ratifying new European treaties, not least in France where in the first round, 30% voted for anti European candidates, but I suspect Hollande and Merkel will give it a try. Their argument will be twofold. First there is no other way to save the Euro and the post war political settlement in Europe. Secondly, a stronger Europe is the only way to protect people against the multiple risks of globalisation.

For the British Coalition their policy is likely to result in greater isolation in Europe on both their priority for austerity and their negative approach to the future of the European Union. But for Labour this is a major opportunity to re-engage with a Continental Left whose basic instincts and values we share.

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