David's Thoughts on the French Elections - II

In two rounds in June the French went to the polls and reversed the makeup of Parliament, giving the new Socialist President a Socialist majority.  This election seemed much more sweeping than the presidential one, which was closer than predicted. 

Because of the multiplicity of parties, the socialists, with less than 50% of the total vote nationwide, won a majority of the seats.  Seats, similarly to the US, are voted upon by population districts.  The candidate, who in the runoffs gets a majority in the voting district, is elected.

Francois Hollande and the Parti Socialiste will now have control of the levers of power, and the ability to make decisions without the need to cater to coalition partners or other parties that they would have needed to make up a majority in parliament.  It will be interesting to see how this plays out, as economic constraints with the Euro and with France’s budget will, like many places in the world, constrain the government’s ability to initiate new programs.  There is little or no ability to increase deficit spending, and little or no ability to significantly increase taxes to pay for more spending.   Unlike in the US, countries cannot simply print more money as we have been doing [“Quantitative Easing”] to finance job creation and other economic activity.

It does seem that both on the street and in the press that there are few unrealistic expectations, which should help the government.  Problems typically occur when peoples’ expectations exceed what the system can or will deliver.  The elephant in the room right now for western governments worldwide is the possibility [some would even say certainty] of Greek default and the breakup of the Euro zone.  This has the potential to produce results that will be devastating for Europeans, and will require a good deal of skill and statesmanship from many heads of state.

The Euro Symbol outside the European Central Bank in Frankfort, Germany