First Round French Elections: Preliminary Thoughts

The first round of the French parliamentary elections will be held Sunday. Although the Greek election on June 17 has received more attention, the French parliamentary election is also important. Since Hollande was elected in mid-May, he has remained in campaign mode to boost his chances of having a parliament that will enact his program.

There are 577 seats at stake, meaning 289 seats are needed to secure a majority. If Hollande's Socialists do not achieve this by themselves, their first call for an ally will likely be the Greens. The Left Front may poll higher than the Greens, but would make more difficult governing partners, for numerous reasons, but a Socialist-Green government could draw parliamentary support from them.

The importance of these elections is not simply to strengthen Hollande's hand for his domestic agenda, which includes reversing Sarkozy's retirement age increase, but also repealing the planned VAT hike, and increasing taxes on wealth and corporations. It also will free him up to reach a some compromise with Germany over a growth pact and in broader euro zone integration issues.

The timing could not be better. There is a G20 meeting on June 18-19 and the EU heads of state summit on June 28-29. It is at the latter meeting that the ECB/EC/Eurogroup are to unveil a road map that takes the euro area from a weak monetary union to a larger monetary, banking, fiscal and maybe even a political union.

To address Greece, European leaders innovated and built institutional capacity (EFSF/SMP). Out of the new pressures and the deterioration of the situation in Spain comes the impetus for the new big push. It took the prospects of a united Germany to help lift countries over their ideological hump and surrender monetary sovereignty. It is taking this existential crisis to get countries to consider more seriously the sacrifice of their fiscal sovereignty.

Still Merkel and Van Rompuy have cautioned against expectations that the end of June summit will be a big bang. First, given the pattern of under-whelming investors, it makes sense that expectations are guided lower. Second, it seems true that the kind of integration that may be possible now will not come from any one summit. Third, the summit is nevertheless important because the ultimate glue that holds EMU together is not economics but politics and specifically political will. Our contacts have hinted that this summit may provide but a sketch of what is to come and tell us to look forward to the Oct summit for more progress.

There has been institutional capacity built through the crisis, as the founder of the EU understood would be the case. Critics argue that EMU has not been a democratic undertaking, but is an elite project. Yet while officials seem comfortable in broadening the powers of EC Commissioners, the ECB, the EIB, the EBA, etc., the one democratic institution that seems to have been sidelined is the European Parliament itself. Shouldn't a vision of greater integrated Europe have an increased role for the region's parliament?