French Unemployment Reaches 10.8% as Government Plans Fail

At the start of Hollande’s time in office, France, the second largest economy in the area, had enough gross domestic product (GDP) momentum, compared to its neighbors, to act as a wall against the German desire to control the financial fate of Europe. Angela Merkel favored a crack down on nations that could not control their deficits and growth in their national debt. She became the primary architect of tight control over country budgets as part of a series of bailouts. Hollande, on the other hand, mostly favored the notion that the European Central Bank, European Union and International Monetary Fund should provide money to stimulate growth in troubled nations. Of course, it was an argument in which Germany continued to have the most powerful voice, if only because it had to provide a lion’s share of the capital for stimulation.

Hollande’s great weakness now is that, as France enters a recession and its unemployment rate moves toward 11%, Germany and other opponents of stimulus will argue that he cannot get his own house in order, despite its own stimulus efforts. Germany can point to tiny GDP growth and an unemployment level that is between 5% and 6%. Whatever upper hand Germany had in the austerity debate has been strengthened by Hollande’s failure, and the probable result that he will not stay in office.

The argument that stimulus may have to be balanced with austerity to bring about a recovery has gained some credence among European and IMF leaders. Hollande’s chance to be the champion of that movement, and perhaps the most likely person to fight for the stimulus side of the argument, has ended. A jobless rate of 10.8% undermined whatever authority he might has had.