French Candidate Hollande's Projected Win Could Change Eurozone's Course

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French presidential frontrunner Francois Hollande, of the Socialist Party, could prompt major changes to the German-led austerity model, which much of Europe is already rising up against.

French elections on Sunday will likely speed up changes to the core European dynamics that have steered the eurozone's path through the economic crisis, particularly if socialist Francois Hollande, who is leading President Nicolas Sarkozy narrowly in the polls, scores a victory.

Mr. Hollande seems certain to set in motion a change to the strict German-led austerity measures that have so far allowed Berlin to dictate steep spending cuts in national budgets, even as the European debt crisis spilled over into a political crisis, with five governments falling and streets filling with protesters.

Mr. Sarkozy has worked shoulder-to-shoulder with German Chancellor Angela Merkel to bring the model of spending cuts and balanced budgets into play. Only a few months ago, when European Union members signed a "fiscal compact" setting the new economic approach in stone, the austerity prescription looked ironclad.

But Hollande has campaigned on plans to incorporate elements of growth into the austerity mandate, an idea bolstered by support from Mario Draghi, head of the European Central Bank, who has suggested a "growth compact" for Europe. Across Europe, even some adherents to austerity are beginning to question it as a solution to the economic crisis. So when Hollande promises a "new direction for Europe," as he did in his only debate with Sarkozy on May 2, the promise may be more than rhetorical, analysts say.

"We are entering a period where all cards are not yet on the table, where various conflicting logics in Europe, economic and social, are testing each other," says Karim Emile Bitar, senior fellow at the Institute for International and Strategic Relations in Paris. "We are approaching a fault line: How much austerity can growth proponents accept, and vice versa?"

Hollande is part of a larger movement

A Hollande victory would not take place in vacuum. Anger and frustration with austerity is rising across the continent, as seen in marches in Prague and Madrid, pushback from some of the austerity model's former strongest backers (like the prime minister of Spain), the collapse of the ruling coalition in the Netherlands, dissent among leading German politicians, and the general angst in Italy, Greece, Ireland, and Portugal.

And of course, there is worry in France itself, which had its AAA credit rating reduced in January and where unemployment hovers at nearly 10 percent. (There is also a fear in France that there could be a market backlash to a Hollande victory, which would bring in a socialist government for the first time in 17 years.)

By challenging austerity, Hollande would likely position France as a lever between the debt-ridden southern tier of Europe and the prosperous German-led north, creating some "creative tension" with Germany over basic direction, as Ulrike Guerot of the European Council of Foreign Relations in Berlin puts it. …