France's presidential election has Wall Street and the global markets worried – and for good reason. The election of Socialist party leader Francois Hollande to France's top job this coming Sunday would introduce an air of instability into the global economy at a time when it desperately needs a steady hand.
But beyond the instability, there are concrete reasons why the markets should be concerned with a new Socialist-led government in the Elysee Palace. If elected, Hollande will inevitably push for tougher financial regulation in France and on the continent, and unlike his predecessor, will most likely see them through. This will invariably impact and eventually restrict the way Wall Street and the City of London does business, both on the continent and, quite possibly, at home. And if he pushes hard enough, he could disturb the carefully crafted agreement with the European Central Bank that is keeping the euro on life support, setting off a chain of events that could have dire worldwide economic consequences.
Wednesday's much hyped television debate between incumbent President Nicholas Sarkozy and his challenger, Francois Hollande, was nastier than expected. The candidates barked insults and spoke over one another for over three hours on everything from nuclear policy to who would be the toughest on Islam. While the debate did not provide any earth-shattering revelations from either man, it did solidify Hollande's commanding lead over Sarkozy.
It is no surprise French voters would be looking for a change in leadership given all the economic turmoil in the country. Voters and parliaments across Europe have pushed incumbent governments out of power, regardless of ideology, as the financial crisis has deepened. Germany is the only exception, but only because its elections are scheduled next year. Governments in Spain, Ireland, Italy, the UK, Portugal, Greece and most recently, the Netherlands, have all fallen in the last year or two.
In the eurozone, the changes in leadership have been viewed as mostly positive by the markets -- they have brought with them the tough changes needed to help stabilize the seemingly endless European sovereign debt crisis. A change in leadership in France should therefore be viewed the same way, right?
No. Hollande has said that he would shake things up once he gets in power and would not toe the line with Germany or anyone else. That means anything is on the table, including agreements Sarkozy had carefully worked out with his European counterparts in taming the sovereign debt crisis. In addition, Hollande seems bent on really sticking it to the banks. He is no fan of the City of London and Wall Street and has openly criticized them for the role they played in the financial crisis. "My enemy is not another candidate, it is not a person, it has no face, it is the world of finance," Mr. Hollande said in January. He clearly has an axe to grind, but he may be getting ready to slice off his own hands.
