Undercurrent

Nicolas Sarkozy lost his bid for a second term as President of France, a high-profile casualty of the social uncertainties produced by the European financial crisis. He lost, as all the pre-election surveys predicted, to Socialist Party candidate Francois Hollande.

The son of Hungarian immigrants, Sarkozy rose through the ranks of the Gaullist party espousing a tough pro-market policy position. He was the paragon of decisiveness at home and abroad. When the civil war in Libya was beginning, he did not hesitate to recognize the anti-Gadhafi council in the city of Benghazi and sent in French warplanes to destroy the armored column the tyrant sent to basically devastate that rebellious city. In the last election, he ran on the slogan La France Forte — a strong France.

Sarkozy cut a Napoleonic figure in French politics. His glamorous presence in French political life abetted by his marriage to Carla Bruni, a fabulous Italian fashion model and singer. This was not, however, the pan-European partnership that truly mattered to the markets.

Throughout his term, Sarkozy enjoyed an excellent working partnership with German chancellor Angela Merkel. They replicated each other’s policy views on financial and economic matters. Together they held the line as the entire Eurozone was threatened by chaos due to the financial difficulties encountered by several southern European economies.

Sarkozy and Merkel worked feverishly together, pulling together all the Eurozone countries, pushing money to finance the bail out of Greece and stabilize the euro. They forced Greece, Italy and Spain to adopt tough austerity measures to stave off financial collapse. They combined to provide a confused continent credible leadership during a most difficult episode.

To be sure, as Sarkozy remarked as he conceded the elections to his rival, history will remember him well. But this is not the point. He succumbed to a strong populist undercurrent that was chaffing at the painful economic policies that tough fiscal management required.

As he struggled to save Europe, Sarkozy lost popularity at home. The economy wheezed, unemployment among the young was high. Sarkozy’s valiant foreign policy positions, especially in the Middle East, won international acclaim and voter disdain at home. His work to save the euro inflicted pain on French taxpayers.

In democratic elections, the parochial often trumps the heroic. Sarkozy played hero to the hilt and was punished at the polls.

At the grassroots, Sarkozy was caricatured as the president of the rich, a perception encouraged by his sharp dressing and his fashionable vacations. At the start of his term, he attempted to cure youth unemployment by relaxing labor protection standards. That produced a storm of street protests — especially from the unemployed young people he was trying to help.

The strong populist undercurrent is not peculiar to France alone. Sarkozy is already the 11th European leader to fall from power since the financial crisis hit the Eurozone.

The list is likely to lengthen. In this week’s Greek elections, the anti-austerity politicians are expected to score heavily against the proponents of financial stability. This is going to be a war of attrition between the financial managers and the increasingly impoverished voters.

As Sarkozy’s electoral defeat appeared imminent, pressure on the euro escalated. There was strain across all the European markets. The prosperous continent appeared on the threshold of a new episode of uncertainty.

Francois Hollande is not just Sarkozy’s nemesis. He is also Sarkozy’s anti-thesis.

Hollande is bland as Sarkozy is colorful. He exudes the air of a quietly spoken accountant while Sarkozy was routinely imperial in demeanor. His opinions are tempered as Sarkozy’s were tempestuous. He is vague as Sarkozy is clear.

Sarkozy was called many names as discontent with his austerity program rose. Hollande is simply called Mr. Normal.

Sarkozy stood for financial stability, even if this meant absorbing the social costs implied in the shorter term. Hollande stands for growth before fiscal discipline, a discrete rejection of the austerity program.

Hollande’s pro-growth platform pleases the distressed voters as much as it distresses the financial managers across the globe. In the wake of the French elections, prophets of financial calm are trying to spin the results as less a vote for the Left as much as a vote against Sarkozy’s personality. That spin has little to drive it.

There is much to gain by characterizing the outcome of the French vote as anti-Sarkozy rather than anti-market. This will help avert any dramatic fall in confidence on the euro that might be difficult to remedy.

Hollande, for his part, is contributing to reassuring the markets. While he promised immediate changes in policy direction during the campaign, he now says dramatic shifts in policy are not forthcoming.

In a move clearly intended to calm the markets, Angela Merkel, Europe’s champion of fiscal discipline, has summoned Hollande to Berlin for a conference on the financial turbulence sweeping Europe. That meeting is likely intended merely to occasion a photo opportunity of two leaders, arm-in-arm, committing to promote stability in a financially volatile region.

Sarkozy was always an easy man to read. He was always forthright in his views and never allowed political convenience to get in the way of policy clarity. He paid the ultimate price for that, of course.

The world now struggles to read Francois Hollande, a man given to few words and even fewer ideas. The only other Socialist elected French president in the last half-century, Francois Mitterand, tried to nationalize the banks in his first day in office only to reverse course shortly after as the realities of an interlinked financial market immediately knocked sense into his program. Hollande may be more prudent.