Chicago School

«With its well-educated populace and sophisticated business culture, France has more economic breathing room than a smaller, poorer nation such as Portugal. Yet it is precisely to Portugal that Hollande should look for an example of the resolve he needs.

Portugal has stuck with a program of austerity and debt-reduction despite severe economic pain and declining living standards. Its center-right government is now ushering in another austerity budget in the face of public protests. What’s not obvious today but will be soon is how dealing forthrightly with its debt, reforming its markets and curbing its public spending will clear the way for growth in the future.

On a recent visit to Portugal, German Chancellor Angela Merkel endured some nasty public protests, including displays of swastikas and catcalls such as, “Merkel Nazi, Go Away.” As head of Europe’s largest and most successful economy, Merkel is pushing fiscal discipline across the continent. She recognizes it is a tough path to follow. But she is exactly right when she notes that Portugal’s “conditions for growth” have improved dramatically, as a result of “the courageous action of its government.”

For Germany, France is the bigger worry. France is healthier yet than Portugal, but as Europe’s No. 2 economy — and Germany’s largest trading partner — much is riding on Hollande’s ability to nurse his nation back to vigor. Germans are skeptical: A recent headline in a prominent German newspaper asked, “Will France be the new Greece?”

Hollande has shown a willingness to adjust his policies. But his scattershot approach won’t be strong enough to pull France out of its economic tailspin. What’s needed is a coherent strategy.

Hollande has to muster the same political courage as leaders of Portugal and his counterpart, President Cavaco Silva, to make France competitive again.»


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