The problem is that markets don't listen to politicians.
If Hollande thinks he can make money out of nothing, then he will be another politician who to be whallopped by the markets (not that he really cares) Like the rest, he will play to his crowd and blame it in bankers.
Bloomberg News, sent from my Android phone
April 25 (Bloomberg) -- French Socialist Francois Hollande, the leading presidential candidate, said France won't ratify the European agreement pushed by Germany to tighten budget rules if he's elected.
"There will be a re-negotiation," Hollande told journalists today in Paris. "Either there will be a new treaty, or there will be a modification of the existing treaty. It's about negotiation."
The comments put Hollande on a collision course with German Chancellor Angela Merkel, who has championed debt reduction as the key to ending the region's fiscal crisis. Hollande, who has also pledged to eliminate France's budget deficit, is aiming to use popular support at home to strengthen his hand in talks to promote an alternative.
Merkel and her ruling party are standing firm on German-led remedies, including the commitment to cut debt that was signed last month by all 17 euro-area leaders, among them Hollande's opponent, President Nicolas Sarkozy.
"If Mr. Hollande were to say that he wants to increase government spending and save less, he'll lose the confidence of the financial markets," Peter Altmaier, the parliamentary whip of Merkel's Christian Democrats, said in an interview in Berlin yesterday. "We will stick to our fundamental principles because there's really no alternative."
Hollande finished first among 10 candidates in the first round of France's presidential election with 28.6 percent of the vote. Incumbent President Nicolas Sarkozy finished second with 27.2 percent. The two face off in a decisive electoral contest on May 6.
Resistance Growing
Germany, the largest country contributor to euro-area bailouts, is facing growing resistance from traditional allies to its anti-crisis prescriptions as a $1 trillion firewall and unlimited European Central Bank loans to the region's lenders fail to stop the turmoil from threatening Spain and Italy.
ECB President Mario Draghi said it's too early to talk about a plan for weaning the euro area off emergency measures. "Any exit strategy is premature given the current situation," Draghi told lawmakers in Brussels today.
Dutch Prime Minister Mark Rutte urged politicians yesterday to tackle the country's economic woes after his coalition collapsed over proposed budget cuts, raising investor concern about his country's ability to retain its AAA credit rating. A proposal on austerity measures will be sent to parliament today.
European 'Credibility'
Merkel, who faces two German state elections next month and a national election in the fall of 2013, joined with Sarkozy to craft the euro area's crisis response over the past year and backed him for re-election. She insisted on the need for austerity yesterday, saying Europe's "credibility" depends on reducing deficits and debt.
"We're not saying that saving solves all problems," she told a conference in Berlin. Still, "you can't spend more than you take in. You can't live your whole life this way. Everybody knows this."
The euro strengthened for a second day against the dollar and yen, rising 0.1 percent to $1.3207 at 6:25 p.m. in Paris. The risk premium for 10-year French bonds over German bunds of similar maturity declined for a second day after reaching the highest level since January on April 23.
Merkel may cede ground to austerity critics if the Social Democrats, the main German opposition party, increase their support in May's state elections as polls suggest, said Thomas Costerg, an economist at Standard Chartered Bank in London.
'Last Bastion'
If Hollande becomes French president and Merkel switches allies to govern with the Social Democrats after the German election in 2013, that "may further help to make views converge," he said in an e-mail. "The last bastion of austerity could remain the Bundesbank."
Hollande has said he'll seek to add growth and investment measures to the fiscal treaty signed by Merkel, Sarkozy and 23 other EU leaders on March 2.
If he's elected, his first visit will be to meet Merkel, so he can bring her "French people's vote for another Europe," Hollande said last night.
Merkel "is pretty resistant to pressure," Altmaier said. France's presidential vote and the Dutch government's collapse don't change the fact that "there's no money in Europe, only deficits everywhere you look. Knowing the chancellor, she will await the outcome in France and then we'll try to come to an understanding with the new government, whoever leads it."
Spain, Greece
Europe's front against austerity has expanded in recent weeks after Spain struggled to meet EU-imposed deficit targets, election campaigns in Greece faced anti-austerity rumblings and the revolt against extra spending cuts in the Netherlands, a traditional German ally, pushed Rutte's coalition toward an early breakup. The Netherlands is one of four remaining AAA states in the euro area.
For all the turbulence, "nothing has happened in recent weeks that would raise questions" about the need for area countries to overhaul their economies and cut debt, German Deputy Finance Minister Hartmut Koschyk said in an interview.
No financial backstop is big enough to arrest the debt crisis and hold down borrowing costs on its own, he said. "It doesn't matter," he said yesterday. "It is no substitute for structural reforms" because "the readiness of markets to tolerate out-of-control public debt has vanished."
Holland also said that he'd like the European Stability Mechanism to be backed by the ECB in order to increase its lending capacity.
"I'd like the ESM to have a link with the ECB so it can have the necessary firepower," he said.
To contact the reporters on this story: Helene Fouquet in Paris at hfouquet1@bloomberg.net ; Tony Czuczka in Berlin at aczuczka@bloomberg.net
To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net
Find out more about Bloomberg for Android: http://m.bloomberg.com/android
