THE BLOG
08/29/2014 10:59 am ET Updated Oct 29, 2014

Francois Hollande in Purgatory

French president François Hollande is evermore himself and this is bad news for France.

In his first year it was the old Socialist pattern of campaigning in left-wing poetry (for example the 75 percent tax on incomes over 1 million euros), then backpedaling to mixed-up prose once in office when the big interests and the Constitutional Court opposed him. Several months ago he suddenly announced an unexpected pro-business turn (cut labor and social benefits costs to increase competitiveness), trying to cover his tracks with a nod to the left (modest reductions in taxes and social contributions paid by salaried workers).

The strategy was to combine supply side and demand side economics. He hoped to simultaneously stimulate business investment, thus growth and jobs, and to increase demand, thus business investment and jobs. He ditched his complaisant Socialist prime minister, Jean-Marc Ayrault, replacing him with forward-looking realist Manuel Valls, a determined pragmatist who understands that a Socialist (indeed any) French government needs to support the private sector ideologically more than it ever has in the past against France's traditional reliance on the State.

His political balancing act has just cracked. Conservatives never gave him much credit and public opinion deserted him early on. Now he's openly criticized from within in his own party by two important members of the government representative of the Socialist party's left-wing. These are Arnaud Montebourg, the 51-year-old rising star economics minister known for his anti-austerity, nationalist economic views and Benôit Hamon, the education minister, long an ally of Hollande's.

Montebourg's defection is crucial. He's a tall, handsome, charming politician of large ambition, i.e. he wants to be president. He denounced Hollande's pro-business turn and his u-turn to emphasizing reducing deficits as opposed to using deficit spending to stimulate growth (i.e. he accused Hollande, like his conservative predecessor Nicolas Sarkozy, of following the recipes of Germany's Angela Merkel and the IMF).

At this point, Hollande has every reason to despair politically. Unemployment hasn't declined (100,000 more jobless since March), GDP is flat, and domestic and foreign business investment is down. He has no constituency left among the French people and now he's publicly lost control of his own party. Another of his legacies will be failure to prevent the breakout rise of Marine Le Pen's patriotic/nationalist far-right National Front party.

True enough, Holland tried to make his mark in foreign policy, with France taking sole responsibility for pushing back Islamists in Mali for example. He's talked a tough line against Bashar Assad, militant Islamism and Russia's policy in Ukraine but without much military commitment. Among Europe's top leaders he has little gravitas. Merkel and even the British and Polish governments have more sway.

The future of French unemployment is a guidepost to his personal political future.

On April 18, 2014 he told a journalist, "If unemployment doesn't decline by 2017, I have no reason to be a candidate and no chance of being re-elected." This seemed to commit himself so people won't be surprised if he doesn't seek re-election. Why risk a second term filled with more political and personal humiliation when he could retire from politics, write a memoir and move on to some more appropriate occupation.

The grave problem for France is what now?

One hope is the Fifth Republic's hybrid institutional framework set up under founding President Charles de Gaulle. The core is an ambiguity in the words describing who controls the government. French institutions can operate either as a presidential system or an amalgam of presidential and prime ministerial authority ("cohabitation"). Normally the president controls more or less everything, but when elections result in a president and an opposed parliamentary majority it is the prime minister who is in charge of domestic policy with some influence in foreign affairs in collaboration with the president.

Hollande has the following option: he could throw in his cards, become a figurehead president with residual influence in foreign policy. Valls would effectively run the country on the basis of market economics (including de-demonizing the profit motive) while preserving the welfare state as much as possible. Reliance on the State to create jobs through hiring in civil service would be restricted without Hollande having to take responsibility for it.

Hollande should let Montebourg and the Socialist party's left-wing go its own way. He's lost them anyway. The Socialists would be free to prepare the 2017 presidential election with Montebourg a strong candidate against an MRP politician such as Alain Juppé or former president Sarkozy. The battleground for France's political culture would be shifted, including a reduction of the National Front's current open field.