Better a True Socialist Takes France Over the Cliff Than a Failed Conservative

It would be understandable for those American conservatives who take an interest in goings-on in Europe (and I appreciate that many will have grown bored of the regular announcements that the debt-mired continent has been 'saved', followed a few days later by the news that it's once again at the brink) to root instinctively for Nicolas Sarkozy in France's presidential election run-off a week on Sunday.

As Michel Gurfinkiel writes on the front page, Sarokozy, of the nominally conservative UMP, finished narrowly behind the Socialist Party's Francois Hollande in yesterday's first round of voting. The outcome of the run-off will depend on how many votes each can pick up from the eliminated candidates.

Opinion polls, which called the first round pretty accurately, suggest a win for Hollande, and crunching the numbers he appears to have a slight edge; factor in Sarkozy's personal unpopularity and the 'throw the bums out' mood of French voters and the margin grows. Sarkozy could still turn things around; however, from a conservative viewpoint, his defeat would be no bad thing.

When Sarkozy came to power in 2007 he was hailed in some quarters as a French Reagan or Thatcher, the man who would finally take on the unions and other vested interests to cut taxes, reform the public services and free businesses and industry from burdensome regulations.

He made some progress, but was thrown off course when the financial crisis hit in 2008. Sarkozy soon reverted to the time-honored French policies of state intervention, or dirigisme, raising taxes and clamping down on what he called the "dictatorship of the market". Acknowledging this change of direction he even mused "Have I become a socialist? Perhaps." From the French Reagan to the French Bernie Sanders in a little over a year.

Sarkozy was pushed further to the left by the rise of Hollande, who has promised big increases in state spending, 60,000 new teaching jobs (Sarkozy had promised 100,000 new state-subsidized jobs), a rise in the minimum wage and a 75% top tax rate on high earners (sound familiar?). He's also pledged to scrap Sarkozy's modest proposal to raise the retirement age from 60 to 62.

While it's tempting to leave French voters to choose their poison, the result of this election will have implications for the rest of Europe and beyond. While Sarkozy has so far gone along with Germany in promoting austerity-led policies in a bid to tackle Europe's sovereign debt crisis, Hollande favors an approach based on more borrowing and more spending to promote growth – precisely the policies that brought ruin to Greece and now threaten Italy and Spain. He's also pledged to 'renegotiate' the Fiscal Compact that Europe's leaders signed in March, which holds nations to strict deficit limits.

As this Wall Street Journal analysis makes clear, France is already heading for the edge of the fiscal cliff; the only question is how quickly it gets there. Yesterday's victory for Hollande caused European stocks to fall, and if he prevails in the run-off and makes good on his promises, the bond markets could soon begin to take a tougher line with France, as they have with Europe's southern nations (French banks are already dangerously exposed to Spanish and Italian debt).

A Sarkozy win would postpone the day of reckoning, but if he continues to pursue his socialist-lite polices then France will eventually find itself facing a Greek-style crisis either way. That would hasten a radical restructuring, and perhaps the break-up, of the single currency eurozone, which in turn would drive another nail into the coffin of the European welfare state model – which the eurozone has helped to sustain way beyond its sell-by date by propping up the continent's weaker countries with borrowed money.

That's an outcome fiscal conservatives both in Europe and the US should welcome, and if Mitt Romney is elected in November the opportunity will exist to once again demonstrate the superiority of America's free-market model for those who need persuading, or reminding. And when France goes over the cliff it will be better to have a full-throated socialist in the driver's seat than a discredited conservative.