AFP

BRUSSELS WHICHEVER candidate wins Sunday’s French presidential vote, Paris has work to do to patch up EU relations as a debate on whether to go for growth over austerity becomes a key issue, analysts say.

The French Socialist candidate Francois Hollande, challenging outgoing rightwing President Nicolas Sarkozy, leads in the opinion polls and has made the emphasis on growth a central campaign policy.

This, analysts say, puts Hollande in a strong position as austerity fatigue takes hold in countries worst hit by the debt crisis and as calls grow for action on growth to counter the emphasis on stabilising strained public finances.

That is the view of leading European Union analyst Janis Emmanouilidis, who sees the political debate having changed right across the eurozone and the European Union.

German Chancellor Angela Merkel “is also under pressure and the government in Germany will also look different after 2013,” Emmanouilidis told AFP after a showcase TV debate between Hollande and Sarkozy which most commentators agreed left Hollande in a strong position.

“Assuming he completes his victory, Hollande will come into his first talks with Chancellor Merkel in a stronger position, leading efforts supported by a number of countries to rebalance the EU ‘recipe’,” he said. The ‘ABC’ of fiscal rigour will remain at the core, he added, but an ‘XYZ’ of policies and investment designed to boost growth must now be grafted on as well.

Merkel insists that the fiscal compact cannot be renegotiated, as called for by Hollande, but has conceded that growth would be on the June EU summit agenda.

Controversy about austerity and growth in the European Union turns on the views of those who say that a return to sound finances will generate growth through structural reform, and those who say that extra stimulus is needed.

This dilemma was highlighted by European Central Bank chief Mario Draghi who said on Thursday: “There is absolutely no contradiction between a growth compact and a fiscal compact.” He told a news conference after the ECB’s regular monthly policy meeting in Barcelona: “We have to put growth back at the centre of the agenda.” Draghi himself talked of a “growth compact” to complement the fiscal compact last month but said growth would have to come from structural reforms and not from extra stimulus spending, a point also stressed by Merkel.

The influential Londonbased ‘Economist’ magazine has warned readers to fear “the rather dangerous Monsieur Hollande” but academics and the wider media acknowledge that Europe is at a crossroads of change.

In the run-up to the next scheduled summit of EU leaders at the end of June, Hollande could claim “a strong mandate” to shape a new ‘growth compact’ to “correct” what some say is an over-emphasis on austerity and the fiscal compact which has yet to be ratified. Experts expect an increase in funding for the European Investment Bank as one measure in this direction. One analyst commented: “Merkel is already adapting to a new political landscape ... showing she is preparing to accept certain mistakes were made ... and accept the need to re-balance the overall policy approach.”