More skepticism regarding Sarkozy

Update: More here. Emphasis mine.

Congratulations to France’s newest President Sarkozy. Although the media is calling you a “Conservative” being as you’re from France and the news agency call McCain a Conservative, I can’t help but wonder how far to the right you really sit. If you’re of the typical European right winger stripe, you’re a Trostskist and your real crime is that you’re not in line with the hard core Stalinists that make up your population.

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Liberals are liberals no matter where they are – be it France, Germany or Washington DC. And the goal of all liberals is to insert themselves in positions of power where they can tell people what to do free of criticism and completely untouchable by voters. So how much will Sarkozy actually be able to get done? Will he actually be able to do the things that need to be done to pull France out of the doldrums? I’m not going to hold my breath….

No, indeed, Nicolas Sarkozy is no Margaret Thatcher. Thank you!

But the 52-year-old Sarkozy—to address a question posed repeatedly during the presidential campaign—is not France's Margaret Thatcher. The economic program he has outlined so far would yield only modest improvement in growth and unemployment. To give the economy a real boost, Sarkozy would have to take aim at some of France's most sacred social protections. It's doubtful that most French people really want that. In fact it's not even clear that Sarkozy himself does (see BusinessWeek.com, 3/26/07, "French Elections: The Impact on Business").

One big problem is France's rigid anti-layoff laws, which force employers to engage in long, expensive negotiations in order to downsize. That has discouraged employers from hiring, and has led in recent years to a surge in outsourcing of jobs. Another big problem is the ballooning cost of government-paid health and retirement benefits, which saddle employers with some of the heaviest payroll taxes in the world.

Sarkozy is certainly aware of these problems. But despite prodding from the business community, he said little about them during the campaign. That's not surprising. The law that triggered last year's paralyzing strikes was a relatively mild plan to roll back anti-layoff protections for younger workers. Scaling back generous health and retirement protections would be politically explosive too—not just among Socialists and labor militants—but also among the millions of voters who supported Sarkozy.

Is Sarkozy planning to bide his time, hoping to enact incremental change and weaken the unions' grip before tackling more difficult reforms? That's anybody's guess.

For now, France Inc. is giving him the benefit of the doubt. The leading French employers' group, known as the Medef, on May 7 hailed his election as "a new page being turned for France," a sentiment echoed in statements by other business groups.

Investors reacted more cautiously, with the Paris stock market remaining flat on May 7, the first trading day after his victory. The market was rife with rumors, though, reflecting expectations that Sarkozy may exercise a dirigiste industrial policy—as he did previously as Finance Minister when he orchestrated a state bailout of engineering giant Alstom. A report by the Journal du Dimanche newspaper, for example, said Sarkozy might use France's stake in the European Aeronautics Defence & Space Co., the parent of troubled planemaker Airbus, to force a management shakeup.