End of triple-A, end of Sarkozy?

On 13 January, France lost its triple-A rating from Standard and Poor's, who downgraded France to AA+.  This is bad news for the French economy and a political disaster for Sarkozy, especially as it comes just a few months away from the presidential elections this spring.  It damages Sarkozy’s credibility, benefits his rivals and focuses attention on his weaknesses and away from his strengths.

For months he has been staking his credibility on the preservation of France's triple A status.  During the Socialist party primaries to designate the left-wing presidential candidate, Sarkozy contrasted France’s triple-A status with the economic disasters playing out in Greece, Italy and Spain.  He claimed that it was thanks to his government that France enjoyed a triple-A, whereas a Socialist government would have led France to a crisis comparable to the one unfolding in Southern Europe.  As the economic situation darkened in France, Sarkozy was forced to start downplaying such comments and switch to a tone of reassurance, although a French newspaper (le Canard Enchainé) quoted him as stating privately that “if we lose the triple-A, I’m dead”.  Now the triple A has been lost at a particularly delicate time.  Sarkozy is currently switching into campaign mode and this is the worst possible way to launch his presidential campaign.

There are four main negative repercussions of this outcome for Sarkozy.  The first is the economic effects.  Losing the triple-A status will make France a less desirable destination for creditors and investors, and will make loans harder and more expensive for France to obtain.  This is a prominent and damning indictment of the state of the French economy more generally. There is extensive research on France and other countries such as the US which suggests that the state of the economy is one of the main drivers of vote choice.  When the economy is bad, people tend to vote against the government.  So we can expect a poor economy to hurt Sarkozy’s prospects of re-election.

The second problem for Sarkozy is that the economic problems hurt the impression of his leadership more generally.  Even though he cannot be held personally accountable for the unfortunate state of the global economy, the crisis has taken place since he assumed the presidency in 2007 and he will ultimately be held accountable for the fact that France is faring less well than some of her European neighbours in resolving the crisis.

This links to the third problem, which is that Germany has not suffered a downgrade in its credit rating.  Sarkozy has spent much of the past few months flaunting himself as a world leader, standing shoulder to shoulder with Angela Merkel as the two parents of the EuroZone, sorting out their wayward family members in Greece and Italy.  This posturing increased Sarkozy’s stature on the world stage and improved his domestic opinion poll ratings.  Now Merkel stands rather taller than Sarkozy, whose status will be diminished by this very public confirmation that the French economy is weaker than that of Germany.

Finally, and as a consequence of the above, the opinion polls have confirmed the bad news for Sarkozy.  François Hollande, the Socialist candidate, could be perceived as something of a risk due to his lack of executive experience.  Sarkozy’s leading role in the Eurozone made him appear the better placed candidate to resolve the economic crisis.  This new setback will damage confidence in Sarkozy and make voters more willing to take a chance on Hollande.  Marine Le Pen, the candidate for the far-right National Front party, has also profited from the crisis.  Disillusioned voters have flocked to her as she promises to withdraw France from the Eurozone.  She is now once again threatening to qualify to the second round of the presidential elections at Sarkozy’s expense.  If she did, she would follow in her father’s footsteps in 2002 when he faced Jacques Chirac in the second round at the expense of the Socialist candidate.  Just as Chirac won with a landslide on that occasion, so Hollande would be expected to beat Le Pen if a similar scenario emerged in 2012, as the majority of French voters still reject the politics of the far right.

So is it all over for Sarkozy?  Let us not overstate the crisis.  This is bad news, without a doubt.  But Sarkozy is nothing if not a fighter, and three months is a long time in politics.  This election is far from over yet.  He will need to regain the trust and confidence of voters and investors, and demonstrate that he is the best placed to lead France out of the crisis.  It will be a long uphill battle, but his experience and determination might yet see him emerge victorious.