Hollande Set to Travel to See Merkel, Obama After Being Sworn In

Francois Hollande will be sworn in tomorrow as president of France and hit the road hours later to confront issues from Afghanistan to the Greek crisis.

Hollande, 57, flies straight from his inauguration to a dinner in Berlin with German Chancellor Angela Merkel. He holds his first cabinet meeting in Paris on May 16, before heading to a get-together with President Barrack Obama at the White House, a global leaders’ summit at Camp David, outside Washington, and a meeting of NATO chiefs in Chicago.

“It’s going to be baptism by fire,” said Antonio Barroso, an analyst at Eurasia Group. “This week will show how able Hollande is to build consensus around certain issues.”

With Merkel, Hollande will try to overcome her skepticism to stimulus spending to counter a contraction in the euro-area economy this year. In the U.S., he’ll have to justify his plans to withdraw French troops from Afghanistan a year earlier than the schedule outgoing President Nicolas Sarkozy had agreed upon with North Atlantic Treaty Organization partners.

Hollande said during the campaign that he wanted to renegotiate the euro-area’s fiscal treaty, saying it puts too much emphasis on austerity and not enough on growth. He also called on the European Central Bank and the European Investment Bank to play more active roles in stimulating demand. Merkel has said the treaty can’t be touched, and has said she’s opposed to using government money to boost the economy.

“The new French president has expressed the willingness to complement the fiscal compact with growth-enhancing measures, and it seems that some of his propositions could gain traction,” according to Raphael Brun-Aguerre, an economist at JPMorgan Chase & Co. in London. “Angela Merkel will likely not concede ground with respect to the ECB, but a larger role for the EIB and the EU structural funds could be a viable option.”

Treaty Talks

Pierre Moscovici, the head of Hollande’s transition team, wouldn’t say in a May 7 press conference if Hollande would insist on re-writing the treaty, or if he’d be satisfied with separate statements about growth measures. Hollande last week met with EU President Herman Van Rompuy and euro group head Jean-Claude Juncker, and made no statements after the meetings.

Merkel’s spokesman Steffen Seibert said May 11 that Merkel and Hollande won’t take any decisions tomorrow. The two leaders will hold a joint press conference after their dinner.

The talks could be dominated by Greece, whose elections on May 6 -- the same day Hollande was elected -- produced a political vacuum that puts in doubt the country’s ability to stick to the cuts required to receive bailout aid.

Afghan Withdrawal

Bonds of at-risk countries have suffered since last week’s Greek elections. Spain’s extra 10-year yield over German levels widened to as much as 456 basis points last week from 415 at the end of previous week. Italy’s widened to 408 basis points from 385 basis points.

Obama called Hollande the night of his victory to invite him to the White House before the G-8 summit.

While NATO has agreed to pass on combat responsibility to Afghan forces throughout 2013, Hollande has said he wants all 3,300 French troops -- out of about 129,000 -- out by the end of 2012. Merkel said May 10 that NATO allies must respect the principle of “we go in together, we leave together.”

French newspapers such as Le Figaro have said a pullout by end 2012 may be impossible anyway, because the French military lacks enough transport aircraft and Pakistan has closed overland routes after disputes with the U.S. over drone attacks.

Hollande could find himself closer to the U.S. on economic matters. Obama and his advisers have often criticized the 17- country currency union for not doing enough to spur growth.

Treasury Secretary Timothy F. Geithner said April 25 the U.S. faces risks from the slow growth in Europe, even as he did say the euro region had taken steps to calm the debt crisis.

Domestically, Hollande’s platform lists several steps he plans to take even before the French return to the polls June 10 and 17 to elect a new parliament. They include a freeze on retail gasoline prices and higher payments to parents for school expenses.

To contact the reporters on this story: Gregory Viscusi in Paris at gviscusi@bloomberg.net; Mark Deen in Paris at markdeen@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net