Feb. 9 (Bloomberg) -- Nicolas Sarkozy, the most unpopular incumbent French president since World War II, is counting on his stewardship of the debt crisis to deliver a second term in what would be an unprecedented election victory.
Sarkozy, 57, has promised to be “captain in the storm” after the weakening economy cost France its AAA credit rating for the first time. With the vote 74 days away, Sarkozy trails his Socialist opponent in the polls with an approval rating of 32 percent. No French president so disliked has been re-elected in the nation’s current Fifth Republic.
“His main asset, and maybe his last card, is that he looks more like a statesman,” said Pascal Perrineau, an analyst at the Paris-based Cevipof political studies institute. “He has to hammer home this point.”
Sarkozy said in a Figaro Magazine interview released today that he’ll work “for as long as possible” before announcing his candidacy. Addressing a television audience of 16.6 million, or about 25 percent of France’s population, on Jan. 29, he said that he has confidence in his record of the past five years. He aims to avoid becoming the eighth victim of a sovereign debt crisis, which since 2010 has ousted leaders in Ireland, Portugal, Greece, Spain, Italy, Slovenia and Slovakia.
At the start of his term, Sarkozy was France’s most popular leader since General Charles de Gaulle, World War II hero and founder of the Fifth Republic.
S&P Rating Cut
He now trails Socialist candidate Francois Hollande by 16 percentage points in the latest opinion poll. Hollande may get 34 percent of the vote in the first round on April 22 against Sarkozy’s 26 percent, and win 58 percent to 42 percent for Sarkozy in the decisive second-round election on May 6, according to a poll published Feb. 6 by Paris-based BVA.
While France has weathered the economic malaise better than countries such as Spain, with its 23 percent unemployment rate, Sarkozy’s prowess has become harder to sell with the country on the brink of recession and after jobless claims jumped by 5.6 percent last year to a 12-year high.
Standard & Poor’s stripped France of its AAA credit rating by one level on Jan. 13, saying European policy makers haven’t done enough to address the “systemic stresses in the euro zone.” Sarkozy called the downgrade a non-event, saying it “changes nothing” and he has found vindication in the markets.
Yields on benchmark 10-year French bonds are at 2.9 percent, down 17 basis points since the rating was cut. Credit-default swaps on government debt tumbled to 160 basis points from 219 on Jan. 13, according to CMA. The drop signals improvement in investor perceptions about the country’s credit quality. The CAC 40 stocks index has gained 7.2 percent.
French bonds are delivering better returns this year than Europe’s AAA rated debt, aided by the European Central Bank’s unprecedented 489 billion euros ($649 billion) in three-year loans that have flooded banks with funds.
Sarkozy held interior, budget and finance ministry positions before running for president in 2007, while his opponent Hollande, 57, has never held a ministerial post. Members of Sarkozy’s government have criticized Hollande’s lack of experience, warning it would hurt France’s credibility.
“Experience does matter,” Prime Minister Francois Fillon said during a January visit to Brazil. “And for me, that’s why Sarkozy should be re-elected.”
Sarkozy’s presidency has been marked by global economic crises almost from the start. He took over on May 16, 2007, three months before Europe began coping with fallout from subprime mortgage losses in the U.S.
On his watch, the French economy slowed to 1.6 percent in 2011 from 2.3 percent in 2007, while the trade gap widened to a record 69.6 billion euros from 42.5 billion euros in the same period.
Fillon cut the growth forecast for Europe’s second-largest economy by half to 0.5 percent for 2012. France may grow by no more than 0.2 percent this year, the International Monetary Fund estimates. Insee, the national statistics office, expects 61,000 job losses in the period.
Hollande said in a July speech that Sarkozy’s government widened deficits with tax breaks to the rich, swelling the public debt to 1.69 trillion euros, or 85 percent of gross domestic product from 64.2 percent in 2007.
To regain the upper hand after Hollande unveiled his economic plan on Jan. 26, Sarkozy announced measures to bolster growth and job creation, including an unpopular increase in the country’s value-added-tax to compensate for cuts in labor charges and the imposition of a financial transaction tax.
“Courageous economic moves, even in the current circumstances, aren’t a big enough argument,” said Jerome Sainte-Marie, who heads Paris-based CSA’s public-opinion department. “Since his Socialist opponent hasn’t shown irresponsibility in his platform or in his words, Sarkozy’s case as the only economically credible candidate is falling short.”
Hollande says Sarkozy’s moves are too little too late.
“They’re trying to do in less than three months what they haven’t done to fight the crisis in the past years,” he said during a Jan. 30 press conference.
Hollande advocates forcing banks to separate consumer and investment operations and stop awarding stock options to executives. He said he’ll raise taxes on the wealthy to help fund the addition of 60,000 public school teachers and shrink the state budget deficit. He also would boost levies on banks and large companies.
“There are parts of Hollande’s platform that lack guarantees for the debt and deficit cuts requirements, while Sarkozy looks efficient in crisis management,” said Perrineau of Cevipof, whose essay entitled “Marianne’s Choice: for Whom and What We Vote” is being published this month.
For his part, Sarkozy says his own package shows courage, not unlike Prime Minister Mariano Rajoy of Spain whose election campaign succeeded after he pledged austerity measures to slice the budget deficit.
“The split is not between the Left and the Right,” he said during his television appearance on Jan. 29. “It’s a new world out there. One has to adapt and not be trapped in an old model believing France is exonerated from efforts required of other countries.”
In his Figaro Magazine interview to be published on Feb. 11, Sarkozy said he plans to change France’s unemployment benefits to focus on training and encouraging the jobless to go back to work.
Sarkozy’s unpopularity stems at least in part from the “President Bling-Bling” reputation he earned during his first months in power when he was photographed with Ray-Ban aviator glasses, providing fodder for celebrity magazines. He also is the first French president to get divorced while in office. He married former Italian model-turned-singer Carla Bruni at the Elysee presidential palace in February 2008.
The French, more attuned to aloof presidents who keep their private lives private, haven’t always appreciated his flamboyant style. Hollande often makes references to Sarkozy’s “behavior” in his campaign speeches.
Sarkozy has attempted to tone down his image, becoming more discreet about his private life. In October, he and Carla went out of their way to ensure that the birth of their baby girl, Giulia, was kept out of the media spotlight.
For all his determination to win, Sarkozy says he’s prepared for defeat. On a trip last month to French Guiana, he said over dinner with reporters that he would “quit politics” if he loses the May ballot.
“I’ve always envisaged defeat,” he told them, according to two transcripts of the discussion obtained by Bloomberg News. “One must always envisage all possibilities.”
To contact the reporter on this story: Helene Fouquet in Paris at email@example.com
To contact the editor responsible for this story: James Hertling at firstname.lastname@example.org