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Spain’s Debt Struggle Opens Door to Sarkozy Campaign Message

France's President Nicolas Sarkozy
Spain’s struggle to fend off concern that it may be the next debt-crisis domino to fall has proven opportune for French President Nicolas Sarkozy’s re-election bid. Photographer: Jock Fistick/Bloomberg

Spain’s struggle to fend off concern that it may be the next debt-crisis domino to fall has proven opportune for French President Nicolas Sarkozy’s re-election bid.

One of Sarkozy’s main campaign themes is that he has protected France from the penalties investors have imposed on Europe’s periphery. Spain’s rising bond yields and missed deficit targets, requiring ever-deeper austerity measures and threatening to reignite the regionwide crisis, have given traction to the French leader’s message.

“Do you want to be in the same situation as Spain or Greece?” Sarkozy said today on France Info radio, the same rhetorical question he’d asked the night before in a Canal-Plus television appearance. “If I hadn’t done pension reform, if I hadn’t decided to only replace one of every two retiring state workers, can you doubt that we’d be in the same situation.”

While Sarkozy trails Socialist challenger Francois Hollande in polls for the decisive May 6 vote, the gap has narrowed in recent weeks, and Sarkozy is more highly rated than Hollande for being able to handle international crises. So far, the French presidential campaign has focused on job creation and purchasing power, deemed to be Hollande’s strengths.

“It certainly reinforces Sarkozy’s rhetoric that he is the only leader capable of protecting France in times of crisis,” Antonio Barroso, an analyst at Eurasia Group, said in an e-mail interview.

Rajoy’s Retort

Spanish Prime Minister Mariano Rajoy declined to respond directly, while saying other European Union leaders should be “careful with their comments.”

“We are not against anyone, we don’t talk about other countries,” Rajoy told members of his People’s Party today in Madrid. “To all countries of the EU and euro zone, we wish them the best. What is good for Spain is good for the euro zone. And what is good for the euro zone is good for Spain.”

Hollande would beat Sarkozy by 53 percent to 47 percent in the second round, an Ifop-Fiducial poll said April 10. That compares to 54-46 percent a week earlier and 58-42 at the start of February. The survey of 1,869 people gave no margin of error.

France’s 10 presidential candidates compete in the April 22 first round. The top two -- almost certainly Sarkozy and Hollande -- face off May 6.

Sarkozy’s Standing

Sarkozy’s approval rating is now at 42 percent, up 6 points in a month and its highest in two years, according to Ifop poll April 3 that questioned 1,004 people and gave no margin of error.

An Ipsos poll April 9 put Sarkozy’s approval at 40 percent, the highest since 2009. That poll questioned 955 people.

Hollande was rated better than Sarkozy at creating jobs, boosting growth and purchasing power, and improving education, according to a BVA poll March 26. They were equal at cutting the debt, and Sarkozy was rated higher on European issues and foreign policy. The BVA poll questioned 890 people.

Since that poll, the euro crisis has returned to the French evening news shows with Rajoy saying Spain’s future is at stake in its battle to tame surging bond yields.

Spain’s 10-year borrowing costs have jumped more than one percentage point since March 2, close to levels that prompted Greece, Ireland and Portugal to seek European bailouts, after Rajoy said Spain will miss its 2012 budget-deficit target.

Crisis ‘Not Over’

“The euro crisis is not over,” Jacques Attali, a former French presidential adviser and ex-head of the European Bank for Reconstruction and Development, said in an interview on France 2 television yesterday. “European issues will impose themselves in this campaign.”

The reignited euro crisis comes after Sarkozy failed to make much headway from last month’s murders of seven people in Toulouse by a self-declared jihadist. The March 26 BVA poll showed that only 17 percent of the French said the Toulouse killings had any impact on their voting intention.

“The French remain above all preoccupied by economic and social questions, and not by security issues,” Carine Marce, associate director at TNS-Sofres, said in a note yesterday.

Spain’s travails have allowed Sarkozy to claim calamity for France should Hollande be elected and put in place his plans to hire 60,000 new teachers and create government funded jobs for youths. Hollande has committed to balancing the budget by 2017, a year later than Sarkozy would.

“If we return to spending without control, we will find ourselves in the same situation as Spain,” Sarkozy said on France Info.

Bond Spreads

While France this year lost its AAA credit rating at Standard & Poor’s, its 10-year borrowing costs compared to Germany’s have declined so far this year, while Spain’s have climbed almost 100 basis points. Ten-year French notes yield about 3 percent about half the level of Spain’s 5.9 percent.

During an April 7 campaign visit in a Paris suburb, Hollande said it was “bad manners” and “a poor example of European solidarity” for Sarkozy to criticize Spain so openly.

He said Sarkozy shouldn’t be giving lessons. “When there’s been a 30 percent increase in the debt, the best attitude for the person responsible would be to be quiet,” Hollande said.

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