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Sarkozy-Hollande Runoff Shaping Up in Fight on Finances

France's President Nicolas Sarkozy
Nicolas Sarkozy, France's president. Photographer: Lionel Bonaventure/AFP/Getty Images

April 20 (Bloomberg) -- French President Nicolas Sarkozy headed South and his Socialist challenger Francois Hollande went East on the last day of campaigning before the first round of voting, courting supporters of other candidates whose backing they need in the runoff.

Hollande and Sarkozy are almost certain to top the 10-person field April 22, putting them into the May 6 decider. Hollande will be in the Ardennes region today, while Sarkozy holds a rally in Nice on the Mediterranean tonight. No campaigning is permitted tomorrow or on election day.

“It’s a foregone conclusion who will be in the second round,” said William Keylor, a professor of modern French history at Boston University, said in a telephone interview. “Now begins the not-always easy task of maintaining the base and appealing to the center.”

With the highest joblessness in 12 years and an economy barely growing, Sarkozy has trailed Hollande in every poll in a head-to-head match over the past 11 months. Hollande promises more spending and higher taxes, saying Sarkozy’s tax cuts worsened France’s finances and failed to create jobs. Sarkozy claims credit for spending cuts and a retirement-age increase that he says warded off the worst of the euro debt-crisis turmoil.

The winner faces commitments to the European Union to reduce debt and deficits. Government debt will exceed 90 percent of gross domestic product next year, the International Monetary Fund estimates. The IMF sees a deficit of 3.9 percent of GDP next year -- while Sarkozy has promised to reach the EU limit of 3 percent -- and growth of 1 percent.

Debt, Deficit

“Post the election, Hollande probably moves toward the center,” Stephane Deo, the chief European economist for UBS Securities in London, said in a note to investors April 17. “Whoever wins is going to have to start talking honestly about how to tackle the deficits and debt levels.”

The final polls before the vote showed Hollande, 57, with a lead in a head-to-head match of between seven and 14 points over the incumbent, who is finishing his first five-year term.

A CSA survey completed yesterday showed Hollande will win 28 percent in the first round and Sarkozy 25 percent. That puts Sarkozy, 57, at risk of becoming the first incumbent not to win the first round. Ifop-Fiducial’s last tracking poll had Sarkozy up 28-26. Neither published a margin of error.

Top Five

CSA had the National Front’s Marine Le Pen at 16 percent, anti-capitalist Jean-Luc Melenchon at 14.5 percent, and self-styled centrist Francois Bayrou at 10.5 percent. Five others would split the rest.

The scores of Hollande and Sarkozy have varied only a few points in the past month. “There’s been a remarkable stability throughout the campaign,” said Jean-Daniel Levy, director of opinion research at Harris Interactive in France. “Sarkozy has made several efforts to shake things up, but we haven’t seen it generate any momentum.”

London bookmakers see Hollande as the likely next president of France. William Hill Plc offers odds of 1-5, meaning that a winning $5 bet returns $1 plus the original stake. Sarkozy is 10-3, meaning a $3 bet wins $10. Paddy Power Plc offers 1-8 on Hollande and 9-2 on Sarkozy. Ladbrokes Plc has Hollande at 1-8 and Sarkozy at 9-2.

“The real key of the first round is not who crosses the finish line first but the overall balance between votes for the right and the left,” Gael Sliman, director of BVA, said in e-mailed comments. “From this point of view, the Socialist candidate should have important reserves for the second round.”

The first-round leader has won five of France’s eight direct presidential elections, dating back to 1965.

Second-Round Reserves

Hollande leads Sarkozy in what the French call “reserves,” or likely support from among the also-rans.

While 85 percent of Melenchon voters will vote for Hollande in the second round, only 54 percent of Le Pen’s supporters are sure to go for Sarkozy, according to a BVA poll April 17. Bayrou’s support splits 39 percent for Hollande and 25 percent for Sarkozy. The rest were undecided.

Hollande, who was party leader from 1997 to 2008 and represents a rural district in the parliament, would be the first Socialist president since Francois Mitterrand in 1995. He has never held a minister’s post.

He has proposed a 75 percent tax on the wealthiest, an increase in the minimum wage, renegotiating European treaties on deficit limits to promote growth, and banning leveraged buyouts.

Debt Rating

Sarkozy has stressed personal responsibility, security, and national identity to chip away at support for the National Front. He has sought centrists by saying speculators will attack French bonds should Hollande be elected. While Standard & Poor’s cut France from AAA this year, the country’s debt has kept the top grade from other credit-rating firms.

“It is particularly difficult to know from either Hollande or Sarkozy what are political rhetoric and electioneering and what are true commitments,” said Marc Chandler, chief currency strategist at Brown Brothers Harriman & Co. in New York.

A Sarkozy ouster would follow those by leaders in Ireland, Portugal, Greece, Italy, Spain, Slovenia and Slovakia since the debt crisis began, and make him the second French president after Valery Giscard D’Estaing in 1981 to lose a re-election bid. Sarkozy’s 36 percent approval rating in an April 15 Ifop poll is the lowest for any post-World War II French president.

ECB Role

In the final days of campaigning, both Hollande and Sarkozy have backed a more activist European Central Bank. That risks tensions with German Chancellor Angela Merkel. The comments by Sarkozy also broke a pledge by Sarkozy and Merkel last November not to publicly comment about the ECB.

“The candidates’ views on European matters have converged over the past few weeks,” Thomas Costerg, an economist at Standard Chartered Bank in London, wrote in an e-mailed comment. “We think fears of a Franco-German rift are overdone. The solid Franco-German relationship goes beyond party politics.”

While about 70 percent of voters have told pollsters they are sure of their choice, that doesn’t mean the campaign has thrilled them. As many as a quarter of registered voters may not vote, said a BVA poll April 6, which would be the second-highest abstention rate in a French presidential election.

“With high unemployment and France’s loss of its triple-A rating, Sarkozy doesn’t have much of a record to run on,” Boston’s Keylor said. “But Hollande has never even held a ministerial position. He doesn’t have much charisma. For many voters, it’s a question of the lesser of two evils.”

To contact the reporter on this story: Gregory Viscusi in Paris at

To contact the editor responsible for this story: James Hertling at

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