The Western world breathed a sigh of relief on Sunday, as the centrist Emmanuel Macron decisively defeated the extreme-right Marine Le Pen to take the presidency of France. It's not totally over, however: There are legislative elections next month, where the National Assembly will be selected. If Macron or parties sympathetic to him don't win a majority, President Macron could be in "cohabitation" with an unfriendly parliament — akin to divided government in the United States, and similar in terms of the resulting gridlock.
But assuming that Macron has at least a workable relationship with the Assembly, the big question for him now is how to avoid the fate of his predecessor, François Hollande, whose approval now sits at roughly 4 percent. To save himself, he must save the European Union — by fixing the eurozone.
What wrecked Hollande's presidency was the same thing that wrecked PASOK in Greece and the Spanish Socialist Workers Party: austerity and the euro. Before the 2008 financial crisis, huge sums of hot money flowed from German and French banks into southern European nations — which caused a sharp economic collapse when they stopped on a dime after the crisis.
The wise response for a country suffering a sharp recession is obvious: deficit spending and monetary stimulus to restore demand, and devaluation to improve the balance of trade. So long as there is unemployment, and the central bank stands behind the government borrowing, there will be no excessive inflation.
But when they signed up for the eurozone, European nations also signed away most of their economic sovereignty. The IMF, the European Commission, and above all the European Central Bank now dictated economic policy. They used their control of the euro to mandate the opposite of wisdom: austerity instead of deficit spending, tight money instead of monetary stimulus, and neoliberal assault on workers protections and social programs. (Devaluation was largely ruled out by the fact of the common currency itself.) The result was an extraordinarily terrible economic performance overall, concentrated in the southern European countries, which suffered a Great Depression-level disaster.
France got a small piece of that during the Hollande years when austerity and neoliberal reforms were implemented under eurocrat pressure. Advertised to create more growth and employment, these sacrifices had the precise opposite effect: France's economic growth and unemployment fell behind that of neighboring nations.
Obviously France is not suffering like Greece. But people tend to compare their situation to the closest available baseline. So it's understandable that the French would be upset at falling behind — especially given that the promised payoffs are not materializing. The fact that Hollande was essentially taking orders from unaccountable technocrats outside the French government only added to the disillusionment.
So what Macron needs to do is shake some sense into the eurocrat class. He must confront them, publicly if necessary, and demand an end to pointless austerity, anti-worker reform, and anti-democratic behavior. At a minimum, he must demand fiscal stimulus to restore employment in the depressed eurozone nations and reverse the eurocrats' world-historical failure. And to show he's serious, Macron must also appoint a finance minister who can forcefully advocate his positions to the Eurogroup.
Frankly I do not believe that Macron will do anything like this. You almost could not imagine someone with a more unlikely background — a milquetoast centrist former investment banker who literally wrote Hollande's failed reform bill — for confronting the eurozone dictatorship.
But people can surprise you. While Macron faces a difficult task precisely because the eurozone is outside of democratic control, the eurocrats will no doubt hesitate to bludgeon France into line as they did Greece. The French-German partnership is the heart of the eurozone and the European Union as a whole, giving Macron far more leverage than Alexis Tsipras ever had. Plus, Macron would be able to argue with much plausibility that if the eurocrats cannot come to terms with him, eventually they will face a left- or right-wing French leader who will conclude the eurozone is beyond saving and simply withdraw.
And it's important to remember that to a great degree, Macron's policy would be a sensible one for the whole eurozone. An economy should not be satisfied with eight years of economic flatlining.
If he doesn't, and France's economy continues to sputter along (or get worse), then Le Pen should be very well placed indeed for a rematch in the next election. Look out.