Will the revelation of French President Francois Hollande's affair with actress Julie Gayet wound him and overshadow his economic policies? Don't be so sure.
Hollande ran for office as the anti-Nicolas Sarkozy -- a modest, mild-mannered alternative to all the bling and Carla Bruni supermodel razzmatazz that the former president represented. Now, though, the image that won him the election has become a liability. He's a boring and indecisive leader, something the French don’t really want.
The economic policy that Hollande promised has also proved problematic. He pledged to rule like a true socialist, changing nothing in an economy that needed painful structural reform and raising taxes to compensate. This is even less possible today than it was when Francois Mitterrand tried to take France on a big tack to the left in 1981, only to reverse course two years later.
Some of France's most troubled neighbors in the euro area -- Spain, Italy and Greece -- have moved ahead with the tough reforms that Hollande has been avoiding. As a result, they are no longer distracting investors' attention from France's fiscal problems. French bond yields are rising and today stood at 2.46 percent, compared with 1.74 percent last April. The cost of servicing France's debt pile, which currently stands at 90 percent of gross domestic product, rises with those yields.
Hollande knows he's in trouble. He is the least popular president in the polling history of the Republic. To rescue himself, he needs to do two things: become interesting and reverse course on his economic policies.
Sex is interesting everywhere, and the French seem less inclined to judge Hollande on moral grounds. An opinion poll conducted since the scandal suggests that sneaking out of the Elysee Palace on the back of a moped to cheat on his formal partner and make love to a glamorous 41-year-old actress even gave him a little boost, especially among women.
Hollande's sexual escapades offer hope to the French everyman. He's no George Clooney, yet the three women in his public life -- former presidential candidate Segolene Royale, current first lady and journalist Valerie Trierweiler, and Gayet -- are all gorgeous, smart and independently successful. There must be something about him. Wondering what that might be makes him interesting.
Of course, the first question at Hollande's 2 1/2-hour news conference yesterday was about his affair, and he dodged it. That's smart: Keep the mystery going a little while longer, especially while Trierweiler is languishing somewhat dramatically in the hospital from the shock of it all. The president may soon be switching first ladies: Who in France doesn't want to know?
The focus on the affair with Gayet might even aid Hollande's efforts to reinvigorate his economic policy. It's safe to assume that, because they were curious about his sex life, more people watched or read the stories about Hollande's news conference. They will therefore have heard him announce cuts to public spending and nonwage labor costs, as well as this sonorous declaration: "The time has come to resolve the main problem of France: its production. We must produce more and better. It is on the supply side that we must act."
You can tell right there that Hollande needs a new speechwriter. He also needs someone in the Elysee who will completely redo his image. An actress, perhaps?
The left-leaning daily Le Monde concluded from the news conference that Hollande has found his Mitterrand conversion. "They thought he was a reformer, but they were wrong. He is more than that: He's a revolutionary," the newspaper gushed.
Hardly. The announced 50 billion euros ($68 billion) in cuts to government spending were required in any case for France to meet its budget deficit target. The 30 billion-euro reduction in companies' labor-related taxes was mostly already committed. France still has the highest so-called tax wedge of any country in the Organization for Economic Cooperation and Development. Income tax plus employee and employer social contributions, less cash benefits, was 50.2 percent of the average single earner's salary in 2012, according to OECD estimates.
Hollande, Gayet and Trierweiler will have to work out their private lives, but on policy, the president remains too timid. He needs to embrace France's burgeoning anti-tax movement and purge his government of die-hard socialists. He needs, in the middle of his presidential term, to do not a Mitterrand, but a Gerhard Schroeder, enacting the kinds of reforms that the former Social Democratic chancellor made in Germany. Now that would be sexy -- something even Sarkozy didn't dare try.
(Marc Champion is a Bloomberg View editorial board member. Follow him on Twitter.)