An Economic View of France From Hollande

NEW YORK ( TheStreet) -- With the first round of French presidential elections slated this weekend, investors have speculated what a potential François Hollande victory would do to the global economy in his first year.

Hollande's proposal to increase taxes on France's highest income earners and his suggestion that the European Central Bank lend directly to states instead of banks have left investors unclear of how the Socialist Party candidate would govern.

French Socialist Party candidate François Hollande

"Whatever people thought of what Nicolas Sarkozy has done, the lack of continuity that is going to result from new leadership in France I think is going to be a very very big concern to investors; and if there's a shift in power, we essentially know what we have in Sarkozy, and we don't know what we have in Hollande - we do know what he stands for, which involves printing euros and higher taxes for people at certain income brackets," said Jeffrey Sica, president and chief investment officer of SICA Wealth Management.

As French polls give Hollande a wide lead, 57% to 43%, over Sarkozy, we took a peek at what he's outlined for the French economy in his first year. The platforms (pulled from Hollande's Web site ) are based on the assumption that the Socialist candidate would hold his lead and become president of France.

Hollande hopes to reduce his presidential pay and that of his cabinet members by 30%, which he would sign at their first meeting.

The prospective new president has also promised to lock in fuel prices for three months, and he has guaranteed above-inflation interest rates on tax-free savings accounts. Hollande's platform said he would enact these new policies to provide French consumers with more purchasing power.

France would withdraw its NATO troops from Afghanistan by late 2012. It would also repeal the circular Guéant on foreign students, which passed in January and made it more difficult for foreigners who had recently completed French university degrees to get jobs in the country.

Hollande has promised to return the retirement age to 60, down from 62. This stipulation would apply, at least in the first year, to those who started work early and paid all their annuities, according to the candidate's Web site.

Under a section labeled "Redresser le pays dans la justice," or, "rehabilitate the country in justice," the candidate wrote that he would submit by July or August a plan to parliament that would balance the budget by 2017. Also part of this section is the promise to eliminate tax loopholes, curb taxes on small- and medium-sized businesses, raise the solidarity tax on wealth to its previous level, and to create a 75% tax bracket on those who earn more than €1 million a year. Finally, Hollande has determined he would remove Sarkozy's value-added sales tax .

Hollande wants to launch major employment projects by mid-July that would focus on training, wage policies, equal pay and pension security for France's work force. He would also prepare for energy transition by "preservation of natural resources and biodiversity, securing energy systems, development of industrial clusters and a new energy plan through massive thermal renovation of homes."

Teachers and civil servants are in luck if the French elect Hollande as he will recruit 60,000 of them to fill positions left by retiring public workers.

Hollande has said that he would look to separate banks' retail and investment arms, according to Reuters.

Under a Hollande presidency, renters could see the government on their side by imposing rent control laws that curb owners' power to freely determine rent prices.

It would be unwise to assume Hollande would successfully pass all these promises, and it's unlikely that his parliament will agree to all these reforms. Regardless, the uncertainty as to how Hollande will govern versus how Hollande has promised to govern, will leave investors concerned through the May runoff election.

"I think that's the biggest risk in Europe right now, and I think that's what can cause the greatest volatility," said Mark Lamkin, president and CEO, Lamkin Wealth Management. "That's what we're going to be watching very closely in the next 30 days on this runoff election."

-- Written by Joe Deaux in New York.

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