Is Francois Hollande more like Mariano Rajoy or Mario Monti? In other words, is the French socialist president condemned to be always behind the curve with reform like Spain's conservative prime minister? Or can he get ahead of it like Italy's technocratic premier?
I put this question to my fellow guests at a dinner in Paris last week. France is not in imminent risk of blowing up, as wrongly implied by The Economist magazine, which used a cover picture of a lighted fuse on baguettes tied together like sticks of dynamite. France is much richer than Spain and its people are more willing to pay their taxes than the Italians. French 10-year borrowing cost is only 2.1 per cent, compared to Italy's 4.9 per cent and Spain's 5.9 per cent.
That said, the country has three deep-seated problems which could ultimately cause a mega-crisis: public spending at 56 per cent of GDP is way too high; industrial competitiveness has steadily eroded; and the population is in a state of denial. The last cannot be said of either Italians or Spaniards.
Mr. Hollande certainly started off like Mr. Rajoy. During his election campaign, he did nothing to prepare the population for the sacrifices ahead. Instead, he made promises he couldn't keep. The French president spent his first few months in office merrily attacking the wealthy, pushing up taxes and partly reversing his predecessor's pension reform. This anti-enterprise message has knocked the trust of the business community – which is precisely the opposite of what France needs as it flirts with a renewed recession.
Mr. Hollande, like Mr. Rajoy, is a politician. He had to get elected, a process which almost invariably forces leaders to sugar-coat their messages. Mr. Monti, by contrast, didn't have to face the ballot box and so hasn't had to go back on any promises. He also had a clear idea of what problems Italy faced – unlike Mr. Hollande and Mr. Rajoy – and so didn't need to waste time learning on the job.
Mr. Hollande and Mr. Rajoy have been forced into U-turns – in both cases, for example, putting up VAT – partly as a result of which their popularity has plummeted. Mr. Hollande's approval rating has sunk to only 36 per cent from 60 per cent when he took office six months ago. Mr. Monti's popularity, though, remains high.
That said, Mr. Hollande seems to be more adept at making U-turns than the Spanish PM. The increase in VAT will be used to compensate for part of the revenues lost caused by a €20-billion ($25.5-billion) cut in taxes on employers. This is a classic "internal devaluation," which will go some way towards restoring France's competitiveness. The rest of the money for funding this tax cut will come from spending cuts – again, a good move, even though the precise reductions haven't been specified. Mr. Hollande also largely adopted the recommendations of a report on competitiveness he'd commissioned from Louis Gallois, the former EADS boss.
The French president also started softening up the population for the need for reform in a widely praised press conference last week. That's important because it suggests that he, at least, is no longer in denial. What's not clear is whether a leader who has lost the trust of parts of both the business community and the electorate can drive through further changes.
In the last 30 years, several attempts at reform in France have been abandoned in mid-course. Governments capitulated to street demonstrations and strikes protesting even minor reductions of privileges. The Greeks and Spaniards look stoical in comparison.
The internal devaluation was a dry run for Mr. Hollande's big test: reforming the sclerotic labour market. More flexibility is needed to keep labour costs down and encourage business to invest – both of which will be required to stop the unemployment rate rising too much from an already uncomfortable 10 per cent.
Unfortunately, two big changes aren't on the cards: an abandonment of France's 35-hour week and a cut in the minimum wage. However, it will still be possible to make improvements to competitiveness if the package is sufficiently radical.
Mr. Hollande hasn't yet spelled out what he wants. Instead, he has asked employers and unions to sit down and negotiate a new deal. That was one tactic employed by Mr. Monti that didn't prove effective. Italy's resulting labour reform is half-hearted.
That said, the Medef, the French employers' association, has come out with a robust initial opening position in the negotiations. What's more, a socialist is probably better placed to persuade the unions of the need to change than a conservative president. So the question really comes down to how much courage Mr. Hollande has.
My dinner companions and others I saw in Paris were divided on the topic. Some said he would only ever do the minimum at the last moment possible. One argued that, while he was good at navigating political shoals, he has no sense of direction. Others said he was a natural optimist who understands that change is necessary but underestimates its urgency. One, though, said he might surprise everybody by realising that reforming France was his historical opportunity and that he would then display audacity. We must all hope this is the correct assessment.