On a day when Greece called for new elections, with serious implications for the European economy and the future of the euro, the other country with elections on May 6 swore in their new President. Francois Hollande came to power in France calling for a return to growth rather than a single-minded focus on debt reduction and austerity in Europe. He called his program a new pact:

Newly installed French President Francois Hollande declared Tuesday that he would propose a “new pact” to his European partners emphasizing economic stimulus in addition to the fiscal discipline imposed by Germany [...]

“On this day, a lot of people, and first of all in Europe, await us and look toward us,” Hollande said. “To overcome the crisis that has struck it, Europe needs plans. It needs solidarity. It needs growth.

“I will propose a new pact to our partners that will join the necessary reduction of public debts with an indispensable stimulation of the economy.”

This already retreats a bit from the tougher line focused more on growth that Hollande carried through the campaign. In the end it’s just words; the action commences today. Immediately after his swearing-in, Hollande flew to Berlin for a meeting with German chancellor Angela Merkel. The meeting will presumably focus on this “new pact,” and whether that means a side deal, focused on growth, to the fiscal pact already agreed to by Eurozone member states, or a renegotiation of the deal entirely. My suspicion is that it’s the former. Hollande has emphasized growth more, and Merkel austerity, but there’s a way to meet in the middle here that doesn’t upset the status quo too much. Maybe you add some small investment fund, known as project bonds, to stimulate demand across Europe. And maybe the “growth” emphasis goes to the euphemistically named “labor market reforms,” which would get at growth through an internal devaluation, breaking the leverage that workers have for wages and benefits.

That’s bad news for the citizens of Europe. The status quo is already strangling them. The emphasis on austerity needs to be wholly rejected at this point, with the whole focus on getting the Eurozone out of its economic crisis. Austerity has become self-defeating. One obstacle to that is today’s better than expected economic news from Germany. This will allow the Germans to deny reality for a while longer, even as Greece cracks up. They may even convince themselves that a Greek exit from the Eurozone will have no ripple effects throughout Europe.

Bold leadership is still needed for Europe to avoid catastrophe, but the early signs look to be for more muddling through.