Now what?

Of course,the Merkozy pact is not the only responsible way forward. It has been argued that instead of a single standard of punishing austerity across the eurozone,there could be differentiated levels of fiscal tightening in various national economies: more in Greece,less in the Netherlands,for example. There is also a case for balancing structural reform with a boost to demand. However,the worry is that Hollandes antipathy for austerity is not a genuine stress on growth,but a push towards public sector bloat,in service of some unsustainable Gallic ideal of the good life. France cannot afford that situation,with its soaring debt,undercapitalised banks and unemployment.

The upside is that whatever Hollandes instincts,he is hemmed in by circumstances he simply cannot repudiate the fiscal compact,even if he wants to recast it. Germany will continue to lead this dance,and investors will keep a hawk-eye on Frances credit-worthiness. Hollandes test is only beginning and we should judge him by what he does,not what he says.