I thank my good friend George Ross and Jeremiah Riemer for their comments on the previous message, which have provoked a few further thoughts. Indeed, George is quite right that we know very little about the timing of either prong of the responsibility pact (elimination of cotisations familiales and reduction of public spending), and we can't be sure that there is agreement within the government about any of this. The opposite is almost surely true: that there is sharp dissension.
Hence to my mind the principal reason for Hollande's announcement was to signal a position in advance of the hard bargaining ahead, bargaining with both the social partners and the various ministries. Hollande is in a deep hole, and he's intelligent enough to know just how impossible his predicament has become. He's going to take a shellacking in the upcoming European and municipal elections, and he's maneuvering now to turn tactical defeat into strategic advantage (I don't say victory, which remains far too uncertain--all he wants is to improve his strategic position for the difficult year ahead). The extreme right is going to emerge from these elections as a threat to be reckoned with--a real danger, and a danger more immediate and pressing even than the crisis. Hollande sees this, and so do the unions--which sense the ominous rejection of the existing regime and even defections to the FN within their own ranks--as well as the patronat. Hence there is just possibly a small window available to make some serious structural changes--structural changes that eluded the Right during all its time in power and on which the Left has never been able to agree.
But the part of the Left from which Hollande springs has wanted to change the financial basis of the social security system for a generation. It rightly sees the tax wedge between the worker's wage and the employer's labor cost as an impediment to job creation and proposes to broaden the base on which part of the social security system rests. The responsibility pact is a signal to the patronat that Hollande is now prepared to stake his presidency on commitment to such a structural change. Until now, employers did not trust Hollande's professions of good will, not only because the good will sometimes seemed to be lacking (although I think many were prepared to see the expression of animosity toward finance and the 75% marginal tax on top incomes as the words of a politician doing what politicians do) but because they believed that when the battle was finally joined in earnest, Hollande would retreat, as Sarkozy retreated before him.
But now he has something more to fear than the ire of workers unconvinced that social liberalism has their best interests at heart, namely, the implacable enmity of the strange alliance of reactionary forces of all stripes (Front National, Catholics, anti-Semites, xenophobes, neo-Poujadists, regionalists, corporatists, nationalists, sovereignists, and ras-le-bol populists), who contest not just the wisdom of this or that policy but the very legitimacy of centrist government, be it of the left of center or the right of center. Hollande is therefore signaling his readiness to join in une union sacrée against this new threat. Les patrons can trust him because he has nowhere to go but into their arms, and les ouvriers can trust him because the only alternative is to trust Mélenchon, Besancenot, et cie., whose ability to fend off the extreme right has been demonstrated in numerous local election contests to be nil. (Anticipating Brent's objection here: you can argue all you want that Mélenchon has better solutions than the center left, though I wouldn't agree; you can't, however, argue that he has ever persuaded a majority anywhere that that is the case. So it's either democracy--and a coalition with elements of the patronat, of which Pierre Gattaz and Louis Gallois represent relatively palatable factions--or a putsch, and if shove came to putsch, I don't see Mélenchon remaining in the vanguard for very long. It's not his style.)
Hollande's Hail Mary pass also has the advantage of splitting the Right. The UMP is already in a tizzy about whether or not to support the responsibility pact, and the pressure from the patronat not to upset the applecart must be intense. Sarkozy is very cannily keeping a low profile so that he can sweep back in when the time is right and pick up the pieces remaining after the current principals knock one another off.
In short, what matters in the end is not the economic logic of this plan--pace Gourinchas and Martin. It's the political logic. Until now, no Socialist has dared to stake the party's future on building a coalition in the center of the political spectrum. The logic has always been "run to the left to win the nomination, then tack to the right once in power." Hollande followed this Mitterrandian formula as far as he could, but the left of the left has disintegrated into a populist nebula that offers no support, and the only terra firma remaining is in the center, if it is anywhere. So that is where Hollande is trying to find his footing. He's been so inept up to now, however, that it's hard to see him pulling this off.
Nevertheless, failure is too bleak a prospect to contemplate. We are witnessing an attempt to found a party of the center left in France, which explains why Hollande was so eager to embrace the label "social democrat" in his press conference. That eagerness is really an ironic tribute to the persistence in France of the archaic and perverse equation of social democracy with social treachery, etc. The old Stalinist amalgams never quite died in France, even after "social democracy" ceased to have any clear referent. What Hollande's embrace of the term really means is that he's searching desperately for an alternative to the Mitterrandian concept of the Socialist Party on which he was raised. He doesn't quite know what this party will look like or whether it will be electorally viable, but his responsibility pact will have been its founding document--if it isn't stillborn.