Special Report: French hopeful Hollande says he's nothing to fear

TULLE, France (Reuters) - It's not an introduction you'd expect from a presidential contender. Last month, when French socialist candidate Francois Hollande stepped off a train on a visit to London, he did so with the words "I am not dangerous."

The bespectacled 57-year old, who is running against President Nicolas Sarkozy, is barely known outside France. Even at home he was long best known as the supportive partner of fellow Socialist politician Segolene Royal. Now, though, opinion polls put him ahead of Sarkozy, a center-rightist, in the election whose first round will be held on April 22.

For many in financial markets, in both France and Europe, that's a worry. They see Hollande's promise to impose a 75 percent tax on high earners, split investment banks from retail banks, and focus on economic growth - for which the bond market reads big state spending - as a threat.

In his first major campaign speech in?January Hollande declared: "In the battle ahead, my main adversary has no name, no face and no party. He will never run as a candidate. He will never be elected, but he rules in spite of all that. My adversary is the world of finance."

If he wins, says George Magnus, a London-based senior economic adviser at investment bank UBS, the market's current tranquility "will evaporate." Not solely because of the Frenchman's demands, but because he might persuade other Europeans that it's time to deviate from the path of austerity and start spending.

Which is why when he arrived in one of the world's biggest financial centers in February, Hollande emphasized his innocence when asked by a reporter about financial markets.

Hollande, who has not given an interview for this story, styles himself an ordinary man. And a close study of his track record - as well as old friends, voters in his local constituency, colleagues and advisers - suggest he may not be all that radical. He is certainly the opposite of Sarkozy - rather than celebrity connections and "bling-bling", he's plain and simple, and in place of ministerial experience, Hollande had three decades in the provinces.

Without naming Hollande, Sarkozy has said his chief rival lacks experience and "lies morning and night". Hollande has said Sarkozy's fatal flaw is his record in office. At a lunch last January French newspapers reported that the socialist called Sarkozy a "nasty piece of work".

Hollande's supporters say he has to play a careful political game. He needs left-wing support to win the election, in which candidates from both the far left and far right are stirring discontented voters with increasingly strident campaigns. But at heart, say his backers, he is a congenial, ordinary pragmatist who will look for compromise.

"Every president is the product of a moment in time," says Claude Bartolone, a long-serving member of parliament who joined Hollande's campaign?team last year.

MR NORMAL

In the very early hours of a Sunday morning in Paris last year Francois Hollande learnt his life had changed. His partner, Valerie Trierweiler, shook him out of a deep slumber, people close to the couple say.

She told him Dominique Strauss-Kahn, a fellow Socialist, the head of the International Monetary Fund and runaway favorite to become the next president, had been arrested on sex assault charges in New York. Even though these were later dropped, it made Hollande suddenly the frontrunner to become the country's first Socialist president since Francois Mitterrand in 1981.

In a campaign book, "Changing Destiny", published in February, Hollande acknowledged that his prospects got a boost from the "candidate who never showed up". He has also been keen to emphasize how his lifestyle differs from that of his globe-trotting socialist rival.

Behind a blue door in his parliamentary offices in the southern town of Tulle is the room where Hollande sleeps on Fridays, when he shuttles to the Correze region, his political constituency for the past 30 years.

It's a room so drab its most extravagant item is a brown electric trouser-press that looks as if it dates from the 1970s.

A metal bed is draped with a blue-and-white quilt and flanked by two nondescript bedside tables. There's an alarm clock, a wicker chair, and a chunky old TV set. The cold faux-parquet flooring, also found in his office next door, adds to the image of Spartan simplicity.

Hollande usually arrives by plane from Paris late Thursday or early Friday, and rarely leaves without shaking dozens of hands and kissing dozens of cheeks at Tulle's open-air market on Saturday morning. "He knows almost everyone, the sellers and the shoppers," says Tulle's Socialist mayor Bernard Combes, 52, who met Hollande at a village fete and quit his job as a schoolteacher a decade ago to work with him.

Hollande is often seen at the Caleche cafe, just around the corner from his constituency office. On Saturday mornings he slides into a horseshoe-shaped sponge-plastic seat for his customary "grand cafe et croissant". On one day last month, an all-music channel played on the TV screen that hangs over his favorite breakfast table.

Correze is a semi-mountainous region that takes its name from the river that runs through it. It swung to the Socialists in 2008. Before Hollande, it was the political fiefdom of former president Jacques Chirac, from Sarkozy's UMP.

Like Chirac before him, Hollande is convinced of the need to maintain a base away from Paris and not change constituency with each election. "He can take the true temperature here," says Jacques Spindler, communications director for Correze General Council. "People won't just tell him what he wants to hear."

CORREZENOMICS

Correze has the second-oldest population of France's 101 regions or departments, and many of its nearly 250,000 people are farmers. Correze is also the most indebted department. Its debt is projected at more than 360 million euros ($474 million) this year. Per head, Correze debt is double that in other regions.

For Hollande's opponents, that is a prime target. One Sarkozy ally has called Hollande's constituency "the Greece of France", saying it is "the laboratory of what he could be tempted to do" if elected.

But the region may not be such a strong example of tax-and-spend Socialism. Hollande inherited almost 300 million euros of the debt from Sarkozy's party when he took over in 2008. In the five years before then, local accounts show, the debt had almost tripled from 105 million euros. Under Hollande, over four years, it has risen by a little more than a quarter. Between 2007 and 2010, according to finance ministry figures, Hollande increased operating costs 17 percent but cut investment by 24 percent.

Recent savings include an end to free school buses. Local public service employees now drive cheap Renault Twingos instead of mid-range Clios.

Hollande, who has made education a priority in his campaign, says the cuts will allow him to maintain spending in priority areas, above all social services. Despite the constraints, every child entering secondary school now gets an iPad. So far, more than 13,500 laptops and tablets have been handed out to school goers and their teachers at a cost of around 1.5 million euros a year, according to local documents.

Nationally, Hollande says he will create 150,000 state-aided jobs and hire 60,000 extra staff in public-sector teaching. That will cost nearly 4 billion euros, according to his manifesto.

The money for that will come in part from higher taxes. Under Hollande, the Correze tax on property owners has been increased by 6.5 percent. He says tax increases are also part of his plan to reduce France's public deficit to zero by the end of a five-year term in 2017. Earnings above 1 million euros, he says, should be taxed at a rate 75 percent - up from 41 percent now. He says it's essentially a symbolic stand, which will affect around 3,000 people and raise just 200-300 million euros. His advisers say it may be a temporary measure.

Hollande argues the overall tax burden has risen since Sarkozy took power and tax will have to rise whoever wins.

The country's main employers' organization, Medef, isn't happy with either of the main candidates. Hollande's 75 percent tax rate isn't popular, but neither is a plan by Sarkozy to curb payouts to CEOs. Medef head Laurence Parisot says neither man has offered a clear vision of how they will make France more competitive.

MAN FROM THE MIDDLE

Hollande was born into a middle-class family in Rouen, a middle-sized town to the?northwest of Paris, and started his education in a private Catholic school.?In 1968 - the year France held a general strike and Paris was convulsed by student protests - his father, an eye-and-ear doctor who got into property investment, uprooted his family of two children to bring them to Boulogne, an affluent suburb of the capital.

For Hollande, 13 at the time, the shift was striking. According to "Secret Journey", a biography of Hollande by journalist Serge Raffy published last year, Georges Hollande threw out his sons' metal dinky cars and lead soldiers as part of the move.

Francois was close to his mother Nicole, a social services worker who had a fascination with Francois Mitterrand. She remained a strong influence into her son's adult life and died in her early 80s just three years ago.

Hollande was a generation behind the protesters of 1968, but as a teenager he had a couple of run-ins with the law. As Raffy tells it, he spent a night in custody after he and friends were caught cannibalizing spare parts from an abandoned car to fix the vehicle they wanted to use for a holiday trip; in another escapade, his Fiat 650 "bubble-car" spun out of control on a corner and toppled over several times. He and a friend walked away unscathed.

But the move to Paris also marked the start of a high-flying education: Hollande picked up diplomas at the HEC business school, Europe's top-rated, followed by the highly acclaimed political studies institute Sciences Po and the Ecole Nationale d'Administration (ENA), traditional training ground for the country's top public servants. At ENA, students tackle everything from economics and budget management to industrial relations and negotiation techniques. Hollande qualified in the top 10.

It was also there, at 25, he met fellow student Segolene Royal, who would become his partner for decades and run for president in 2007. Jean-Marie Petitclerc, a priest who works in some of France's most notorious slums, remembers them as a socially conscientious pair, working together in a high-rise social housing project.

Politically, Hollande opposed his father, who objected to France letting go of its Algerian colony in the 1960s and ran for the extreme-right political movement of the time. Despite that, Hollande recently said that if he won the election, the first person he would phone would be his dad.

Hollande is short-sighted, which earned him a waiver from obligatory military service - a decision he contested, Raffy says, because he already had political ambitions and felt failing to serve would damage his prospects. Some of his closest friendships were formed during military service in Britanny in the late 1970s, when he shared a dorm?with people like Michel Sapin, a former finance minister who is now in charge of devising his election platform.

Royal and Hollande had four children together. She announced their break-up after she lost to Sarkozy; she ran against Hollande early in this campaign, but lost in the party primary. Hollande's current partner, Trierweiler, is a 47-year old journalist whom he knew before Royal announced their split.

ADIEU MERKOZY

If elected, Hollande would take over in France at a critical time for Europe. The leaders of the euro zone are struggling to fix the bloc's debt crisis.

It's here that Hollande's policies raise most concerns for proponents of austerity, like German Chancellor Angela Merkel and financial investors.

Chief among their worries are the fact Hollande has pledged to renegotiate a deal struck by Sarkozy and Merkel with other European leaders on budget control. He argues it needs to encourage growth as well as savings.

That annoys Merkel, who has endorsed Sarkozy's candidacy. Her government was also horrified by a spate of anti-German rhetoric from Socialist politicians in late 2011, when they accused Sarkozy of succumbing to pressure from her. At Sarkozy's request, she has refused to meet Hollande, according to a German official. The leaders of Britain, Spain and Italy have not met him either.

Hollande has said he wants to move away from the Paris-Berlin duopoly known as "Merkozy" - after the combined names of the countries' leaders - that has driven Europe's policy for the past two years. He wants to try to restore the voice of other EU governments, national parliaments and institutions. In a December speech to Socialists in Berlin, he said decisions "cannot be limited to a few meetings of heads of state."

Hollande's opponents say such ideas show naivety and lack of statesmanship. Financial market commentators including UBS's Magnus, who wrote in a note to clients last month that Hollande had taken a "bellicose" attitude towards the financial sector, believe a Hollande victory would cause a new flare-up in the euro crisis. Jacques Cailloux, head of European economics at RBS, says some investors "may decide to shoot first and ask questions later", by buying French credit protection.

Hollande's allies argue his stance stems from a deeply pro-European, democratic view: he favors integration to the point of federalism. In 2005, he was pelted with eggs after campaigning hard - but in vain - for a "yes" vote in a referendum asking if the French wanted a European constitution.

Jean-Yves Le Drian, an old friend, argues that Hollande has a notable record as a bridge-builder. In the early 1980s, he says, the pair were among five founders of a political club, the Transcourants - the name translates roughly as ?cross-currents' - that sought to ignore tribal battles within a branch of the Socialist Party.

What began as a tiny group in the Britanny town of Lorient soon became a big hit, winning the backing of Socialist grandee Jacques Delors, the former European Commission president.

In the same way, aides say, Hollande's bid to renegotiate Europe's budget pact doesn't mean he wants to derail the new treaty. "Francois Hollande is a European who wants to change Europe while remaining totally pro-European," says Pierre Moscovici, his election campaign director.

That tension - between internal political goals, the demands of investors and shared European aims - is one all European leaders face. If Hollande wins, Merkel's advisers say, she believes she can work with him, and Berlin will go on a "charm offensive".

For Hollande, for now, the point is that every opinion poll since last May has pointed to him winning the election runoff, due on May 6. That may change. But if he gets there, says his friend Le Drian, "it will have been one hell of an adventure."

(Additional reporting by Catherine Bremer in Paris, Swaha Pattanaik in London and Noah Barkin in Berlin; Edited by Sara Ledwith and Simon Robinson)

Source: http://news.yahoo.com/special-report-french-hopeful-hollande-says-hes-nothing-070646845.html

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