Hollande in winning position for French runoff
PARIS (Reuters) - President Nicolas Sarkozy faces defeat at the hands of Socialist Francois Hollande in a presidential runoff on Sunday, paving the way for a French push to temper austerity in stagnating euro zone economies with a new focus on growth.
A slight narrowing in latest opinion polls suggests Sarkozy may manage a closer finish than Hollande's 6 to 10 point lead in the deciding vote, yet his failure to land a knockout punch in a televised debate may have doomed his re-election hopes.
Cruising to the finish as voters punish Sarkozy for a sickly economy and an abrasive personality, Hollande would take over Europe's No. 2 economy as investors remain keen to see it rein in its deficit amid renewed fears about the euro zone crisis.
The Socialist seemed poised and unflappable, while Sarkozy was agitated and edgy as they clashed over Europe in Wednesday's primetime TV debate watched by 17.8 million people. Analysts agreed Sarkozy failed to land a blow that could have weakened Hollande's advantage.
"If the margin continues to narrow, that indicates a shift in opinion that could continue, and so the result could be very tight," said Dominique Reynie, professor at the Sciences Po university and head of the liberal think-tank Fondapol, noting that a last batch of voter surveys was due before the vote.
But he added: "After yesterday, you cannot say Francois Hollande could not be a president, so he's rather the winner."
An LH2 opinion poll showed 45 percent of respondents found Hollande more convincing and 41 percent preferred Sarkozy. It found no significant change in voting intentions.
Conservative Sarkozy has fought an uphill battle for re-election as economic gloom, his failure to keep a 2007 pledge to cut unemployment to 5 percent, and a dislike of his brash and showy manner have turned many former supporters against him.
He suffered a setback this week when far-right leader Marine Le Pen, who won nearly one in five votes in the April 22 first round, refused to endorse him. Centrist Francois Bayrou, with 9 percent on the first ballot, was due to give his position later on Thursday, but he too was expected to sit on the fence.
BACK IN RECESSION
The prospect of a Socialist president leading France for the first time in 17 years comes at a crucial time for Europe, with Spain under market pressure and concern growing that the euro zone is tipping back into recession.
Hollande has said his victory would change the economic direction of Europe towards a stronger drive to promote growth.
The election has prompted financial markets to look anew at France's struggle with feeble growth, a gaping trade deficit, 10 percent unemployment and strained public finances - factors that prompted one agency to cut to its AAA credit rating.
Hollande, 57, plans to meet spending needs with higher taxes, but some analysts worry that anemic growth will derail his goal to balance the budget by 2017, especially if his planned tax hikes, including a 75 percent rate on income over 1 million euros ($1.3 million), prompt an exodus of high earners.
Analysts say France should trim its unrealistic growth forecasts and face up to the need for public spending cuts. But Wednesday's debate shed little light on how either candidate planned to deal with that challenge.
"Unfortunately, we did not have the details the markets were looking for, especially about savings on public expenditures or reforms to enhance competitiveness," said BNP Paribas economist Dominique Barbet in a research note after the debate.
Both candidates vow to tackle an industrial decline driven by poor competitiveness against low-cost foreign manufacturers, but they have shied away from promising deep structural reforms.
They have also tiptoed around the issue of slimming down a welfare system that swallows 28 percent of France's gross domestic product each year, higher than any other OECD country.
Polls will be open from 8 a.m. (0600 GMT) on Sunday to 6 p.m. (1600 GMT), and two hours later in big cities.
Reliable projections of the result based on a partial vote count will be published as soon as the last polling stations close. Media that publish exit polls or partial results before that risking fines and legal action.
The runoff vote coincides with elections in Greece, where voters are set to punish mainstream parties for austerity. Those polls come a week before a major regional election in Germany in which conservative Chancellor Angela Merkel may suffer a mid-term rebuff to her strict austerity policies.
For French voters, the economic crisis, Europe's debt woes and pressure on household incomes have been the overriding issues, driving the wave of support for Le Pen's National Front.
"It's the people who are really struggling financially who vote for Le Pen," said Reynie. "For the runoff, people voting for Sarkozy are thinking about somebody who can lead in Europe and handle the crisis. Those who vote for Hollande are thinking about their own purchasing power and social well-being."
Having made his mark as a leader of Europe's response to the economic crisis, Sarkozy responded to the resurgent far-right vote by attacking some European Union trade and immigration policies as harmful to France and calling for public tenders to favor European firms as long as Asian countries do likewise.
Hollande has raised fears of strains with Berlin by saying he would push for pro-growth measures to augment the fiscal discipline treaty driven by Merkel.
Germany, the EU's paymaster, is firmly wedded to its focus on austerity rather than Keynesian spending, though several other EU governments are also calling for a new focus on growth.
Aides say Hollande, who would join a small minority of centre-left leaders in Europe, is a committed European and would travel to Berlin as early as possible to discuss his growth ideas with Merkel.
The Socialist says he does not want to unpick the fiscal compact's central tenet of balanced budgets, but wants to "complete" it by adding instruments to stimulate growth.
He has dropped calls for joint debt issuance to fund public borrowing, which is a red flag for Merkel. But he favors jointly issued "project bonds" to fund infrastructure investment.
Aides say Hollande is a closet reformer far more centrist than his party's last president, Francois Mitterrand, who oversaw a wave of nationalizations in the 1980s.
Hollande has been freed of having to make concessions to the hard left after the Communist-backed Jean-Luc Melenchon scored a disappointing 11 percent in the first election round.
That may help him push through tax reforms and other changes unhindered, but the task of selling austerity cuts to an unprepared public may still be politically tough.
Sarkozy, who spearheaded the West's military intervention in Libya last year, would become the first president since Valery Giscard d'Estaing in 1981 to fail in a bid for re-election. But he would be the 12th euro zone leader to lose office since the start of the crisis in 2009.
Hollande would see his diplomatic skills tested within days at a flurry of meetings from a NATO summit in Chicago in late May to a G20 heads of state meeting in Mexico in June.
($1 = 0.7561 euros)
(Additional reporting by Jean-Baptiste Vey; Editing by Paul Taylor and David Holmes)
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