French anti-austerity stand under threat

As the first round of voting in France's parliamentary elections took place, Mr Hollande's tax-and-spend stance was expected to help his Socialist Party and its left-wing allies win a majority in the National Assembly. The President, who ousted Nicolas Sarkozy last month, has made good on promises to cut the retirement age in France to 60 from 62 for people who started work at 18, a move that goes against austerity efforts across the Western world.

Meanwhile, his Labour Minister, Michel Sapin, responded to a rise in the French unemployment rate to 10 per cent, with a pledge to "make layoffs so expensive for companies that they are not worth it". The latest opinion polls indicated that Mr Hollande and his allies would gain the 289 seats needed to take control of France's lower house after a second round of voting next Sunday.

A recent survey showed that 53 per cent of people feel more confident about their country's economic future, up 20 percentage points from just before Mr Hollande became President.

However, it is expected Mr Hollande will be told to change course when the Cour des Comptes, the body that audits France's public accounts, reports to him on the nation's finances as requested on June 19, two days after voting finishes. The President is likely to be told to cut expenditure, a strategy "at odds with his socialist political platform", according to Dominique Barbet, an economist at French bank BNP Paribas. Some believe Mr Hollande will ask for more time, pushing back targets to cut France's deficit.

"This date was not chosen by chance," Mr Barbet said. "The Cour des Comptes has already been critical of the magnitude of public spending. An adjustment of the economic policy targets is thus likely to occur very quickly, right after the elections. The financial crisis offers no time for hesitation."

The big question around the elections is whether the Socialist Party will be able to obtain an absolute majority of seats without its allies, the Greens and far-left candidates.

"The government would still be able to pass its laws . . . but that would be more complicated and time consuming," said Mr Barbet. "Ultimately, the policy would be more leftist."

Although the far-right, anti-immigration National Front can hope for only a small number of seats in the Assembly because of the way the French electoral system works, even that result would represent huge progress for it.

Should the vote throw up surprises, markets are likely to react badly, as it could hobble Mr Hollande's ability to enact the economic policy changes they expect will be necessary.

At stake is not just ascendancy at home, as much as the Socialists relish the prospect.

A parliamentary triumph could resonate throughout the European Union, boosting Mr Hollande's profile as leader of the charge to turn Europe from its fixation on austerity towards promoting growth as the key to solving its economic crisis.

"Reaching a majority in the Assembly would clearly give Hollande more legitimacy to carry out a more radical policy both at home and at the EU level," Oxford University scholar Sophie Heine said.

"The political and symbolic weight of France in the EU is still very substantial."