That would be a mistake. The new governments in France and Greece need to understand that economic growth and government austerity are not mutually exclusive. The type of growth that comes through government spending, especially employment growth, can only be sustained if the private sector grows at a fast enough pace to support it. If not, then any gains would be temporary and just add to the debt load. It is all about the efficient use of resources. Spending billions of euros hiring back thousands of unproductive government workers who produce little value to the country's overall economy isn't the same as spending billions building engines of economic growth that are self sustaining, like a research campus or a fund to seed startup companies.
But all of this talk of growth versus austerity addresses only the short-term economic woes impacting Greece, France and the rest of the eurozone and skips over the structural problems that created the sovereign debt crisis in the first place. This crisis will never end until the 17 members of the euro fully integrate their fiscal and monetary policies. This, of course, would mean a massive transfer of sovereignty that most of the eurozone governments would find unpalatable.
Yet Hollande says he is in favor of the European Central Bank issuing "eurobonds," to support eurozone members that are having trouble funding themselves in the open market. This would be an alternative to the ECB's LTRO program, which currently works by flooding the banks with cheap cash to buy sovereign bonds as a pass through funding mechanism for many eurozone governments. The LTRO program is the only thing keeping the interest rates on the sovereign bonds of countries like Portugal, Spain and Italy from hitting unsustainably high levels.
But the LTRO program is only a temporary measure, one that cannot possibly continue without eventually triggering hyperinflation. The issuing of eurobonds, backed by all 17 members would be a more lasting solution, but it can never work unless all the members have a joint fiscal regime. That's because it would mean the co-mingling of debt and a transfer of risk across the eurozone. That kind of trust can only occur if all eurozone members were on the same page in terms of spending.
So, Hollande is right to support eurobonds as it would be the first real step to solidifying the currency union, but it is unclear if he has any idea what it would take to make it a reality. He would not only need to convince his own government to give up fiscal control but also convince all the other eurozone members to do so as well, including Germany, which is vehemently opposed to the idea. But before all that he will need to reassure the markets and other eurozone members that France is creditworthy and committed to getting its fiscal house in order. That means France's new president will need to use the national credit card sparingly as he tries to rekindle the fire in country's economic growth engine.