French Presidential Election: A Hollande victory could transform British politics

After a miserable few years, Labour's successful local election results have restored the spring in many a left-wing step. The coalition is on the back-foot, both intellectually and electorally, while events overseas suggest the tide may be turning. In 2012's most high-profile election, Barack Obama is a hot 1.538/15 favourite to retain the US Presidency, but punters searching for clues that directly affect the UK scene may do better looking a little closer to home.

For if the polls are correct about Francois Hollande winning today's French Presidential election, there are profound political implications for the entire continent.

The significance lies in much more than the fact Hollande would be the first socialist in the Elysee Palace for 17 years. Rather it is that his agenda represents a marked shift from the ideological consensus that has dominated Western politics for even longer, promising to dramatically reshape European affairs, most critically the economic response to the ongoing banking/debt crisis. Hollande openly rejects the austerity economics that has been imposed on Eurozone members and has pledged to renegotiate the 'fiscal pact' engineered by Nicolas Sarkozy and Angela Merkel, that has already broken the back of the Dutch government and could fall foul of an imminent Irish referendum. Rather than public spending cuts, he wants to follow Obama's example of a fiscal stimulus while narrowing the deficit via a combination of growth and increased taxes on the rich.

Such ideas have been regarded as left-wing heresy by British governments since the 1970s. Tony Blair may have nominally been a Labour PM, but just like Bill Clinton in the USA, his administration governed within the constraints of the Thatcher/Reagan consensus. Standing up to international money markets, economic intervention or raising taxes on the rich were off-limits. Even Gordon Brown, who begun to reverse direction after the banking crisis, cowed away from laying out a bold, leftist analysis at the last election.

Since assuming their party's leadership, Ed Miliband and Ed Balls have hinted at returning to Labour's roots, praising Obama's strategy and criticising the coalition cuts plan for going 'too far, too fast'. However, these Brown prodigies inherited their master's fear of straight talking and analysis that such a message will never play well with the British electorate. However, on the basis of current polling and Thursday's election results, Labour should abandon those fears. If they can lead by double digits overall nationally despite trailing on economic competance, there is surely everything to gain from laying out a bold message. The combination of Tory economic failure and Hollande's ascendancy should finally allow Labour the intellectual cover to lay out a clear alternative to austerity.

More problematic for Labour is that Europe seems certain to take centre stage in British politics over the coming years. Hollande is openly critical of the UK's brand of finance capitalism and his stance is bound to embolden Eurosceptic demands that Britain leaves the EU. Ever the electoral strategist, Lord Mandelson put his head above the parapet this week, calling for an 'In/Out' referendum that would enable Labour to lead this debate ahead of the coalition, although whether the result would go the former EU Commissioner's way is quite another matter. The UK electorate is famously Eurosceptic and Tory strategists are well aware that their only recent poll bounce came after David Cameron withdrew from the Fiscal Pact talks. With the party haemmoraging votes to UKIP, it seems certain that Tory backbenchers will also demand a referendum.

If indeed an in/out referendum becomes the new consensus, David Cameron's stance on it becomes absolutely pivotal to his own future and the next election. To date, Cameron has taken the traditional Tory line of trying to be 'in Europe, but not run by Europe', but that line was unsustainable when John Major was PM and would be even less so if a Franco/German led EU embraces Hollande's ideas and hostility towards the City of London. My suspicion is that Cameron will go into the next election offering a referendum in which the Tories would support 'Out', while blaming his government's failure to withdraw on the hapless Lib Dems. It may be his only hope of reversing the collapse in Tory support. Moreover without adopting such a position, Cameron's position as Tory leader may well become untenable.

Once every few generations, the tectonic plates in politics shift dramatically. Everything is up for grabs right now. The public are disillusioned with politics and the choices on offer. No party is truly capturing their imagination, hence the success of parties like Respect and UKIP. David Cameron and Ed Miliband are approaching a pivotal stage in their careers. He who dares to make a bold move has much to gain. Watch this space.