France in 2013: Living on borrowed time?

This is the latest in a series of entries looking at what we can expect in 2013. Each weekday, a guest analyst will look at the key challenges facing a selected country -- and what next year might hold in store.

By James Shields, Special to CNN

James Shields is professor of French politics and modern history at Aston University in the U.K.He is the first winner of the American Political Science Association's Stanley Hoffmann Award for his writing on French politics. The views expressed are his own.

While it could hardly be more eventful than 2012, with the toppling of a president and an emphatic swing of legislative power from right to left, 2013 could prove to be more decisive for France. As the electoral promises of the past year recede, they are replaced now by an urgent need to deliver.

The three biggest questions hanging over France in 2013 are a potentially hazardous mix of the political and the economic. How will President François Hollande and his Socialists square their election pledges with the hard choices of governing in economic crisis? How will the center-right UMP recover from its bitterly divisive contest to replace Nicolas Sarkozy as leader and face down mounting pressure from a resurgent far-right Front National? And, as a second credit rating agency downgrades France, can the world's fifth-largest, and the Eurozone's second-largest, economy bring its public finances into balance for the first time in almost four decades?

The first of these questions is scarcely new. Since the early onset of recession in the 1970s, French governments have outdone one another in their capacity to over-promise and under-deliver. Elected to implement reform, governments have been blocked in the streets from doing so, then punished in the polling booths for not having done so. In all but one of the eight parliamentary elections since 1978, the governing majority has been thrown out, while a succession of presidents and prime ministers have vied for historic records of unpopularity.

Now it is the turn of President Hollande and Prime Minister Jean-Marc Ayrault. As only the second Socialist president since the foundation of the Fifth Republic in 1958, Hollande must avoid the pitfalls into which his predecessor, François Mitterrand, led the Socialists in the early 1980s with their short-lived and economically reckless pursuit of an untimely "Socialist experiment." Distant echoes there are. The new president fought a campaign on easy promises to eschew austerity and relaunch growth, while early tax rises on income, wealth, companies and capital gains -- including a 75 percent top income tax rate -- appeared to herald an old-style Socialist recourse to soaking the rich.

Yet Hollande is no old-style Socialist. A graduate of Paris's elite technocratic finishing school, the Ecole Nationale d'Administration, he is a pragmatist with a preference for workable over ideological solutions. Hence the €20 billion ($26 billion) cut in labor costs for employers aimed at restoring French economic competitiveness by helping create jobs and close a trade gap measured recently at €70 billion ($92 billion). Hence, too, the deficit reduction program that Finance Minister Pierre Moscovici describes as a "Copernican revolution" in the left's approach to government. Other measures to boost investment and to reform France's notoriously rigid labor market are also underway.

Pragmatism, however, can be but a short step away from incoherence. In an early test of the president's resolve to protect France's industrial base, the government recently found itself in an ugly confrontation with ArcelorMittal, the world's largest steelmaker, over its proposal to close two blast furnaces at Florange in north-eastern France at a cost of 629 jobs. The disagreement degenerated into insults by government ministers against the company's owner, Lakshmi Mittal, who was told he was no longer welcome in France despite owning around 150 sites there and employing some 20,000 workers. The threat to nationalize the disputed site, while conjuring the specter of Mitterrand's ill-fated "Socialist experiment," gave the lie to the government's insistence that France was "open for business." It was also shown to be mere bravado and soon withdrawn as an option in favor of a complex compromise deal.

Such incoherence is damaging. There is, of course, a ritual element to an incoming president talking tough about protecting jobs. Sarkozy, too, huffed and puffed against lay-offs before seeing unemployment rise by almost a million on his watch. As president and prime minister now struggle to explain the strategic direction of government policy, their popularity ratings have plummeted, with Hollande's 36 percent approval rate setting a new record for unpopularity at the six-month mark of a presidential term.

Yet if it is true that a factor in good government is strong opposition, then part of this government's problem is the disarray of its main political opponents. While Socialist ministers were locking horns with ArcelorMittal, the center-right UMP was engaged in a fratricidal feud around the election of its new leader that has split the party down the middle and cast doubt over its ability to hold together.

The leadership contest pitted former Prime Minister François Fillon against outgoing party Secretary General Jean-François Copé. It was also a contest between two different visions of France under a future UMP administration -- one economically liberal and socially inclusive (Fillon), the other economically liberal and socially "unapologetic," code for being tough on immigration and Islam notably (Copé). It was expected that the election would produce a clear direction for the party, setting it either on a more centrist or a more right-leaning course; but the near dead heat resulting from a poll of some 300,000 party members has reopened all the old fault lines that the UMP was formed, in 2002, to seal over.

With Copé's wafer-thin victory disputed by Fillon's camp and calls for a fresh vote, the party is effectively leaderless and, for the moment, directionless. This is a dangerous condition to be in, with a new centrist alliance recently formed under the popular UMP defector Jean-Louis Borloo and -- more ominously -- with the far-right Front National making strong political headway under its new leader Marine Le Pen. She came third in the presidential poll with 6.4 million votes and she has made no secret of her ambition to attract the most right-wing components of the UMP and transform her populist party into the major force on the French right.

Meanwhile, France's accounts make grim reading. Public debt stands at more than 90 percent of GDP and public spending at 57 percent, a eurozone peak; unemployment is above 10 percent (over 3 million), rising to 25 percent among the young and to much higher levels in some deprived suburbs; and successive downgrades of its vaunted triple-A credit rating have struck a blow at France's financial standing. Fiscal discipline is hardly a mobilizing electoral theme, and during the campaigns of 2012 there was barely a reference to cutting public spending; but that is a central part of the challenge now facing the president if he is to fulfill his promise to reduce the budget deficit to 3 percent of GDP in 2013 and balance the books by 2017.

Will President Hollande have the courage to press on with reforms where his predecessors retreated? The answer might be: does he have a choice? A recent report by The Economist described France as "the time-bomb at the heart of Europe" and potentially "the biggest danger to Europe's single currency." Without necessarily going that far, it is clear that Hollande's room for maneuver is slim to vanishing. But it is also clear that, if he has the political will to reform, he has the political means. The Socialists control not only the presidency and both houses of parliament but almost all regions, most departments and most major cities. And if they cannot persuade France's truculent unions to embrace reform, who can?

It may not be attached to a bomb, but France's clock is ticking; and it will tick faster in 2013 than it did in 2012. French presidents once enjoyed a seven-year term; now, since a constitutional amendment of 2000, they have five. Hollande has more power than any other European head of state, but he has only another year, maybe two, to make a difference before the first-draft history of this presidential term is written. Bonne chance!