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France is in a funk. François Hollande is the most unpopular president in the history of French polling. The country's economy is now considered "the sick man of Europe" and French voters still see the cure as worse than the disease. Any attempt to adjust, even minimally, France's statist economic model and cradle-to-grave social safety net is met with paralyzing howls of protest.

The country is effectively ruled not from the Elysée (the presidential palace) or the National Assembly, but by opposition politicians on the far left and far right. Barely 18 months into his five-year term, Mr. Hollande is a canard boiteux (lame duck) whose party may get rid of him before voters get a chance to.

No wonder Mr. Hollande, a Socialist who lucked into the presidency in 2012 after voters had tired of Nicolas Sarkozy's hissy fits, prefers foreign to domestic affairs. He has distinguished himself and his country by taking courageous stands against the Syrian regime's use of chemical weapons (well before U.S. counterpart Barack Obama), urging allies not to be duped into relaxing sanctions against Iran and intervening militarily against Islamic terrorists in Mali.

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Unfortunately, such actions won't win Mr. Hollande many votes at home. Nor will it fix France's broken economy. Just as Spain, Ireland and other bailed-out euro-zone countries are stabilizing, Europe's second-largest economy risks derailing the continent's recovery. France's private sector contracted again in the third quarter and warnings about the country's economic decline have grown louder by the day.

France's credit rating just got downgraded again by Standard & Poor's. And while markets shrugged off the news, the rating agency's stiff rebuke of Mr. Hollande's economic policies has sparked an even more bitter debate than usual (by French standards) about the country's future.

That debate intensified last week after the Organization for Economic Co-operation and Development released a scathing report blasting France's stubborn refusal to get with the program: "Over several years, many European countries have accelerated the adoption and implementation of essential reforms. This adjustment has not happened in France."

Government spending now accounts for an astounding 56 per cent of France's gross domestic product, compared to a bit more than 40 per cent in Canada. So far, Mr. Hollande has sought to meet European Commission-mandated deficit targets by raising taxes – to the tune of €30-billion ($43-billion) in 2012 alone. Not only does he keep missing the deficit targets, he keeps putting off critical spending reforms.

The result is a further deterioration of France's competitiveness and a tax revolt the likes of which the country has never seen. It started after Mr. Hollande imposed a 75-per-cent levy on income above €1-million. The country's top court declared the tax unconstitutional, so Mr. Hollande simply shifted the burden to employers.

No matter, the wealthy are voting with their feet. In July, France's former ambassador to Iraq and Tunisia was arrested trying to smuggle €350,000 in cash out of the country. He is just one of a new breed of so-called "cash commuters" seeking to escape Mr. Hollande's confiscatory tax policies by any means possible.

Such evasion is rightly condemned by politicians on the left. But many, including Mr. Hollande's ex-wife, 2007 presidential candidate Ségolène Royale, have repudiated the President by siding with the farmers who forced Mr. Hollande to scrap implementation of a carbon tax on transport trucks. Protests spread across the country this month as merchants and restaurant owners joined the farmers to fight an increase in the value-added tax. The latter is meant to offset cuts in payroll taxes (now nearing a punishing 50 per cent) – cuts that almost everyone agrees are needed to get French firms hiring again. The country's unemployment rate stands above 11 per cent, and four out of every five jobs added in 2012 were temporary contracts.

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Mr. Hollande's economic policy is full of contradictions. (He appointed an anti-globalization crusader as his minister of industrial renewal.) And he is dogged by open dissension among members of cabinet jockeying to replace him on the Socialist ticket in 2017. The best hope lies in Interior Minister Manuel Valls, even though he is considered a populist heretic by the Socialist elite.

Mr. Sarkozy, meanwhile, is considering a comeback – which suddenly doesn't sound so crazy.

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