Holiday over for France's Hollande as hard times bite

PARIS (Reuters) - As post-election euphoria wanes, French President Francois Hollande returns from vacation under pressure to show that beyond dismantling the legacy of his predecessor he can act decisively at home while grappling with recession in Europe.

Awaiting him are the crisis that still haunts the euro zone, fragile relations with German Chancellor Angela Merkel, and French political opponents who accuse him of sunning himself on the beach while Syria slides into chaos.

Hollande, whose election win was due in large part to voter fatigue with Nicolas Sarkozy, stopped short of promising a rapid economic upturn, arguing that the rich should do more to help restore France's public finances and that the job could be done without drastic Greek-style cuts in wages or welfare.

But the French economy remains at a stubborn standstill and a bout of rioting during Hollande's break has highlighted the challenge he faces to improve the lives of people living in the depressed housing estates that ring many French cities.

As he marks 100 days in office this week, the Socialist who branded himself "Mr Normal" and promised a break with the showy style of the conservative Sarkozy has largely delivered on that front.

He has raised taxes that Sarkozy lowered for the wealthy, partly rolled back a reform that raised the pension age to 62 from 60, and scrapped plans to raise the rate of VAT sales tax.

Hollande has reduced his own salary (Sarkozy had raised his), makes a point of travelling by train rather than private jet when he can, and tells his driver to stop the car when traffic lights go red - all symbolically important.

The problem now is that having rebranded the presidential style, Hollande needs to prove he is an effective leader - or as he said himself days after his election on May 6, to prove that "simple doesn't mean mediocre".

There is a risk now, as influential newspaper Le Monde put it this weekend, that Hollande, who returned by train to Paris on Sunday night from two low-key weeks at the presidential Bregancon Fortress on the French Riviera coast, gets stuck in a "normality trap".

He needs to disprove Sarkozy's pre-election claims that Hollande's "normality falls short of the demands of the job".

"It was a great idea to win an election but is it sufficient to govern?" Jean-Luc Mano, a political communications consultant, asked in Le Monde.

Hollande's popularity is flagging. In a recent survey, the Ifop polling agency said the percentage of people saying they were satisfied with him edged down to 56 percent in July from 59 a month earlier and 61 in May, the month he won power.

Those ratings are if anything marginally weaker than Sarkozy's ratings at the outset of his term but pollsters say Hollande is coming in the middle of a crisis and Sarkozy took power at a time of greater optimism and confidence.

Sylvie Chaineau, a social services worker who deals daily with domestic strife in western France, voted for Hollande and believes he has made a good start but says she now hopes to see "concrete results".

"He didn't promise miracles and I am not putting the bar too high and he will need a bit of time ... there's a crisis and we all need to do our bit," said Chaineau.

"I know that's not everyone's view. My hairdresser was howling about the government and rising expenses for employers."

UNDER PRESSURE ON ALL FRONTS

The backdrop to the challenges facing Hollande is a debt crisis that has plagued the euro zone for two and a half years, his promise to balance France's books without resorting to Greek-style cutbacks, and his positioning as a counterweight to Merkel's tough austerity strategy.

French officials say a meeting on Thursday between Hollande and Merkel, sure to be subject of renewed focus in financial markets after a lull in financial and political activity the past few weeks, will not produce any new decisions.

But in Berlin they hope it will at least show that Hollande remains faithful to the Franco-German axis that has provided leadership in the euro zone for decades.

In Merkel's closest circles, officials say Hollande is still in the process of "discovering himself" but needs to demonstrate he will not let up on pledges to slash France's large deficit.

Others are more disheartened by his visible scepticism over Merkel's austerity line - even if his efforts ultimately boiled down to securing a modest 120-billion-euro spending commitment at European level.

"Nothing is working between Germany and France at the moment," a senior official from one of Germany's ruling parties said. "The expectation that everything would improve after the French elections was unrealistic. Other euro zone countries are beginning to worry because the German-French axis simply isn't functioning," the official said.

Hollande secured pro-growth adjustments to the European pact on budget responsibility but is already considering big cutbacks in infrastructure spending. His government needs to drum up 33 billion euros (26 billion pounds) in spending cuts and extra tax revenues in 2013 so that it can deliver on deficit-reduction targets and knock the deficit to 3.0 percent of GDP from 4.5 percent this year.

His government is due to present its 2013 budget bill in late September.

MORE THAN MANAGING MERKEL

Hollande's problems go beyond how he manages relations with Merkel and accusations from Sarkozy's camp that he has failed to show leadership in the worsening Syrian crisis.

At home, his government is under pressure to show a firm hand after clashes between police and armed youths in the northern city of Amiens last week. But law and order issues are showing up divisions within the government.

Interior Minister Manuel Valls is under attack from within his own party over renewed expulsions of illegal Roma gypsy immigrants, a policy denounced by many on the left when applied under Sarkozy.

Valls remembers well that Socialist prime minister Lionel Jospin was tumbled out of a presidential election race by far-right leader Jean-Marie Le Pen in 2002 partly because he failed to take a hard line on law and order.

Hollande's problem now is that he must ensure that mistake is not repeated, but without riding roughshod over members of his party who believe that, without measures to improve job prospects and social integration, police crackdowns on their own are doomed to fail.

The potential for division was highlighted on Monday when Socialist Party boss Martine Aubry said the Gypsy camp evictions ordered by Valls in the northern city of Lille, Aubry's political fiefdom, were "regrettable" because no alternative lodgings had been found beforehand.

Prime Minister Jean-Marc Ayrault has called a meeting of ministers on the Roma camps on Wednesday, presumably to ensure that the matter does not give rise to public disputes between hardliners such as Valls and advocates of less frontal security policies, such as Justice Minister Christiane Taubira.

On the social front, Ayrault met union leaders before the holiday and promised to pursue more constructive industrial relations based in dialogue.

But that is a slow burn project that will do little to prevent tens of thousands of further job cuts in industry in addition to the 8,000 layoffs carmaker PSA Peugeot Citroen announced in July, at a time when unemployment is higher than any time since August 1999.

"It's all a communications job so far - necessary but not sufficient," says Guy Groux, an industrial relations expert at Sciences Po University in Paris. "They put an orchestra in place. Now it needs to start the symphony."

(Additional reporting by Noah Barkin and Andreas Rinke in Berlin; Editing by Alexandria Sage and Giles Elgood)

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