Francois Hollande has 10 weeks to avert a French bond crisis

There will be no speculative attack against French bonds on Monday morning if Francois Hollande is elected president, the first socialist to take the Elysee since 1981.

The phantom army waiting to pounce is the cynical invention of the Sarkozy campaign. Any fears of a Leftist lurch have been in the price for weeks.

What is true is that the CAC-40 index of French stocks has underperformed Germany's DAX by 20pc since August, a rare divergence for two countries yoked so tightly together. The yield spread of German 10-year Bunds over French OAT bonds has jumped 90 basis points.

This divergence pre-dates the "Hollande scare". It goes beyond downgrade jitters, or fears of contagion from $710bn of French bank exposure to Club Med. It reflects a gut feeling in global markets that France is sliding into deep trouble, clinging to a ruinously expensive social model in a Teutonic monetary union and a Chinese world.

French economists say the danger will come later this summer - whoever is elected - as the full force of Europe's contraction crisis hits France.

"They absolutely must cut public spending and control the debt," said Marc Touati from Global Equities.

"It will soon be clear that we are in deep recession. If they don't act fast, interest rates will shoot up and we will have a catastrophe by September," he said.

Drastic fiscal tightening across Euroland is a grave policy error, but "AA" France has to deal with reality. The country lacks the credibility to go for growth alone under the constraints of monetary union, he said.

Mr Touati blames the European Central Bank - BCE in French or "Banque Contre L'Economie" as he calls it - for making matters far worse by pushing Euroland into a slump out of "blind ideology".

Fund manager Edouard Carmignac makes the same critique. His indictment of the pre-Draghi ECB is ferocious, but that does not alter the strategic dilemma for French leaders. Slump makes it all the more imperative for France to retrench. "If Hollande strays too far from virtue, French rates will go through the roof," he said.

My own view is slightly different. The German deflation regime is the greater threat to Greco-Latin societies, and to post-War comity in Europe.

But it is also true that Germany's own democracy may turn fractious if policy strays too far from German needs and constitutional law. This is EMU's curse. It destabilises each nation state in turn.

The worst of all worlds would be a nasty spat between Paris and Berlin that poisoned the atmosphere without changing Europe's "asphyxiation compact".

"Watch the French debt auctions on May 3 and May 16 carefully," says Sophie van Straelen from the French hedge fund consultancy Asterias.

If they go well, Mr Hollande may start to think that bond vigilantes will stomach his big state dreams.

"He has no choice. He must increase taxes and cut spending, otherwise markets could panic and we will have a disaster," she said. The crucial deadline is the budget proposal in July.

Paris has a strange atmosphere right now. It is hard to get a table at the bistros of Saint-Germain, yet people have a sense of foreboding. They know austerity has hardly begun.

The press is full of stories that the biggest property bubble ever known in France is popping. Yet the party goes on. Perhaps this is what it felt like in May 1931, avant le deluge.

Germany took its medicine with the Hartz IV reforms eight years ago when the world was humming. France will have to do so in harsher times, somehow clawing back 20pc in labour cost against an austere Germany.

Little has been done yet beyond repeal of the 35-hour week. Labour rigidities are among the most entrenched in the OECD club.

The unreformed French state takes 55pc of GDP. The current account has swung from a surplus of 3pc of GDP to a 2pc deficit in twelve years.

Mr Hollande must know the dangers of "socialism in one country" under a currency peg. He was a Mitterrand aide when such an experiment blew up in 1983, leading to an epic U-turn. Markets won't wait so long this time.

Yet he may be prisoner of events if he fails to win a majority in legislative elections in June and has to rely on the neo-Communist Left Front.

There are echoes of 1936 when Leon Blum's Front Populaire came to power with "New Deal" rhetoric and Communist backing. Investors rushed for the exits, forcing the franc off the Gold Standard.

"Conversations in French became increasingly commonplace in the City of London, as French citizens made arrangements to open sterling bank accounts," writes Barry Eichengreen in Golden Fetters.

There are signs that it is happening again, says Louise Cooper from BGC Partners. If Italians were the biggest foreign buyers of top properties in London last year, the French are catching up this year in the pounds 3m to pounds 5m range.

Historian Nicolas Baverez said the French are in a national sulk, idealizing a mythical past and retreating behind a new Maginot Line. Europe has become the great scapegoat.

"I am convinced that France will stand at the centre of the next eurozone crisis," he says.

Luckily for Mr Hollande - or Mr Sarkozy.