European Elections and Austerity blues

Two crucial votes in the EU have just been held. The French presidential election has Socialist François Hollande elected on a mandate that includes cutting back on austerity, raising taxes and a reduction in France’s nuclear capacity. While his margin of victory, 51.7% wasn’t as comfortable as polls predicted, it had the silver lying that suggests that many of those who voted for Marine Le Pen in the first round ignored her advice, and voted in the second round, thus denying the far right an important victory.

Meanwhile in Greece, the party’s that oversaw the European bailout lost significant ground against the anti-austernity parties. Looking at the poll numbers, there is an outside chance that the pro-bailout parties might be able to form an alliance, but it will be a weak government, with constant infighting. Of course, if the anti-bailout side form a government, then its probable it equally won’t be stable for long, however it will be stable long enough to give Merkel and the IMF the two fingered salute. Also, waiting in the long grasses, is the up coming Irish referendum on the EU bailout treaty, which could result in a vote against austerity.

Either way, the results show that the European public are rejecting this policy of deficit reduction purely via austerity measures. Clearly a different strategy needs to be tried. These harsh austerity measures have merely succeeded in making the deficit worse, not better. However, whether the time remains to try such measures and rescue the Euro is questionable. Already the markets are starting to panic, and as I pointed out before, such a panic has a habit of taking on a life of its own.

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