Eurozone elections: Rejecting austerity at the polls

 
Activists wearing masks of Francois Hollande and Angela Merkel taking part in a fake marriage in Berlin, 7 May 2012 Activists in Berlin performed a "marriage" of the French and German leaders

Events in France and Greece have unsettled the markets. Voters, given the chance, have turned against austerity. Cutting budgets has been Germany's main remedy for solving the debt crisis. Francois Hollande's election challenges that by making growth his priority.

In one of his victory speeches, he pledged to "finish with austerity". Today Germany was ruling out any significant shift in its approach.

There would be no renegotiation of the treaty enforcing budgetary discipline as Francois Hollande had called for.

The Germans do appear ready to attach a growth pact to the treaty but they will not accept countries borrowing more to boost spending.

Where might be the room for compromise?

The Germans would back funds from the European Union's structural funds supporting large-scale infrastructure projects.

They might agree to loosen some of the targets for reducing deficits.

The new French leader was told he would be welcomed with "open arms" in Berlin but it is not clear that Franco-German differences can be easily smoothed away.

The Germans will have to show some flexibility but they will not abandon insisting on tough new spending rules for the eurozone.

Uncertainty in Greece

In Greece voters were threatened that a vote against austerity could lead to their having to leave the euro.

It made no difference.

They were told that leaving the euro would usher in a period of "mass poverty". It did not deter them.

They are already facing years of hardship.

Spending cuts - with more yet to come - were a condition for receiving a second bailout from the EU and International Monetary Fund.

Politicians in Athens are now talking of renegotiating the bailout pact.

The Germans and the EU poured cold water on that. Greece faces a period of instability.

Once again Europe has a Greek problem.

Dissatisfaction spreading

Spain today saw its industrial output slump 7.5% from a year earlier, signalling that the downturn is deepening there.

Later this week the government in Madrid is likely to introduce new measures to help banks but fears are growing that the country will need some form of bailout - particularly for the banks.

In Italy, too, candidates opposed to austerity measures appear to have done well in local elections.

One candidate, Beppe Grillo, a comedian who wants to leave the euro, made big gains.

So in the eurozone there are open doubts as to whether the current policy is working while voters increasingly lose patience with spending cuts and hardship.

 
Gavin Hewitt Article written by Gavin Hewitt Gavin Hewitt Europe editor

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Hollande in power

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  • rate this
    0

    Comment number 224.

    "Spanish lender Bankia is partly nationalised"

    ===

    Well that's like being "a bit pregnant" surely.

    Either it's under democratically accountable control or it's not. Part ownership's not really here nor there.

  • rate this
    0

    Comment number 223.

  • rate this
    +1

    Comment number 222.

    @202 wikipedia
    "At the same time, however, the EU remains the world's biggest importer of farm products from developing countries. On average, over the period 2006–2008, the EU has imported €53 billion worth of goods. This is more than the US, Japan, Canada, Australia and New Zealand combined... Today, around 71% of the EU's agricultural imports originate from developing countries."

  • rate this
    -2

    Comment number 221.

    Who the heck thought up this ´latest first´?

    -- must be some UK plot to silence and confuse (even more) its citizens.

  • rate this
    -3

    Comment number 220.

    Eurozone voters losing patience with austerity ?

    Austerity is nowt to what's coming next - just wait till the Euro really gets in trouble and looks more like 'wiemar currency'

  • rate this
    -1

    Comment number 219.

    Poor Merckel.Daggers from every direction.Greece now in open revolt against the plan.Greek message to the EU, bail us out at your cost or risk the consequences.France has its ultimate revenge for being ignored about its vote anti EU constitution.It's message to Brussels, take your plan and go to hell.German citizens must be furious at what she did with their money.UK's message, don't tax us for it

  • rate this
    +1

    Comment number 218.

    216 Osborne
    "The Greek austerity package has little to do with economics, its more a punishment in the form of enforced self-flagellation"
    =
    Why should anyone wish to do that? It is in everybody's interest for all the union to do well. Your presumption makes no sense whatsoever.

    Nothing to do with economics? What happens to you when you don't listen to your bankmanager and go on spending?

  • rate this
    -3

    Comment number 217.

    212.BelPaese
    1 Hour ago
    210. powermeerkat
    "Some pathological America-haters here claim that US is indebted to China"

    Well, Archie, its hardly the America-haters.





    How long a respite from this blog, do you need, sonny?


    As a generous person, hardly needing any money, I can arange it for ya.

    "Go ahead, make my day!" :-)

  • rate this
    0

    Comment number 216.

    The Greek austerity package has little to do with economics, its more a punishment in the form of enforced self-flagellation. Even if they successfully enforce the full austerity plan they're still likely to be left with debt of 135% of GDP by 2020 & many of the measures do little to help with that. Wolfgang Münchau, associate editor of the FT called it "economically and morally hard to justify"

  • rate this
    +2

    Comment number 215.

    211 Steve
    ".would rather see the country turn into a desert, before accepting the necessary cuts."
    ==
    And that's exactly what's going to happen. Going back to the drachma will be no panacea. They forgot that the reason they joined was to escape from their own corrupt and incompetent governments. Instead they milked the system shamelessly. Printing money will be more of the same.

  • rate this
    +2

    Comment number 214.

    I think I heard on the news the other day that Greece has the largest army in Europe. What for? I can appreciate them wanting to have a military, but that is ridiculous. Scope for plenty of cuts right there.

  • rate this
    +1

    Comment number 213.

    Similarities between Greece and Argentina are remarkable, not least the rejection of traditional political parties and the emergence of a viable alternative to austerity. Argentina's subsequent exit from the dollar peg and shift away from austerity and privatisation in favour of increased state intervention in the economy provide a template that Greece would do well to follow.

  • rate this
    +2

    Comment number 212.

    210. powermeerkat
    "Some pathological America-haters here claim that US is indebted to China"

    Well, Archie, its hardly the America-haters. It's the trade balance making the claim

    "Whereas reality is ... Chinese find US security bonds the safest investment in this volatile world."

    Not so. Chinese are just bailing out the highly indebted US households that buy Chinese goods at the US malls

  • rate this
    -1

    Comment number 211.

    A couple of EU countries have rejected austerity, not because it isn't working, they have rejected it because they don't like the taste of the medicine. In Greece those that have lived of overpaid government jobs, avoided tax and retired early would rather see the country turn into a desert, before accepting the necessary cuts. This is not about rejecting austerity, it's about me me me me me me

  • rate this
    -1

    Comment number 210.

    austriacus: project bonds can be interesting for those, who want to avoid derivatives. If they are linked to concrete action.





    Some pathological America-haters here claim that US is indebted to China.

    Whereas reality is, that, as many others, Chinese find US security bonds the safest investment in this volatile world.

    Otherwise they'd buy, e.g. Italian or Spanish sovereign bonds.

  • rate this
    -2

    Comment number 209.

    Klaus-Peter Willsh of the CDU party has made a statement, Germany is preparing for Greece to leave the EZ but stay in the EU.
    The Eurocrat unthinkable is happening

  • rate this
    -1

    Comment number 208.

    I think the EU is on borrowed time."let them eat cake" springs to mind

  • rate this
    +1

    Comment number 207.

    205 MH, I fail to see the link between the exploitation of poor African fisherman by the EU and our own fisherman selling quotas.
    Appart from them both being fisherman, they have nothing in commen

  • rate this
    -3

    Comment number 206.

    France now have a left wing government that has the basic outline of doing what the left wing in the UK are arguing for i.e spend out of recession, over promise to a desperate populous just to win power. I will observe what happens in France with great interest and wait for them to appear on the IMF/EU hand out list in the next 12 mths. The left have NO answer to difficult economic times.

  • rate this
    +1

    Comment number 205.

    182 DM
    "EU bribes poor countries and then decimates their fish stocks. Often throwing large amounts of good fish back into the sea"
    =
    Our fishermen were among the greediest by selling off their quotas to the highest bidder for a quick profit and then complaining when people like the Spanish moved into their former fishing grounds. We also lost the cod war with Iceland in the 1970's.

 

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