The tide is changing in Europe as voters rebel against tough austerity budgets and look for new leaders to ease their financial woes.
In two major elections in france and Greece, voters were clear they wanted to punish the politicians who were imposing cuts.
Francois Hollande won the second round of voting in France to become the first socialist president for 20 years and to thrust Sarkozy out of the limelight.
His first call was a blustering speech trumpeting his intentions to renegotiate France’s austerity budget, which received a swift and harsh ‘Nein” from Germany.
“We doubt Hollande will have much success in changing the mind of Angela Merkel, though we do expect financial markets and sovereign rating agencies to exert more pressure to ensure he oversees a reduction in France’s budget deficit,” observed Schroders European Economist Azad Zangana.
“Angela Merkel has already rejected Hollande’s calls for a ‘Growth Pact’ and there is no doubt that the two will clash again on this issue in the future. France has not run a balanced budget since 1974 and has been one of the worst offenders against the existing Stability and Growth Pact.”
No party won a clear mandate in the Greek elections, a populist move reflecting the mood of voters.
The fear is the vote heralds Greece’s exit from the Eurozone.
“In our view, the results of the Greek election raise the probability of our central view that Greece’s inability to elect a government that will adhere to the demands of Germany and the Troika will eventually lead to the existing bailout deal collapsing, and Greece being forced out of the euro,” said Zangana.
“The greater danger is that another round of elections leads to a new government being formed with a majority that is anti-austerity.”