Europe is at a crossroads now, and you can rest assured that the Powers That Be will be trying to influence the new leadership in whatever friendly way they can to change their minds about austerity – and in some not-so-friendly ways as well. The reality is, governments usually do what the IMF and the World Bank “persuade” them to do. The persuading has probably already begun:
Socialist Francois Hollande defeated conservative incumbent Nicolas Sarkozy today to become France’s next president, heralding a change in how Europe tackles its debt crisis and how France flexes its military and diplomatic muscle around the world.
Exuberant, diverse crowds filled the Place de la Bastille, the iconic plaza of the French Revolution, to fete Hollande’s victory, waving French, European and labor union flags and climbing its central column. Leftists are overjoyed to have one of their own in power for the first time since Socialist Francois Mitterrand was president from 1981 to 1995.
“Austerity can no longer be inevitable!” Hollande declared in his victory speech Sunday night after a surprising campaign that saw him transform from an unremarkable, mild figure to an increasingly statesmanlike one.
Sarkozy is the latest victim of a wave of voter anger at government spending cuts around Europe that have tossed out governments and leaders over the past couple of years.
[...] Hollande inherits an economy that’s a driver of the European Union but is deep in debt. He wants more government stimulus, and more government spending in general, despite concerns in the markets that France needs to urgently trim its huge debt.
While some market players have worried about a Hollande presidency, Jeffrey Bergstrand, professor of finance at the University of Notre Dame, said it’s a good thing that Hollande will push for more spending throughout Europe to stimulate the economy.
Europe is “going into a really serious and poor situation,” Bergstrand said. Hollande “is going to become the speaker for those countries that want to do something about economic growth.”
Meanwhile, the situation in Greece after yesterday’s election is much more volatile as long as they remain chained to the euro. The country is dependent on loans from the European Union and the IMF just to survive, and they will release those funds only if Greece continues to beggar her own people:
In a surprise result, Greece’s Coalition of the Radical Left, or Syriza, which seeks to annul the austerity program, saw its share of the vote more than triple, to 16.2% of the vote and 50 seats—making it the second-largest party in parliament, the ministry projections showed.
Greece’s Coalition of the Radical Left, or Syriza, saw its share of the vote more than triple to 15.5%-18.5%-making it the second-largest party in parliament, exit polls showed. Alkman Granitsas reports from Athens.
Incumbent socialist Pasok party took the brunt of voter anger, dipping to third place, with 13.7% of the vote and 42 seats, its worst showing in more than 30 years.
Meanwhile the far-right, anti-immigrant Golden Dawn party, with an estimated 7% of the vote, or 21 seats, will enter parliament for the first time.
If final results confirm initial projections, a bipartisan coalition by New Democracy and Pasok is unlikely to deliver a viable government, capable of passing through parliament fresh reforms demanded by Greece’s international creditors.
Greek conservative leader Antonis Samaras and Socialist Pasok party leader Evangelos Venizelos called for a cross-party government among those forces supporting Greece’s efforts to stay within the euro zone.
“A coalition bipartisan government would not have adequate legitimacy, nor domestic or international credibility, even if it managed to garner a marginal parliamentary majority,” Mr. Venizelos said in nationally televised remarks.
Samaras invited pro-European parties to join him in forming a coalition government that would seek to change reforms agreed under Greece’s second bailout and shift focus on how to generate growth in the country, which is now in its fifth year of recession.
“We will take on the responsibility of forming a national salvation government with strictly two goals: keeping the country in the euro and modifying the memorandum [of understanding with Greece's creditors] policies so that there can be growth and relief in society,” Mr. Samaras said in a televised address.
But left-wing leaders were quick to reject the call for a coalition government while reaffirming their opposition to the bailout policies.
In a televised statement, Syriza leader Alexis Tsipras said he will stick by his commitment to annul Greece’s austerity package. “The parties that signed the memorandum now form a minority. Their signatures have been delegitimized by the people,” he said.
Officials from the European Union and the International Monetary Fund said Sunday that Greece must adhere strictly to its austerity program—that includes taking new measures in June—signaling that there was little room for a new Greek government to renegotiate the country’s bailout terms.
“The program is the only way forward for Greece,” an EU official said, adding that any renegotiation of the tough targets would be “within strict boundaries, very, very limited.“