Election results in France announced Monday put the austerity budget strategy led by Germany in a semi-precarious position.
France alone cannot reshape overnight financial strategies put together by the country's lame duck President Nicolas Sarkozy and German Chancellor Angela Merkel, but the French elections may only be the start of a turnaround in Europe. The election won by socialist Francois Hollande put austerity programs on notice and put new life into opposition parties elsewhere.
In Spain, opposition leader Alfredo Perez Rubalcaba, a socialist, said the election in France "opens a new era and a big hope for Europe," The New York Times reported.
There is no place more inflammable in Europe than Greece at the moment. The strident terms of international loans to Greece have resulted in severe cuts in social programs, higher taxes and the sale of government assets.
Some of those cuts were necessary. Greece is not Saudi Arabia and could not afford some of the generous programs it had put together -- short work weeks and early retirement options, for example. But demanding severe spending cuts almost overnight is not a viable solution either if it puts the entire society at risk.
Is this overstated? The Times reported Monday that support for two of Greece's stalwart political parties, the conservative New Democracy and socialist PASOK is eroding fast. On the rise in Sunday's election is the Golden Dawn, an extremist conservative group "whose members routinely perform Nazi salutes," the Times said.
Golden Dawn has attracted 7 percent of the vote, which is far from insignificant.
On Wall Street, stocks once again are facing a turnaround in economic data suggesting the recovery has pushed as far as it will go this year. The dropping unemployment rate is attributed to about five times more people giving up looking for work each month than the number of people finding jobs.
That sets up a twisted scenario for Washington. In France and elsewhere, the movement is decidedly anti-incumbent, but it involves incumbents who were tough-minded advocates of austerity. In the United States the incumbent is a left-center president.
Let the rhetoric fly. President Barack Obama has plenty of evidence to show that obstructionists in the lower house have gotten in the way of his attempts to stimulate the economy, but he is also trying to capture bragging rights on tackling the deficit. Unfortunately, he has at the same time little concrete evidence to show that his plans actually work.
In international markets Monday, the Nikkei 225 index in Japan lost 2.78 percent while the Shanghai composite index in China lost less than 0.01 percent. The Hang Seng index in Hong Kong gave up 2.61 percent while the Sensex in India rose 0.48 percent.
The S&P/ASX 200 in Australia lost 2.15 percent.
In midday trading in Europe, the FTSE 100 index in Britain lost 1.93 percent while the DAX 30 in Germany shed 0.3 percent. The CAC 40 in France rose 0.54 percent while the Stoxx Europe 600 gained 0.26 percent.
|Additional Analysis: Economic Outlook Stories|
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