Francois Hollande ousted Nicolas Sarkozy, becoming the first Socialist elected president since Francois Mitterand. Mr. Hollande declared after this victory that “Austerity need not be Europe’s fate.” The new president stressed a “growth” agenda instead. The problem is that he equates growth with more government spending. French government already controls 56% of French GDP, the largest percentage in Europe. Mr. Hollande expects to balance his budget on the backs of millionaires whom he proposes should be paying a 75% income tax. Even though the French government hasn’t balanced their budget in 35 years, he is not suggesting fiscal reform; rather he has campaigned on a promise to renegotiate the German-French euro collaboration known as “Merkozy.”
Greek voters sent an even louder message against austerity in elections Sunday. They rejected the country’s two incumbent parties; supporting smaller left-and right-wing parties that campaigned against the austerity program Greece must implement in exchange for continued European financing. Apparently, Greeks want an end to the sacrifices directed by Brussels and Berlin. Now, with seven parties expected to enter Parliament, Greece has a completely fragmented government. The front-runners have until May 9th to form a coalition. Political instability may ultimately challenge the country’s future in the euro zone.
Closer to home for Angela Merkel, her Christian Democrat Union took 31% of the vote in Schleswig-Holstein to place first, but it was its lowest share of the vote since 1950. Ms. Merkel has continued to focus on policies to cut debt. Two weeks ago in Berlin, she put it this way: “You can’t spend more than you take in. You can’t live your whole life this way. Everybody knows this.” The elections Sunday show that many Europeans don’t agree.
Mr. Hollande campaigned on modifying the euro zone’s “fiscal compact” so that it not only constrains government deficits and public debt, but also promotes growth. However, according to the Economist on April 28th, his program is not suggesting slower fiscal adjustment to smooth the path of reform; he is proposing not to reform at all. With the Dutch government brought down over deep budget cuts and the election results from Sunday, the “balance” in Europe may be changing. More Europeans are rejecting austerity. If Europe is not collectively willing to pursue painful reforms, can the euro survive?