French and Greek elections renew fears for euro’s future

Guardian –

Paralysis in Greece raises doubts about eurozone membership, and Germany’s Merkel can no longer count on French support

Europe was plunged into fresh volatility on Monday as leaders and financial markets digested the outcome of elections that exposed deep fissures over efforts to settle the debt and currency crisis.

While Angela Merkel was licking her wounds after losing a bellwether regional election in Germany, the seismic shift wrought by the French presidential and Greek parliamentary ballots renewed fears for the future of the euro.

Pledging that austerity need not be Europe’s fate, France’s president-elect, François Hollande, signalled he would enjoy the tacit support of many leaders and voters across Europe in his campaign to challenge Merkel.

The Greeks delivered the biggest blow of all to their own and Europe’s leaders, putting neo-fascists in parliament for the first time, the hard left in second place overall, and rebelling against the two main parties of the traditional establishment.

“A peaceful revolution has begun,” said Alexis Tsipras, the big winner of the election, who heads Syriza, a coalition of radical left and green groups that took 16.6% of the vote, the second largest share. “Angela Merkel has to know that the politics of austerity have suffered a humiliating defeat.”

The messy outcome in Greece made it difficult to predict if and when a government could be formed. “The riddle is the formation of a government,” declared the best-selling newspaper To Ethnos. “The vote of rage has changed the entire political scene.”

The paralysis is certain to lead to renewed pressure on the euro and raise questions as to whether Greece will remain in the currency union.

France and Greece delivered clear verdicts damning Europe’s elite response to the debt emergency, but the situations in the two countries were markedly different: instability and political gridlock in Greece, while in France Hollande radiated calm and could rely on the formidable apparatus of the state seamlessly shifting gear to fall in line with a new president.

The contrast was reflected in early market responses to the weekend votes. The Greek stock market fell nearly 8% while the French CAC 40 index was down 1.7%.

Gary Jenkins, of Swordfish Research, said: “The election of the new French president Mr Hollande may well be a seminal event in the history of the eurozone. Whilst many people have suggested that a Hollande victory is priced into the markets, that remains to be seen. It is his relationship with Merkel that may well determine the future of the eurozone.”

European leaders were quick to welcome Hollande into the club of political and financial crisis management. Merkel, David Cameron, Italy’s Mario Monti and the EU’s José Manuel Barroso and Herman Van Rompuy all made contact with the new French leader by telephone.

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