France, Greece Elections Referendum on Austerity Economics

Over the weekend, several countries in Europe held elections and the changes were wide-spreading. But it was in France and Greece where the largest impacts of Europe’s economic crisis could be felt.


In Greece, voters made apparent their displeasure with the country’s handling of their debt crisis, specifically the eurozone deal signed by the former Parliamentary leaders which has led to strict austerity measures increasing the countries economic issues with rising unemployment (now at 21%) and thousands of small businesses shuttering their doors. New Democracy and PASOK, the country’s political powerhouses over the last 40 years, suffered immense losses, receiving only 33% of the total vote – less than half of the vote total they received during the last elections in 2009. The two parties will hold 150 seats in Parliament, not enough to form a coalition government. Rejecting the policies of Greece’s ruling elite, voters instead turned to other political factions, notably the Syriza party, which came in second behind New Democracy’s 19% with 16.6% of the vote. The broad consensus of voters want Greece to remain in the Eurozone, but reject the notion of austerity as the most pressing option for handling the debt crisis. Antonis Samaras, the New Democracy party leader said the newly formed government should have two exclusive aims: first, to stay in the euro; second, to “amend the terms of the loan agreements so there is economic growth and relief for Greek society.”

Renegotiating the terms of the euro bailout likely just became much easier for Parliament in Greece with France’s Nicolas Sarkozy losing to socialist challenger Francois Hollande. Sarkozy and Angela Merkel, Germany’s Chancellor, were the most vocal proponents of the austerity measures taking hold throughout much of Europe, arguing for strict budget cuts to reduce deficits, which would in turn restore “confidence” to the markets and that would spur growth. However, that has yet to happen and most countries that adopted austerity have now dipped back into a recession, as we pointed out in this column last week. Austerity has failed in Europe, and voters saw Sarkozy as having failed to restore the country to its pre-recession levels. Now, with Hollande as President, France can be assured to take a more proactive role in the budget cuts imposed by the Merkel-Sarkozy European treaty, opting instead for increased spending and more government stimulus to return the french, and Europeans in general back to work.

And how does this affect the United States? The implications are varied. Are most Americans aware of the failure of austerity economics in Europe, and thus reject the calls of many conservative politicians to cut spending? Will Americans view the rise of a “socialist” leader in France as threatening and thus reject any idea of ‘wealth redistribution’? (There has been plenty of ‘wealth redistribution’ in the country over the last 3 1/2 decades from the poor and middle classes to the top, but not many see this as such a bad thing; it’s only when it works the other way do some cry foul.) Is the impatience of the Greeks and the French indicative of the impatience of Americans, that no matter who is in office, if they failed to fix things quick enough, the voters are looking for someone different? Will the changing governments in Greece and France be able to enact any palpable, substantive change in the next 6 months prior to our own election to act as a marker? It’s hard to say. All we know right now is Europeans were unhappy and they sent a clear message to their own governments and the other governments around them: it’s high time someone was held accountable.