In Germany, the results of yesterday's elections are seen as a
refusal to follow the austerity plan hammered out by European
leaders in long, painful negotiations.
Elections in France and Greece yesterday did not just bring down
the incumbent governments in these two countries. They also mean the
return of insecurity to the eurozone.
In France, the election winner, socialist Francois Hollande,
campaigned on the promise to put an end to the dictate of austerity,
prescribed under Germany's leadership as a cure to Europe's
sovereign debt crisis. In Greece, the two main parties, the
socialist Pasok and the conservative New Democracy, will not be able
to continue their governing coalition without the inclusion of
smaller parties, who have announced their intentions to renegotiate
the conditions for the bailout package which keeps Greece from
defaulting on its public debts.
Observers in Germany see the election results in France and
Greece as a refusal of the voters to follow the course of
categorical austerity, hammered out in month-long, painful
negotiations between eurozone leaders.
"There are hard times ahead for the euro and for European
markets," says Anastasios Papakostas, chief economist at K&P Invest,
a Frankfurt-based consultancy firm. "We have just experienced a
massive shift to the left in European politics, and that means re-
negotiating the deals and agreements which were meant to solve the
eurozone debt crisis."
German Chancellor Angela Merkel, seen as the main driving force
behind the eurozone's austerity program, was quick to reject any
suggestions for a change of course.
"The fiscal compact is not negotiable," she said in a press
conference this morning, referring to the treaty that was signed by
most EU members in March and which obliges member states to have a
balanced budget. The Chancellor conceded that growth in Europe was
necessary, but added that it should not come at the cost of new
Market indices slide
Financial markets reacted negatively to the prospect of renewed
political upheaval in the eurozone. European and Asian shares sank
Monday morning and US index futures dropped too. The MSCI All-
Country World Index slid 0.9 percent. The Stoxx Europe 600 Index
lost 0.5 percent and Standard & Poor's 500 Index futures fell 0.9
percent. The euro dropped to a three-month low of $1.3006.
The main source of concern could be Greece, according to Mr.
Papakostas. Pasok and New Democracy, the two parties which took
turns governing the country over the past four decades, lost half of
their votes. At almost 17 percent, a coalition of radical left
parties, Syriza, became the second-strongest force in Greek
politics, after New Democracy, which, after some initial resistance,
backed the EU austerity plan for the country.
"It could take weeks for a new government to be formed," Mr. …