Austerity in sharp focus after European elections

Hollandes victory may not only change France, but help Europe to go in another direction

After elections in France and Greece punished leaders advocating austerity, Europeans have begun  contemplating a new and untested political landscape shaped by competing demands for austerity on one hand to counter the debt crisis and growth on the other to avert further deprivation.

With final results of the French presidential election announced, the socialist challenger, François Hollande, has decisively drubbed incumbent president Nicolas Sarkozy, as polls had predicted.

In broad terms, the French vote unsettled centre-right governments across Europe, while their centre-left adversaries felt emboldened, hoping that the triumph of one socialist leader presaged a wider resurgence.

But the real nub of the ideological and fiscal contest lay in the continent’s traditional driving axis between Berlin and Paris, with Hollande promising to rewrite the austerity-driven pact struck between Sarkozy and Chancellor Angela Merkel of Germany, whose own electoral fortunes are also uncertain. Merkel telephoned Hollande on Sunday night, shortly after his victory to congratulate him, Steffen Seibert, her spokesman, said, and on Monday she stepped up her efforts to avoid any appearance of a rift after working so closely with Sarkozy on the euro crisis that their collaboration became known as ‘Merkozy.’

“I may say from my side that François Hollande will be welcomed with open arms here in Germany by me,”  Merkel told a news conference. “We will work together well and intensively.” But she insisted that the fiscal pact negotiated with Sarkozy and endorsed by 25 European Union member states was “not negotiable.”

“We are in the middle of a debate to which France, of course, under its new president will bring its own emphasis,” she said. “But we are talking about two sides of the same coin — progress is only achievable via solid finances plus growth.”

News of Hollande’s election was splashed across the front pages of Germany’s newspapers, with photos of the smiling victor. But, in an editorial, the daily Süddeutsche Zeitung said that, after the champagne corks had finished popping it would be “adieu campaign, bonjour reality. And it is a bitter reality.”

Merkel’s political opponents, though, seemed cheered. Sigmar Gabriel, head of the opposition Social Democrats, said that the result in France showed that “the politics of Angela Merkel and Nicolas Sarkozy led Europe deeper into crisis.” The victory for Hollande will “not only change France, but finally help Europe to go in another direction,” he said.

In effect, Hollande’s commitment to negotiating a new pact for the battered euro zone seemed to challenge  Merkel’s dominance of the debate, projecting France as the vaunted champion of a wider movement of people no longer prepared to go along with threats to cherished living standards. “Austerity need not be Europe’s fate,” Hollande declared after his victory was announced.

“You are much more than a people who want change,” Hollande told a huge crowd in Paris gathered to celebrate his victory at the Place de la Bastille, according to news reports. “You are already a movement that is rising across all of Europe and maybe the world.” 

Rise of extreme challengers

The combative new mood in France and the electoral rise of extreme challengers to the traditional titans of Greek politics in Athens left markets unsettled, with the euro at its lowest against the dollar for months. Stock markets in Asia and Europe tumbled. In Greece, the two political mainstays, New Democracy to the centre-right and the socialist Pasok, secured only about a third of the ballot between them as voters deserted them in favour of extreme parties, according to near-complete results, leaving Greece facing deep political uncertainty.

In televised remarks, the socialist leader, Evangelos Venizelos, said that Hollande’s victory would shift the ‘balance’ in Europe. Venizelos’s political legitimacy has collapsed under the weight of austerity measures that have pushed Greece deep into recession, and his remarks seemed aimed at sending a message that Europe needed to rethink its programme for Greece.

His party suffered its worst showing since its founding in 1974, placing third after New Democracy, the centre-right front-runner, which also backed the bailout, and the Coalition of the Radical Left, called Syriza, which opposed it. The far-right Golden Dawn group, whose members routinely perform Nazi salutes, won 7 per cent as angry voters turned to fringe parties to punish the mainstream.

Hollande’s election had been particularly closely watched in Spain, which has recently been in investors’ line of fire because of concerns over whether the conservative government of prime minister Mariano Rajoy can meet its budget deficit-cutting pledges amid a deepening recession and record unemployment. While Rajoy congratulated  Hollande in a short note posted on Twitter, Alfredo Pérez Rubalcaba, the Socialist opposition leader, was more exuberant, saying that Hollande’s victory “opens a new era and a big hope for Europe.”

In a season of elections, Britain’s Conservative-led coalition took a battering in local votes last week that favoured the opposition Labour Party. In Rome, prime minister Mario Monti, a technocrat appointed last November as the euro crisis deepened, who is regarded a leading proponent of stimulus to nurture recovery, said the outcome of the French vote was a “call for a reflection on European policies.”

"Responsible public finances are a necessary condition but certainly not sufficient for the key objective: sustainable growth that creates employment and is orientated toward social equality,” he said. “For this reason it is fundamentally important that Europe urgently adopts concrete policies for growth".

In Dublin, Deputy prime minister Eamon Gilmore, who is also the leader of the Labour Party, endorsed  Hollande’s call for a new fiscal order. “Put simply, you can’t have economic growth unless you also have stability, but neither can you have stability without growth. It is clear that, with the election of Hollande, there is a growing number of allies in Europe who share this view.”

Further afield, China said it was ‘ready to work’ with the new French administration, news reports said. But in Russia, violent street protest and the inauguration of Vladimir V Putin on Monday eclipsed news of the French election. If anything, the peaceful transfer of power in France and Sarkozy’s acknowledgment of defeat contrasted with Putin’s extraordinary grip on power in the Kremlin.

“A lot of people in our government believe real democracy doesn’t exist,” Mikhail G. Delyagin, director of the Institute of Problems of Globalisation, said in an interview Monday. “They don’t mind that everything is democratic in France but not at home.”

Sarkozy, he said, “admitted his defeated, congratulated the winner, and behaved as a grown-up.” It was a model for Russia, he said.