EU polls reject German-led austerity

By Noah Barkin, Reuters

BERLIN — Greek voters dealt a serious blow on Sunday to the fragile political consensus that has kept Europe’s currency bloc intact through more than two years of crisis, rejecting the austerity-for-aid policies that have shielded the country from bankruptcy and a euro exit. Greece’s vote, combined with the victory of Socialist Francois Hollande over incumbent Nicolas Sarkozy in a French presidential election, will raise pressure on Europe’s paymaster Germany to pursue a more growth-oriented approach to the crisis. But it is far from clear whether German Chancellor Angela Merkel, whose insistence on tough deficit reduction in vulnerable southern euro members is popular in Germany, will take more than symbolic steps in that direction, even after Sunday’s elections. “This shows that politics is getting out of control in Europe, the gap between politicians and voters is widening, that’s what you see in Greece, that’s what you see in France,” said Steen Jakobsen, chief economist at Saxo Bank in Copenhagen. “Clearly, voters across Europe have started to send the message: ‘we are not ready to do the reforms,’ and that’s worrying.” More immediately, the struggle of Greece’s two big pro-bailout parties — conservative New Democracy and socialist PASOK — to secure a parliamentary majority raises questions about whether Athens can stay in the eurozone in the long run, and may spark a new wave of contagion to other member states. The Greek result puts Hollande, a novice on the international stage who has never held a ministerial post nor met Merkel, in the hot seat from day one.

Investors worried about Greece’s future and the arrival of the first Socialist in the Elysee Palace in 17 years, could punish European financial markets starting on Monday, pushing the entire bloc back toward crisis-mode.