A week is a long time in politics. Sunday’s elections have brought about changes in France and Greece that could conceivably send Greece out of the eurozone, upturn the European Union’s deal with the IMF for harsh austerity measures that sharply cut employment and welfare across Europe but infused bailout funds to the tune of 105 billion euros, and possibly reverse the trend of core economic policies across Europe, although no one can be sure if this will worsen the financial crisis arising out of the deepening sovereign debt situation in several European states, or help manage the situation better. All that can be said for now is that a dose of neo-Keynesian economics is certainly on the cards.
On Sunday, when Socialist leader Francois Hollande ousted Nicolas Sarkozy as French President, it was the first time since 1981 that France was putting a Socialist in the Elysee Palace. Mr Hollande announced straightaway: “Austerity need not be Europe’s fate.” He called for “a new start”, namely policies aimed at growth and employment — via public spending — to be incorporated into Europe’s pact with the European Central Bank and the IMF. In Greece, 60 per cent of elected MPs are against the austerity measures that Mr Sarkozy and German Chancellor Angela Merkel had been championing, and by virtue of their sheer weight in Europe, making other countries accept. If Greece abandons that line which eliminates welfare, it may be difficult for it in the short run to get out of its sovereign debt crisis. Presumably voters have given this some thought as the debate on the crisis in Europe has been raging for months.
Since the fall of Communism, socialists and social democrats have had a tough time in Europe. But 10 years ago there were still social democratic governments in half the European Union countries. By the end of last year, there were none. And now, with Europe in a deep financial mess, France, a major European power, has preferred a Socialist to the incumbent centre-right leader who was seeking to become attractive to the xenophobic right and holding tight to the plan of severe austerity for Europe. It is too early to say if the French result will set a trend. But if Mr Hollande can quickly bring in the conscious growth factor into public policy, it could have a demonstration effect. On the day the new French President was readying his victory speech, Ms Merkel’s Christian Democrats in Germany — whose line is the opposite of Mr Hollande’s — were being pushed back in regional elections. In Britain, the Conservatives suffered humiliating defeats in local council elections while Labour gained. Fascinating times for politics and policy watchers.