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Austerity Loses European Vote

There’s a new fear in the air. Of losing support for austerity.

France saw a change of presidency as Sarkozy was voted out 52% to 48% in favour of Francois Hollande, the first socialist president since Mitterand left in 1995. He wants to raise taxes on rich people, and at the same time, expand government employment and the minimum wage. (Source)

The Socialist candidate has promised to raise taxes on big corporations and people earning more than 1m euros a year.

He wants to raise the minimum wage, hire 60,000 more teachers and lower the retirement age from 62 to 60 for some workers.

This would, in general, be okay, but France is in little bit of doo-doo at the moment. More government spending + higher min wages + attempt to tax the rich more = very incompatible, to be honest. Austerity isn’t all that great but their focus needs to be about what happens if and when the banking system unravels; that will end up needing all their money.

Greece on the other hand saw a more fractured mandate. The anti-austerity Neo-Nazi party Chrysi Avgi entered Parliament with a 7% vote, and the anti-Austerity SYRIZA won over 17% of the vote. The main two parties – New Democracy and Pasok, both pro-austerity and supporters of the Greek bailout – fell to 34% put together (from more than 85% in the last election).

Now, getting a 51% majority in Parliament is going to be tough – and given that many parties simply don’t agree on the austerity measures, any coalition is bound to be short lived. But in a wicked way, the only people being "bailed out" by the Greek measures are the German and French (and Spanish and Portugese) banks. If Greece were to show the finger, these banks are toast and those economies are going to end up quite badly burnt – to Greece, the difference between austerity for the next few years may not be very different from the outcome of a default. The people recognize this and want to elect those that will, at the very least, stop the austerity measures, defaulting or otherwise.

There is no easy end-game to this other than a lot of pain now, versus a lot of a different kind of pain now. But it’s obvious that any democracy will choose those that provide a semblance of guts and stand up to austerity imposed forcefully by other countries.