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French and Greek elections renew fears for euro's future French and Greek elections renew fears for euro's future
(40 minutes later)
Europe was plunged into fresh volatility on Monday as leaders and financial markets digested the outcome of elections that exposed deep fissures over efforts to settle the debt and currency crisis.Europe was plunged into fresh volatility on Monday as leaders and financial markets digested the outcome of elections that exposed deep fissures over efforts to settle the debt and currency crisis.
While Angela Merkel was licking her wounds after losing a bellwether regional election in Germany, the seismic shift wrought by the French presidential and Greek parliamentary ballots generated renewed fears for the future of the euro. While Angela Merkel was licking her wounds after losing a bellwether regional election in Germany, the seismic shift wrought by the French presidential and Greek parliamentary ballots renewed fears for the future of the euro.
Pledging that austerity need not be Europe's fate, France's president-elect, François Hollande, signalled he would enjoy the tacit support of many leaders and voters across Europe in his campaign to challenge Merkel.Pledging that austerity need not be Europe's fate, France's president-elect, François Hollande, signalled he would enjoy the tacit support of many leaders and voters across Europe in his campaign to challenge Merkel.
The Greeks delivered the biggest blow of all to their own and Europe's leaders, putting neo-fascists in parliament for the first time, the hard left in second place overall, and rebelling against the two main parties of the traditional establishment.The Greeks delivered the biggest blow of all to their own and Europe's leaders, putting neo-fascists in parliament for the first time, the hard left in second place overall, and rebelling against the two main parties of the traditional establishment.
"A peaceful revolution has begun," said Alexis Tsipras, the big winner of the election, who heads Syriza, a coalition of radical left and green groups that took 16.6% of the vote, the second largest share. "Angela Merkel has to know that the politics of austerity have suffered a humiliating defeat.""A peaceful revolution has begun," said Alexis Tsipras, the big winner of the election, who heads Syriza, a coalition of radical left and green groups that took 16.6% of the vote, the second largest share. "Angela Merkel has to know that the politics of austerity have suffered a humiliating defeat."
The messy outcome in Greece made it difficult to predict if and when a government could be formed. "The riddle is the formation of a government," declared the best-selling newspaper To Ethnos. "The vote of rage has changed the entire political scene."The messy outcome in Greece made it difficult to predict if and when a government could be formed. "The riddle is the formation of a government," declared the best-selling newspaper To Ethnos. "The vote of rage has changed the entire political scene."
The paralysis is certain to lead to renewed pressure on the euro and raise questions as to whether Greece will remain in the currency union.The paralysis is certain to lead to renewed pressure on the euro and raise questions as to whether Greece will remain in the currency union.
France and Greece delivered clear verdicts damning Europe's elite response to the debt emergency, but the situations in the two countries were markedly different: instability and political gridlock in Greece, while in France Hollande radiated calm and could rely on the formidable apparatus of the state seamlessly shifting gear to fall in line with a new president.France and Greece delivered clear verdicts damning Europe's elite response to the debt emergency, but the situations in the two countries were markedly different: instability and political gridlock in Greece, while in France Hollande radiated calm and could rely on the formidable apparatus of the state seamlessly shifting gear to fall in line with a new president.
The contrast was reflected in early market responses to the weekend votes. The Greek stock market fell nearly 8% while the French CAC 40 index was down 1.7%.The contrast was reflected in early market responses to the weekend votes. The Greek stock market fell nearly 8% while the French CAC 40 index was down 1.7%.
Gary Jenkins, of Swordfish Research, said: "The election of the new French president Mr Hollande may well be a seminal event in the history of the eurozone. Whilst many people have suggested that a Hollande victory is priced into the markets, that remains to be seen. It is his relationship with Merkel that may well determine the future of the eurozone."Gary Jenkins, of Swordfish Research, said: "The election of the new French president Mr Hollande may well be a seminal event in the history of the eurozone. Whilst many people have suggested that a Hollande victory is priced into the markets, that remains to be seen. It is his relationship with Merkel that may well determine the future of the eurozone."
European leaders were quick to welcome Hollande into the club of political and financial crisis management. Merkel, David Cameron, Italy's Mario Monti and the EU's José Manuel Barroso and Herman Van Rompuy all made contact with the new French leader by telephone.European leaders were quick to welcome Hollande into the club of political and financial crisis management. Merkel, David Cameron, Italy's Mario Monti and the EU's José Manuel Barroso and Herman Van Rompuy all made contact with the new French leader by telephone.
Despite the strong democratic mandate delivered in France and Greece for a policy shift away from austerity, in Germany Merkel has to contend with precisely the opposite kind of pressure. Her coalition of Christian and Free Democrats was defeated in an election for control of the northern state of Schleswig-Holstein on Sunday. She faces a much sterner electoral test next Sunday in North-Rhine Westfalia, Germany's most populous state.Despite the strong democratic mandate delivered in France and Greece for a policy shift away from austerity, in Germany Merkel has to contend with precisely the opposite kind of pressure. Her coalition of Christian and Free Democrats was defeated in an election for control of the northern state of Schleswig-Holstein on Sunday. She faces a much sterner electoral test next Sunday in North-Rhine Westfalia, Germany's most populous state.
In Greece, Antonis Samaras, the centre-right leader whose New Democracy suffered a drubbing in the election but emerged as the biggest single party, has until later this week to try to cobble together a stable coalition. He argued that Greece had to stay in the euro but that the terms for doing so should be changed. Brussels, Berlin and the International Monetary Fund will disagree.In Greece, Antonis Samaras, the centre-right leader whose New Democracy suffered a drubbing in the election but emerged as the biggest single party, has until later this week to try to cobble together a stable coalition. He argued that Greece had to stay in the euro but that the terms for doing so should be changed. Brussels, Berlin and the International Monetary Fund will disagree.
Forging a governing majority in Greece this week looks like a tall order. Greek voters may be asked to return to the ballot booths to try again to elect a parliament that might produce a government more amenable to the rest of Europe.Forging a governing majority in Greece this week looks like a tall order. Greek voters may be asked to return to the ballot booths to try again to elect a parliament that might produce a government more amenable to the rest of Europe.
If Germany takes a tough line on Greece honouring the terms of its bailouts, it remains to be seen whether it will have Hollande's backing. Merkel could rely on Nicolas Sarkozy, but the balance of power in Europe shifted at the weekend and the political and psychological dynamics of managing the euro crisis also changed.If Germany takes a tough line on Greece honouring the terms of its bailouts, it remains to be seen whether it will have Hollande's backing. Merkel could rely on Nicolas Sarkozy, but the balance of power in Europe shifted at the weekend and the political and psychological dynamics of managing the euro crisis also changed.