François Hollande beat President Nicolas Sarkozy in France's run-off election on Sunday, becoming only the second Socialist Party president elected in post-war France, after François Mitterrand (1981-1995). Sarkozy, for his part, is only the second president in that same period to not win re-election. In his victory speech, Hollande reiterated his vow to renegotiate Europe's recent fiscal austerity–focused pact to save the euro, pledging to shift the EU's economic focus toward growth. "Austerity need not be Europe's fate," he told supporters. But the markets were listening, too, and investors did not seem pleased, with markets tumbling after Hollande's win. Does France's embrace of a Socialist spell trouble for the global economy?
Yes. We're in for a rough patch: Hollande probably won't turn out to be as leftist as many of his supporters hope and critics fear, says Patrick Edaburn at The Moderate Voice. Still, combined with other recent defeats for Europe's pro-austerity governments — especially Greece's rejection of both its mainstream parties on Sunday — Hollande's win is a blow to European fiscal stability, and will "thus have a probable negative impact on the U.S. economy." Hang on tight, world, "it's gonna be a bumpy ride."
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Hollande could be a welcome change: There's a good reason why the French and other Europeans are rejecting Germany's forced austerity, says John Cassidy at The New Yorker. Instead of helping, these "hair-shirt policies" have "tipped both continental Europe and the U.K. into double-dip recessions." If economically stagnant France turns to a U.S. model of fiscal stimulus, well, "most Europeans would gladly take [America's] GDP growth of 2 to 3 percent and an unemployment rate of 8 percent."
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Europe needs a plan, any plan: "Hollande's growth rhetoric will unsettle investors in French bonds," making it costlier to finance any deficit spending, says Stephen Bartholomeusz at Australia's Business Spectator. But the real economic threat to France, and the rest of the world, isn't Hollande's spending or budget-slashing, it's the lack of a credible European plan for shoring up the region's finances. If the "extraordinarily fragile and vulnerable" eurozone can't convince the markets, much less its people, that it has a plan, we all face "very unpleasant consequences."
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