European voters say no to austerity

What happened

Voters in France and Greece delivered a resounding rejection of austerity measures this week, ousting political leaders who had advocated painful budget cuts and tax hikes as the best way to counter Europe’s debt crisis. In France, François Hollande secured a narrow 51–49 percent victory over President Nicolas Sarkozy, the first time in 17 years that a Socialist Party candidate has won the Élysée Palace. Together with German Chancellor Angela Merkel, Sarkozy was a key architect of Europe’s attempt to restore confidence in the euro currency through strict fiscal discipline. But Hollande argued that growth would be best achieved through stimulus spending, contending that the singular emphasis on budget cuts had burdened the Continent with recessions and soaring unemployment. “Austerity no longer needs to be our fate,” he said.

In debt-ridden Greece, furious voters punished mainstream parties that backed the tough terms of the country’s euro zone–imposed bailout, handing extreme left- and right-wing parties opposed to austerity more than 60 percent of the vote. With no single party securing enough seats in the parliament to form a viable coalition, the troubled country was expected to return to the polls in weeks. In Berlin, Merkel said the French and Greek votes would not alter her insistence—recently ratified by the European Union—that deeply indebted nations engage in belt-tightening. “The fiscal pact is not negotiable,” she said. “It has been negotiated and signed by 25 countries.”

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What the editorials said

The French and Greeks are living in a dream world, said The Daily Telegraph (U.K.). They’ve tricked themselves into believing that in place of self-sacrifice, “there may be some magical, pain-free way out of this crisis.” Hollande has promised he’ll balance the budget by 2017 by “going for growth; what he actually means is that he will have to borrow more.” That could be catastrophic in a country where debt is forecast to hit a record 90 percent of GDP next year.

But “relentless austerity is not working,” said The New York Times. In Greece and Spain, vicious cuts to government spending have sent unemployment soaring to almost 25 percent and their economies plunging into a crippling recession. Hollande grasps a simple truth that has eluded Merkel: that while many troubled European nations need to “wrestle their budgets under control, they cannot repay their debts unless they are also allowed to grow.”

What the columnists said

French and Greek voters are protesting an austerity that exists only on paper, said James Pethokoukis in the New York Post. A new study by George Mason University found that France and Greece “haven’t significantly reduced spending since ‘austerity’ supposedly started in 2008.” That’s bad news, as research shows that debt levels above 90 percent of GDP—America’s currently is just over 100 percent—“can lower economic growth for a generation.” Americans should view Europe as a warning not about the dangers of cutting government spending, but about what happens “when big government runs out of other people’s money.”

But the French election wasn’t mainly about austerity, said Christopher Dickey in TheDailyBeast.com. Sarkozy lost simply because he was Sarkozy. The French disliked his vulgar ways—the $70,000 watch, the partying on millionaires’ yachts, the ex-supermodel wife—and his belligerent, argumentative style. Bland bureaucrat Hollande “won largely because of who he wasn’t.” Sarkozy’s departure may mean trouble for all of Europe, said Max Fisher in TheAtlantic.com. He and Merkel created a Franco-German partnership that set the new EU agenda of fiscal restraint—an agenda Hollande has explicitly rejected. “Germany doesn’t decide for all of Europe,” he recently sniffed. If Europe’s two main powers can’t get along, then the whole project of European unity could start to falter.

Hollande might want to “lead the battle in Europe against austerity,” said Gideon Rachman in the Financial Times, but Greece makes that impossible. Greece’s economic crisis is so severe that without deep cutbacks, it will go bankrupt and be booted out of the euro. “Faced with a choice between supporting Greece and supporting Germany,” the French will stick with their grumpy but solvent ally next door.