The people have spoken, and they don’t like what’s going on

As messages go, that was pretty clear. European voters are not always given a real choice at elections - too often the major parties all pretty much agree with each other. Not this time. In both France and Greece, it was ‘fork-in-the-road’ time: do we go on with the Merkel/Sarkozy plan for endless austerity, or do we try something different.

The rejection of the ‘Merkozy’ plan was more dramatic in Greece, of course, but then they’re the ones who have suffered a 20% drop in national income and living standards in the last four years. Perhaps we shouldn’t be surprised that the parties who brought the country to where it is, and who were offering their electorate more of the same, were shown the door.

Greece's Parthenon on Acropolis hill in Athens Credit: REUTERS/John Kolesidis

To put it in context, the conservatives of New Democracy and the socialists of Pasok have never before shared less than 79% of the total vote. Yesterday they won 32%. And it wasn’t just a vote for extremist parties, because there was a far-right party that suffered very badly yesterday called LAOS. They had joined the coalition and endorsed the most recent austerity plan - today they no longer have a single seat in Parliament. This was, pure and simple, a vote for any party that rejected austerity, rejected the bail-outs, in some cases rejected membership of the Euro.

The result is a Greece that may be ungovernable. Prime Minister Lucas Papedemos has been asked to stay on for the time being while the party leaders haggle. Antonis Samaras of New Democracy gets three days to try and form a coalition (he has now said he has failed to form a coalition) , then the leader of the far left ‘Syriza’ party, Alexis Tsipras, gets his three days. He says the conditions imposed by Europe have been ‘delegitimised’, and he wants to form a leftist coalition of anti-bailout parties. He doesn’t have the votes. Then Evangelos Venzelos of Pasok has a turn. If and when all three fail (the most likely outcome), and assuming they reject the idea of a national government (also likely) there would have to be new elections next month. Messy.

Protests in Greece in February Credit: REUTERS/Yiorgos Karahalis

Whoever ends up in charge, it is going to be impossible for them to ignore such a massive popular rejection of current policy. The IMF is already talking about withholding some of the promised bailout money because it doubts reforms will be put in place. Senior figures in Germany have been saying today that the wider Eurozone has already been insulated from Greece. The carefully structured plans put in place so laboriously just a couple of months ago appear to be collapsing under the weight of popular anger and, frankly, their own internal contradictions.

If Berlin can insulate itself from Greece, it cannot do so from France. The two leaders have spoken already. Angela Merkel (who François Hollande has never met) will be the first foreign leader he goes to see. Already German officials are talking about the need to make accommodations to the French and add ‘growth’ clauses to the ‘Fiscal Kompact’. But if Governments are going to start stimulating, where is the money going to come from?

A man looks at a stock board in Tokyo after Asian stock markets were pummelled by the election results in Greece and France Credit: AP Photo/Shizuo Kambayashi

A former French finance minister, Thierry Breton, estimates that Hollande’s plans will need €20-30 billion. Are the markets going lend him the money? Are the Germans? Merkel herself got an electoral shot across the bows last night when her Christian Democrats won the lowest share of the vote in regional elections in Schleswig-Holstein in 50 years. The brutal reality is that the leaders of Europe have very little room for manoeuvre.

Two other straws in the wind that you may have missed amid the maelstrom that is European politics this morning: Spanish industrial output fell 7.5% in March. The country is already in recession, but it is rapidly beginning to look more like a depression. And, for the first time, the odds at Irish bookies (who know a thing or two) are suggesting that the Fiscal Treaty will not be passed at the referendum on May 31st. That is the next time that European voters have a chance to tell their leaders what they think about austerity, and the message may well be the same as it was yesterday.

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