Socialist contender Francois Hollande won the first round, and all polls suggest that he will remain ahead of the incumbent president, Nicolas Sarkozy, and seal a victory on Sunday. In Greece, we are in for a less predictable outcome. Many Greek voters are extremely angry with the two big parties, the conservative New Democracy (ND) and the Panhellenic Socialist Movement (PASOK), that have dominated Greek politics for decades. Both parties reluctantly support the highly unpopular harsh austerity measures dictated by the EU. Furious Greeks want to punish the traditional politicians they hold responsible for the present economic and social crisis and seem to be inclined to turn to small parties that reject the European bailout. The big question is whether the ND or the socialist PASOK will manage to win enough seats to govern without having to rely on one of the smaller parties. In European capitals, many fear a scenario in which the elections will not produce a workable majority that will help Greece remain inside the eurozone. A blocked Greek parliament that rejects the austerity program would create a chaotic situation that could trigger a wider crisis in Europe and reopen the debate on the viability of the common currency.
But even if this worst case scenario is avoided, many analysts have started to speculate on the impact of a new French president and a fragile Greek government on the rest of Europe. During the election campaign, Hollande has made it very clear that he wants to renegotiate the fiscal treaty that was agreed by 25 European governments. ND leader Antonis Samaras also wants changes to the present bailout plans, and PASOK’s Evangelos Venizelos has proposed to spread the pain over three years instead of two. The French and Greek push for changes to the tough austerity measures comes on top of Spanish requests for more flexibility in the face of a disastrous economic recession and an unemployment rate of 25 percent. According to EU observers, European electorates, one by one, are revolting against a policy that is seen as counter-productive. Forced to cut budgets and raise taxes, eurozone economies are pushed into a downward spiral that produces more deficits and debts and leads to negative growth. How long can Berlin and Brussels, seen as the two main driving forces behind the disliked and controversial policies, continue to force others to stick to these plans? As Mr. Hollande put it bluntly, “It’s not for Germany to decide for the rest of Europe.”
It seems the German government and several European institutions have gotten the message that they have to come up with additional proposals that put the emphasis on economic growth. Mario Draghi, the president of the European Central Bank, has already called for a “growth pact” in parallel to the fiscal pact and Herman van Rompuy, the president of the European Council, wants to convene an extra meeting of the EU member states shortly to discuss the best ways to boost growth. Even Angela Merkel, the German chancellor, has changed tone and has stressed that Europe needs both budgetary discipline and measures to promote jobs and growth. Will it be enough to bring Mr. Hollande on board and prevent him from seeking renegotiation of the fiscal treaty? Will the new European enthusiasm for growth promotion be able to water down the anti-Europeanism in Greece and will it help the Spaniards to survive?
Much will depend on what exactly the new additional plans will entail. As The Economist put it, “Calling for growth is like advocating world peace: Everybody agrees that it is a good thing, but nobody agrees how to do it.” Does it mean, as Mr. Draghi and Mrs. Merkel have suggested, making labor markets more flexible, encouraging entrepreneurship and removing barriers to the EU’s single market? Or is Mr. Hollande right when he calls for common European project bonds to finance infrastructure and a redirection of EU regional funds to create more jobs? I believe The Economist is right in predicting that all this frenzy about growth will eventually lead to the conclusion “that the choice is not really between austerity and growth, but over the timing and speed of deficit-cutting and the right mix of structural reforms.” Let’s hope the outcome of this weekend’s elections, especially the one in Greece, does not make this new, sensible blend impossible.