Are we watching the beginning of the end of the European ‘Austerity Consensus’?

This morning news that the Cutty Sark, a ship strongly associated with bringing global products and trade to European markets, was bookended this evening by the news that global financial markets are setting sail away from European financial markets.

This has been brought on by the result in the first round of the French elections that suggests that François Hollande could be on his way to the Élysée Palace; but could his victory also be the crest of a wave that shows the tide is turning in the so called ‘Austerity Europe’?

Although, such a tide may not wash away the right-wing austerity drive in some parts it certainly would knock it off course. And it would herald that the current consensus on austerity policies in Europe, enshrined in the European Fiscal Compact, is starting to crumble with more political clouds forming on the horizon.

The resignation this afternoon of the Dutch PM, Mark Rutte, is one such storm cloud. The subsequent malaise means that the budget enforcing the European fiscal pact will not go through. And the coming elections could lead to the rise of an anti-austerity left who are chomping at the bit for an early election smelling blood; despite recent opinion polls putting the Labour Party and Socialist Party’s behind the current government coalition.

Then there is another dark storm cloud starting to form in the looming Greek elections in May; although the Greeks may still return the governing coalition, they may be emboldened to argue for opening up the  European Fiscal Compact if they see other senior European countries attempting to do the same. Especially as there is a chance that pro-bailout parties could be in the minority, unable to form a government, as four smaller anti-bailout parties sit on a 10% share of the vote each.

In addition, there are local elections in Italy whose outcome could put the technocrat leader Mario Monti, who relies heavily on cross party support, in a rather inclement disposition. Furthermore, Ireland is going to the polls to in a referendum to ratify the European Fiscal Compact and the trade unions are leading the “No” campaign, although they trail the Yes campaign 42% – 27% there are 37% of voters undecided.

When one pours more misery on top of this in the shape of next month’s North Rhine-Westphalia state elections that are expected to land Angela Merkal’s party a bloody nose, with a Red-Green Alliance victory, European Austerity starts to  appear to be a sinking ship.

Although, Angela Merkel and her governing coalition appear to be faring well in the opinion polls, the German Federal Elections in October 2013 could begin to look grim if the popular Fiscal Compact begins to look unworkable, and on her watch German taxpayers believe they are picking up the bill.

The situation could look even worse for the European centre- right, if Hollande and the French Socialists show a more agreeable and successful alternative than currently on offer by centre-right European political governments,  sparking a boost for the European parties like the German SDP. The latter who also endorse the Francois Hollande’s European fiscal plans.

The potential for a domino or snowball effect to occur starts to become imaginable. And let’s not forget what Mr. Hollande has said he sees himself in this role as insurgent:

“I am a European who is going to change the direction of the continent….” “….Germany should not decide the direction of Europe alone.”

“If Europe is not capable of taking decisions, I will not ratify the treaty because I consider it’s a very important point for growth,”

Not since Napoleon could a Frenchman stand on the precipice of holding such sway in Europe that would make Charlemagne blush; and it is also been a long time since European leaders have grown to be cautious of the sound of the name Hollande.

As Napoleon famously once said: “A leader is a dealer in hope”, and today as global financial markets rush to dump European shares overboard, and the day before the UK could slip into a double dip recession, François Hollande is selling a hopeful alternative that the rest of Europe could start to buy. 

Regardless of if anyone agrees with his alternative, his election would certainly changes the current consensus in Europe. Something centre-right leaders will be fully aware of…

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