There were three elections last week.
The one in France set the French on a collision course with Angela Merkel’s Germany on European financial and austerity measures. However, it remains to be seen how rabid M. Hollande remains on his anti-austerity intentions as he takes power. In practice, a reasonable balance is likely to be struck between France and Germany which is pragmatic and workable.
The UK Council elections should – must – be re-energising at the top of the Coalition. There were many growth measures in George Osborne’s last Budget, but these have been completely choked by a mixture of the lack of presentation and self-inflicted political foul-ups over the last month. Policies are one thing; the delivery something else. It is hoped that the political delivery will be kick-started by the Council results.
But in my view the most important election result last week was that in Greece. The Greeks have voted to essentially throw out their austerity measures in the current form, which breaks the terms of the EU bail-out.
I blogged some months ago about the possibility of Greece being unable to accept the EU terms, and the consequences for themselves and the Eurozone if they chose to default. Greece is now quite a lot closer to rejection of the EU assistance. This puts extreme strain on the euro.
As I mused last December, there is no mechanism for a country to leave the euro but it looks to me that we are heading down the road of creating one. I had been concerned at that time that if a general exit procedure was devised and Greece took that option, why not also Portugal? Ireland? What would the effect be on the Eurozone countries who remain and of the Euro itself?
And if the eurozone economy remains stressed and the austerity measures start to appear endless, what might the voters of other highly-borrowed countries start to think, like Spain, or Italy?
Even with just a Greek ejection from the Eurozone, the shock waves across the UK will be massive, because of the shock waves across Europe and the Eurozone. The result of the Greek elections is one of the single biggest threats we have in the UK to our recovery.