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Video: French and Greek Elections Were Not Proof Austerity Doesn't Work

Anthony Randazzo
May 8, 2012, 10:18am

Over the weekend France elected a new president, the Greeks shuffled their parliamentary make up, and Germany's leading party lost some local elections. The votes are viewed as a push back against the way European governments have handled the continent's sovereign debt crisis. Some analysts have been quick to argue that this proves austerity doesn't work. 

And that is the basis of the debate in the video below, a panel discussion from RT last night. However, I argue that this doesn't prove much of anything about austerity in general. Citizenry are not to be blamed for being upset with austerity measures. The whole point is that it doesn't feel good to get your fiscal house in order after a spending binge. The democratic reaction doesn't suggest the viability of the plan's capacity to achieve its goal of reducing government debt. 

While the elections don't say anything about the viability of the idea of austerity, at least the Greek election suggests that the form that austerity has taken in Greece is not the best approach. The big winners in the parliamentary elections were groups that despise outsiders and want to take back control of their country. Their win was the Greek people (at least the very low 65 percent of them that turned out to vote) saying it is unfair for Greece to take sharp budget cuts while still being saddled by the Euro so that the rest of Europe can avoid GDP losses that would occur if Greece left the European monetary union today. Eventually they will have to leave, but for now Europe gets to wall off that threat and plan for an orderly break.

In France, the election could also be seen as a nationalistic movement. All indications are that the vote was more anti-Sarkozy then pro-Hollande. There is a bit of populism that likes his tax the rich mentality. But Hollande seem to win over France with his Mr. Normal pitch vs. Sarkozy's flashy style that has worn out its welcome in France. Moreover, there could be some frustration in France that Sarkozy allowed Germany so much run of the house on the debt crisis negotiations. Germany will now have to deal with a more nationalistic government when sorting out coordinated actions to bail each other out.

(Side note on Greece: it is unlikely they will be able to form a government that lasts. The two parties receiving the most votes only form about 30 percent of the parliament, making it necessary for a big tent coalition to work out in order to avoid a new election. And even if that happens, such a coalition will be very susceptible to the need to make big decisions on budget cuts and handling negotiations with the rest of Europe. Further complicating the matter is the scatter shot approach that the Greek populace took in their choice of representatives this year. Not only did a far-right, neo-nazi group get 20 seats, but a far-left, old line communist group also got more votes then they'd seen in a long time. History does not need to be consulted that far back to suggest that the combination these two failed ideologies mixing as one is not likely to be the chemistry needed to get Greece on solid footing.) 


Anthony Randazzo is Director of Economic Research


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