The financially besieged European Union embarked on an uncertain path Tuesday, with a new president in France and a call for new elections in Greece, developments that are certain to change the way Europe handles its economic crisis.
In an expression of the uncertainty, European stock markets closed at their lowest levels of the year, while the dollar value of a euro sank to less than $1.28.
In France, Socialist Francois Hollande took his oath of office in a rainy Paris at a subdued ceremony befitting a troubled economy. Hollande’s four children and other family members were not in attendance and his personal guest list numbered only 40, in contrast to the 500 who’d been invited to the swearing-in of the last Socialist president, Francois Mitterrand, in 1981. Hollande pledged to cut the president’s pay by 30 percent, a gesture that contrasted with the bombast of his predecessor, Nicolas Sarkozy, who at his inauguration five years ago announced that he was raising his salary 140 percent to $24,843 a month.
In his inaugural address, Hollande described France’s economic situation in blunt terms: "massive debt, low growth, high unemployment, a degraded competitiveness and a Europe that is struggling to emerge from the crisis." He pledged to spread the pain of a budget shortfall, through new taxes, from a middle class that is losing jobs to the wealthy.
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"It’s time to put production before speculation, sustainable employment before quick profit," Hollande said. "There cannot be sacrifice for some people – and even more sacrifices for those people – while there are privileges for others."
He then flew off to Berlin for a meeting with German Chancellor Angela Merkel, whose advocacy of tough austerity measures as the way to cure Europe’s economic malaise had found a champion in Sarkozy. In contrast, Hollande has called for government spending to try to jumpstart the slowing European economies.
The beginning of the trip seemed to augur the difficulties of the coming relationship: Lightning struck Hollande’s state jet, forcing him to return to Paris for a new plane before continuing on to Berlin. There he proposed that both parties “put all the ideas and suggestions on the table” at a European Council scheduled for May 23, “including euro bonds, common European obligations,” which so far have been opposed by Germany. For her part, Merkel made scant mention of the differences between the two.
Meanwhile, in Greece, that country’s president gave up on his efforts to cobble together a unity government, a failure that will send Greek voters back to the polls next month in an effort to settle the country’s political morass.
No date for the new elections – the last ones were on May 6 – has been set, but the balloting must take place by mid June – coincidentally, the deadline for the country to impose new spending cuts and taxes called for under the bailout agreement.
That timing is likely only to increase the appeal for voters of the Radical Left Coalition, whose leader, Alexis Tsirpas, has called for the country to repudiate the austerity measures.
Radical Left, which is also known as Syriza, finished second in the May 6 balloting. But voter surveys last week showed that it now is polling in first place, ahead of the last vote’s leaders, the conservative New Democracy party and Greece’s formerly dominant political party, the Socialists, also known as PASOK. New Democracy and PASOK made up the coalition government that signed the bailout accord agreeing to the austerity measures.
Still, Radical Left, with an estimated 20 percent of the vote, would not control enough seats in Parliament to form a government on its own and would have to find other parties willing to rule with it.
The prospect of a government led by Tsirpas unnerved many in Europe, who feared a Greek default on the bailout agreement would lead to its exit from the eurozone, the 17 countries that recognize the euro as their currency. German Foreign Minister Guido Westerwelle in a statement called on Greece not to give up on the structural reforms called for in the bailout agreement, which imposed budget cuts and new taxes in return for billions of euros in international loans.
"The decisions that lie ahead in Athens are not just about the future government of Greece,” Westerwelle said. “This is about a commitment by the Greek people to Europe and the euro."
There is no mechanism for member nations to force Greece to leave the eurozone, but their animosity if Greece simply refused to repay them so soon after being bailed out could make remaining in the monetary union very uncomfortable, if not untenable.
Still, while Merkel has assured the rest of Europe that austerity is far from dead, Greece – which announced Tuesday its reserves were down to $1.9 billion, while its debt remains around $540 billion – might find some leniency.
Europe also has a lot to lose in a Greek default. If Greece left the union, bankrupt, other nations would have to absorb that debt, in addition to their own.