What's next for the euro zone


A composite photo of French President-Elect Francois Hollande (top left) celebrating victory in the place de la Cathedrale on May 6, 2012 in Tulle, France and supporters of Greek's conservative party gathering in Athens leading up to Sunday's vote. Many Greeks have been fed up with grinding austerity drives and are seeking out parties promising to scrap deals with the EU and IMF.



It's pretty clear what European voters don't want.

Austerity was shown the door in Sunday's elections in France and Greece, along with all the politicians who have championed it.

In France, Francois Hollande won — albeit narrowly — against President Nicolas Sarkozy, in a resounding rejection of the austerity-focused administration.

Greeks, in their first opportunity to vote since 2010, wasted no time in ousting the parties that had imposed crippling budget constraints. Many said they'd choose anyone but the current governing coalition. Greeks were willing to put Golden Dawn — a neo-Nazi party that has never won enough support to be politically relevant — into the parliament, rather than reward the governing coalition.

Nobody likes austerity — essentially a fancy word for fiscal belt-tightening. The pinch has perhaps been felt most severely in Greece, where some have killed themselves out of desperation, and others have resorted to a kind of barter economy to survive.

But the real question now is whether their politicians can deliver on the people's demands.

Nobody has yet come up with a way to reduce the debt while spurring growth. But whether they like it or not, politicians interested in staying in office are going to have to reconsider strict fiscal discipline as a solution. 

In Greece, whatever governing coalition emerges will face another round of stiff cuts demanded by the EU and the IMF next month. Worry over whether they'll comply is already rankling the markets.

Analysts are also watching the relationship between German Chancellor Angela Merkel and Hollande. (Merkollande? Hollerkel?) Before Hollande was elected, both took opposing positions on austerity. Hollande threatened a 75 percent income tax on the wealthy and vowed to toss out the fiscal pact. Merkel declared Germany wouldn't compromise on their demands for austerity in the EU. But once it became clear that Hollande was actually going to be president, the rhretoric from both camps softened.

But they're back to their hard lines now.

On Sunday, Hollande promised the change voters demanded, saying austerity need not be the only route out of the crisis.

Merkel fired back on Monday, as the German government said it was "not possible" to renegotiate the fiscal pact, according to the BBC.

For more on what's happened — and what's ahead, check out GlobalPost's full coverage:

We'll be following up on the view from Germany and Brussels soon, so stay tuned. I'll update this post once more reports come in. 

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Tagged: Europe.