The EU’s fight against sovereign debt has entered a new stage. In France, Francois Hollande defeated French President Nicolas Sarkozy in the presidential election this weekend, and in Greece, the governing party was routed in the parliamentary elections. As the political climate in Europe is changing, the question is whether German Chancellor Angela Merkel will be able to remain a pillar of strength able to hold the ground for the euro and the EU. Failure to do so could result in a new and unpredictable situation in Europe.
The changes in France and Greece caused international stock markets to drop across the board. The concerns are not about the relative strengths or shortcomings of Sarkozy and Hollande, but rather about the prospects of a solution to the EU sovereign debt crisis. Political commentators say this round of elections has caused anxiety among Europeans, and international observers are focusing on whether Hollande, following his criticism of Sarkozy’s policies during the campaign, will introduce major changes to the current policies that are aimed at consolidating the European project. Since Germany and France have been the driving force behind the finalization of the EU’s agreement on fiscal discipline, it will be difficult for Germany to save the situation if France pulls out, and that could result in a difficult situation for both the euro and the EU.
The French and Greek votes were an expression of voters’ dislike of their governments’ austerity policies. After the onset of the sovereign debt crisis in the EU, one European country after the other has had problems with shortages in the national treasury and high debt levels. As these countries implemented strict austerity policies, public welfare suffered, unemployment increased and the economy took a dive, with labor strikes and national protests making an economic recovery even more difficult. As governments are unable to tell the public when the suffering will be over, a feeling of uncertainty and agitation is spreading through society, and elections offer voters with an opportunity to vent their anger.
The main reason French voters supported Hollande was that they wanted to express their dissatisfaction with Sarkozy. Although voters supported the socialist line, the fiscal situation is not very positive and increasing the tax load on the wealthy will not necessarily be enough to improve the fiscal situation in the short term. In addition, the government is also under different international pressures, and neither Hollande or the new Greek government will have enough room to implement all the changes they promised during their campaigns. They have no access to any magic formulas that would immediately eliminate public suffering and solve their problems. They may not be able to do much more than implement minor policy changes, so it is not very surprising that many people are worried over future reform prospects.
The skies over the EU are turning gray and the clouds are spreading over all Europe. With the changes in France and Greece, the debt problem could take another turn for the worse, and it might even spread across the entire globe. Although Taiwan is far away from the EU, and although our budget problems are not as bad, data from the Directorate-General of Budget, Accounting and Statistics shows that total government debt reached NT$21.47 trillion (US$732.88 billion) last year, NT$93,000 per capita. That was an increase of NT$2.3 trillion last year alone. This is a serious warning signal.