With so much hanging in the balance, I went to Paris, France to witness the results of the French elections first hand. I arrived Sunday morning, May 6th, the day of the second round of the election, which pitted Socialist Francois Hollande against Angela Merkel’s right hand man, Nicolas Sarkozy.
Everything was relatively quiet until the late afternoon. But once the elections were announced, the streets became jammed. Literally. By the look of things, French youth are celebrating Hollande’s victory by picking up all of their friends and then driving up and down the streets honking their horns incessantly. Most cars were packed to the brim with passengers hanging out of every window and even the sunroof waving French flags, singing, or simply yelling pro-Hollande slogans.
Indeed, at times, traffic intersections become gridlocked as some cars simply parked in the middle of the street so their passengers could get on top of the vehicle and hang out (a few of them even lit cigarettes like they were sitting on a terrace instead of the roof of a fiat).
The Euro has taken the news much more poorly, gapping down sharply in the overnight session to below critical support at 1.30.
Stocks… are collapsing. The S&P 500 futures have gapped down from 1,360 to 1,346 as I write this Sunday night.
This shouldn’t be a surprise to anyone. Virtually every poll showed Hollande winning the election. And how exactly is the election of a socialist who proposed the following, euro-positive…
- Proposed raising tax rates on high-income earners from 41% to 75%.
- Wants to lower the retirement age to 60.
- Completely goes against the recent new EU fiscal requirements Merkel just convinced 17 EU members to agree to and has promised to try and renegotiate them to be looser.
Oh, and Greece also had an election which saw its Parliament swing in favor or anti-bailouts/ anti-austerity measures.
Remember, politics, not economics, rule Europe. What I mean by this is that most major decisions in Europe are determined by political agendas that ignore economic and financial realities.
For this reason, EU political leaders will maintain their agendas regardless of whether said agendas go against financial or economic realities (or common sense for that matter) until these agendas begin to have real negative consequences for their political careers.
Well, we’re now at the point at which there are MASSIVE political consequences for the pro-bailout/ austerity measures political agenda. Which means… it’s only a matter of time before the EU in its current form collapses.