The Euro Crisis - One Step Forward, Two Steps Back

Less than two weeks ago, our CQ Global Researcher report on the “Future of the EU” (April 17) quoted European leaders as saying the worst was over in the EU’s sovereign debt crisis. Then, suddenly, two political shocks hit financial markets. First, French President Nicolas Sarkozy was narrowly defeated on April 22 in the first round of the presidential elections by socialist rival Francois Hollande, who has pledged to renegotiate the Fiscal Treaty that 25 EU countries signed in March to impose tighter controls on government spending. The following day the Dutch government, which had worn its loyalty to fiscal austerity as a badge of honor, collapsed after a populist coalition party led by Geert Wilders abandoned the coalition. Wilders felt the government was too slavishly following diktats from EU mandarins in Brussels. Both stories suggest a surge in popular rejection of the austerity policies that have underpinned the EU’s debt exit strategy thus far. Financial markets have taken a nosedive with the news, fearful of yet another impending setback in the EU’s seemingly interminable debt crisis.

Brian Beary