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The Eurozone Crisis

By   /   June 13, 2012  /   No Comments

Francois Hollande’s decision to follow-through on his campaign promise to reduce the pension age in France is a sharp reminder that this French government will be quite different from the last.

While Mr. Hollande’s opening month in his position as French President has been reasonably understated, we can expect his tenure to vary considerably from that of his predecessor, Mr. Sarkozy. This is likely to have particular significance for relations in the European Union.

Ever since the financial crisis hit the Eurozone in earnest, there have been a series of measures taken to try and reassure markets of the enduring stability of government finances. Political leaders ought to be given credit for their united front, and coherent policy. When faced with dire economic and political circumstances, members of the Euro, with the help of the IMF and, on occasion, the World Bank, have bailed out struggling nations to prevent a full-scale government debt default, and pressed persistently on with austerity measures that are utterly necessary to keep respective bond markets in check. Merkel and Sarkozy’s relationship has been crucial in this process, yet the Eurozone crisis continues.

While the temporary distraction of the Greek government elections this weekend may draw some temporarily away, the majority of Europe’s eyes and ears are watching the new Franco-German relationship with immense care. ‘Mer-kozy’ frequently met in the period immediately preceding a major confluence of European leaders. Such meetings allowed for the development of common ground and a united front in the face of huge external criticism.

Therefore, it was no surprise to see that Hollande’s first visit abroad, having been sworn in just hours before, was to travel to Germany to meet with Ms. Merkel. They emerged from talks agreeing on the importance of economic growth, and that they both wanted Greece to remain in the Euro. In other words, it was distinctly underwhelming.

In fact, some of it was outwardly contradictory. While Ms. Merkel is still understood to be reluctant to depart drastically from a long-term program of austerity, Mr. Hollande strived to emphasise that “everyone must put everything on the table” in an attempt to stimulate growth, including a mention of Eurobonds, which Ms. Merkel has steadfastly refused to consider at any stage.

The key question that remains, then, is how Mr. Hollande and Ms. Merkel are viewing the Greek elections? Will they be united in their response?

The Eurozone crisis has stumbled from one ‘critical point’ to another for years now. However, this weekend really could mark the beginning of the end.

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