Joy...gives way very, very quickly to responsibility. —Michel Sapin, Hollande's aide
Voters tend to reject any government that is presiding over economic turmoil, regardless of whether that government is directly responsible. And the more entitlements a nation offers, the harder it is for people to accept austerity measures, no matter how close economic disaster may loom.
Both factors contributed to election results in France and Greece last weekend. Both election results could result in dire consequences for Europe and its trading partners.
For Americans watching from across the ocean, there are plenty of lessons and warning signs.
In France, voters elected Socialist Party candidate Francois Hollande as president. In Greece, voters gave enough strength to fringe parties on the right and left to tear apart a ruling coalition and call into question pacts under which other European nations have agreed to rescue the country from default.
Both nations could be likened to homeowners who have mountains of debt but choose to blame banks and lenders rather than change their own behavior, hoping instead to find new sources of income. Of the two, Greece is the most troubling.
If Greece does not make budget cuts promised in previous agreements, it could lose its bailout money. That could impact its membership in the European Union, and it could lead to total economic collapse. Already, unemployment is more than 21 percent, and cuts to public sector salaries, jobs and benefits have led to strikes and riots. The election of parliament seats to members from parties on both extremes, including some Neo-Nazis, will make forming a new government difficult, if not impossible.
In France, there is reason to believe the new president will temper his campaign rhetoric to reflect harsh realities. As one of his aides, Michel Sapin, said, "Joy...gives way very, very quickly to responsibility." Still, there are reasons for concern.
Hollande has promised to shrink the nation's budget deficit, but he also has promised to expand the welfare state, lower the retirement age and hire thousands of new teachers. Worse yet, he has no realistic plan for doing this, other than to raise taxes on the wealthy to 75 percent, add taxes on banks and end several exemptions. He is relying on assumptions of a 2.5 percent growth in gross domestic product next year — a problem considering experts predict growth of only 0.9 percent and the 20-year average is 1.6 percent. A national audit due out this summer may give him an excuse to impose more difficult austerity measures.
In both these nations, majorities have avoided the tough decisions. But financial institutions also have a vote, and it tends to be more binding. France already has lost its triple-A bond rating. If it doesn't curb deficits, interest rates will rise and political decisions will become more difficult. In Greece, unrest and extremism will only grow.
Lest Americans become smug, it is important to note that the public here is just as unwilling to confront difficult choices, and that inability is reflected in a Congress that is stuck between two ideologies. Social Security, Medicare and Medicaid are trending toward insolvency, but politicians lack the will to enact solutions.
This nation's advantage is that it can see Europe's struggles and learn to avoid them, if it only will.