It’s The Economy, Stupid!

With the Presidential election in the U.S. beginning to heat up, it is natural to forget about elections elsewhere in the world.  But before our elections start to cause volatility in the Fall, a round of elections in Europe in May could have a very meaningful impact on the marketplace.

Given the discontent among most of the populous of  both countries facing severe austerity programs and the countries funding the bailout, a change in leadership in any of these countries could dramatically impact future actions to stem the debt crises.

In Greece, the elections will decide between politicians that will continue upon the path already laid out by the Trokia or newly elected officials who will try to exit the austerity programs agreed to as a condition of the most recent bailout.

In France, Sarkozy is in for the fight of his life (he has already lost the first round of the elections) to get re-elected against a competitor who is running on a platform of less austerity and more growth.   Thus, even if he wins he will at a minimum be forced to bend more towards the growth camp during his campaign.  This could put him at odds with his closest ally, Germany, which is still staunchly in the austerity camp.

In Germany, regional elections will begin to take place in early May and they will be an important early read on Chancellor Merkel’s ability to retain control and fund future, inevitable bail out efforts.