Prospect of President Hollande and collapse of Dutch government raise new questions about €urozone's future

By Tim Montgomerie
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Le Pen won 20% of the vote, the left-wing firebrand Melenchon won 11.7% and centrist Bayrou 8.5%.

It's not looking good for Sarkozy. The momentum that he appeared to be enjoying until a fortnight ago hasn't continued and exit polls (which, in France, are usually very accurate) put him 1.7% behind Hollande in round one of the presidential elections. Mr Hollande is hot favourite to win the second round (no opinion poll has suggested Sarkozy can win in a fortnight's time) and end the recent sweep of right-wing parties' victories in the EU's big states.

Denis MacShane MP sees a victory for Hollande as the beginning of the end for what he called a thirty year-old neo-liberal consensus: "If Hollande wins, the victory will be specific to France. But the implications for European politics and for the future of the democratic left are huge. The 30-year neoliberal consensus should have ended with the crash of 2008. Hollande is prepared to challenge today’s orthodoxy. Can Labour do the same in Britain?"

In this morning's Scotland on Sunday Bill Jamieson noted the left-wing nature of Hollande's platform: "A victory for the Left, on a programme of nationalisation, the creation of 60,000 teaching posts, the introduction of a 75 per cent tax rate and substantial increases in public spending, could trigger a serious exodus out of French government bonds, prompting questions as to how France’s debts and deficits are to be funded."

But do British Conservatives really want Sarko to win? David Cameron had endorsed the French leader and declined to meet Hollande. Dan Hannan, however, doesn't see France's current president as much of an ally: "The truth is that France faces a choice between two socialists. Both favour a command economy, a measure of protectionism, entrenched entitlements ('les acquis sociaux'), deeper European integration, and a dirigiste state. No wonder they argue so fiercely about immigration: that's virtually the only area where they disagree. Bonnet blanc et blanc bonnet, as they say in France. Tweedle-Dum and Tweedle-Dumber."

What does the election mean for the €uro? Nobody knows but if Hollande starts to resist austerity the single currency area could enter a new period of grave uncertainty. David Cottle at the Wall Street Journal thinks the "€uro could struggle whoever wins". Matthew Partridge at MoneyWeek adds: "A Hollande victory will leave Germany as the only major supporter of austerity. While this may be good for growth, bond markets will hate it, which will speed up the euro’s demise."

The mood does seem to be shifting in the €urozone. Netherland's rag-tag coalition government has just failed to endorse an austerity budget and fresh elections seem likely. Geert Wilders quit the Dutch coalition after blaming the EU for belt-tightening measures. Reuters reports significant opposition amongst the population to deficit reduction measures that would cut the Dutch deficit from 4.6% of GDP to within the €urozone's required limit of 3%. The Wall Street Journal isn't optimistic that Holland will elect a fiscally conservative coalition in fresh elections.

There could be real trouble ahead for Europe with Merkollande likely to be a very different beast from Merkozy.