Austerity-sceptic Hollande wins in France --- and anti-austerity parties gain in Greece

By Tim Montgomerie
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BIFF! France has elected a Socialist president on a massive turnout (81.5% certainly shames Britain) - ending Nicolas Sarkozy's rule and also ending a run of right-of-centre victories across Europe. Some say '75% tax-rate Hollande' will be more moderate than on the campaign trail but IDS has warned of a exodus of French entrepreneurs quitting Paris for London. The Socialist candidate wants to re-negotiate the fiscal pact to place more emphasis on growth.

KA-POW! But will France provide the most important election of the day? Greece has also voted and the ruling coalition parties have suffered slumps in support. Anti-austerity parties have prospered in their place. It is far from clear that a stable coalition can emerge from the election outcome and form a government that is able to fulfil commitments made to the IMF.

DING-DING! Two weeks ago the Dutch coalition also collapsed after Geert Wilders looked at opinion polls opposing further EU-mandated spending cuts and withdrew his support from Mark Rutte's minority administration.

BOOM! Unemployment among Spain's youth hit 51.1% earlier this week. 17.4 million people are now out-of-work across the Eurozone.

While the UK media has been obsessing about the Leveson Inquiry the European continent has been denying the two most touted solutions to its economic problems - austerity or, my favoured solution, the break-up of the single currency area. The next few days and weeks might be very crunchy.

Final word to Chris Heaton-Harris MP:

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.

The Netherlands' likely new PM is a Eurosceptic

ConservativeInternational is indebted to the Open Europe think tank for revealing the Eurosceptic instincts of the man likely to be the new Dutch Prime Minister.

Mark Rutte has said:

• "Europe is not a kind of idealistic project. I'm not awake every morning with 27 stars and a European flag over my head. For me, Europe is a pragmatic project that gives us many benefits and should remain so."
• In arguing for a "half-price EU" he says that the "whole system of structural and cohesion funds is largely circulation of money."

And this is the party's official position:

"The VVD doesn’t want a "European superstate". We want a Europe that functions. Therefore, we don’t need a Constitution, but an EU which limits itself to its core tasks and offers solutions for the 21st century. The solutions of the former century were about agriculture and regional subsidies. In this century it is about climate and energy, asylum and migration flows and fighting terrorism. Therefore we need to go back to what we have: the current Treaties (the Treaty of Nice)."

Here's the original Open Europe blog and here is CI's post on the outcome of Wednesday's Dutch elections.

Will Holland's likely new PM turn to Geert Wilders as a coalition partner?

Further to yesterday's report, the right-wing VVD of Mark Rutte did win most seats in the Dutch elections (31 of 150) but will need to choose at least two coalition partners in order to have a parliamentary majority.

A coalition of the centre could see Mr Rutte form a coalition with the traditional centrist parties - Labour (who won 30 seats, down 3) and the Christian Democrats who won 20 - half their previous total).

Alternatively Mr Rutte - who did not rule out any coalition arrangement - could work with the Freedom Party of Geert Wilders. Wilders did even better than expected - increasing his representation from 9 to 24 seats. This makes him Holland's third biggest party. Wilders was banned from entering Britain by Jacqui Smith when she was Home Secretary because of her belief that his attitude towards Muslims represented a danger to public safety.

Mr Wilders' left-ish economic views may be as much of a problem for Rutte as his opposition, for example, to new mosques being built. Rutte fought the election on a Thatcherite programme of deficit reduction.

The Times reviews the options:

"There are several main options for a new government, depending on the exact results: a “purple” coalition of Mr Rutte’s VVD with Labour and two other parties; a right-wing alliance of the VVD with the Christian Democrats, the Freedom Party and one other party; or a left-wing grouping of Labour with some or all of the Christian Democrats, the left-wing Liberals of D66, forecast to have ten MPs (up from seven) and the Greens (with eleven MPs, up from four), or the Socialists (with sixteen MPs, up from nine)."

Business Week fears it could be months before a new government is formed.

First Britain... then the Czech Republic... and now the Dutch are set to vote for fiscal conservatism

Britain and the Czech Republic have already voted for fiscal conservatism in recent weeks. The Netherlands is likely to do the same today.

The leader of the VVD (the Party of Freedom and Democracy), Mark Rutte, is set to become the Dutch Prime Minister if opinion polls are accurate. Mr Rutte has run on a ticket of $24bn of spending cuts as part of a plan to totally eliminate Holland's 6.6% budget deficit. Dutch voters have seen the size of the state increase to more than 50% of GDP and taxes on businesses and wealth creators rise markedly.

The Freedom Party of Geert Wilders has seen its support slip during the last few months - largely because the VVD has undermined Wilders' unique selling point by also promising a very tough immigration policy. The Freedom Party is still set to increase its support, however, from 9 to 18 seats (according to opinion polls) and this may make Wilders the kingmaker in the Dutch parliament. In recent days he has been a rare voice in European politics, ready to back Israel. “The jihad against Israel isn’t against Israel only. It’s against the whole West,” he told the Jerusalem Post.

A victory for the VVD will be a massive change for the nation. The Dutch premiership has alternated between the more centrist Dutch Labour and Christian Democrat parties for most of the post-war period.

Wall Street Journal graphic on the likely results: