7 may 2012, not just yet

The age of austerity may or may not be right, and may or may not be inevitable one way or the other - but it is certainly not popular. And so sarkozy, who started with such great promise, became a rare one-term french president, and the eleventh european government to lose an election since austerity began. Days before, the uk contingent suffered a significant (though largely consequenceless) defeat, and on the same night anti-austerity greeks stormed to victory. However, the british results conform to a typical mid-term reaction; indeed had they been held a couple of months before, the government would likely have held up very much better. For the french, this was above all an anti-sarkozy vote. Beneath the rhetoric there is vastly more that hollande and merkel have to gain by being nice together (and quickly) than in arguing. A new narrative that destresses austerity, bolts on a new "growth" component that anyway everyone was looking for, tweaks the new treaty and lets hollande claim victory, merkel continue with more small steps, and the eurozone avert a crisis of confidence, all ought to be possible after these new dance partners get used to each other's moves. The big unknown however is greece, where the traditional two party-led system, both reluctant defenders of forced austerity, was shot to pieces; registering together just over 30% of the vote, and probably not enough to form a government. This heralds weeks of negotiation and uncertainty, the real possibility of an anti-austerity coalition, or more likely new elections after no government of any sort can be formed. This is exactly the sort of chaos to throw the markets, the euro area's only counterargument being, once again, that greece is small and exceptional. This very much strengthens hollande's hand, as to evidence that argument rapid unity with france is even more necessary. Weeks then turn to days to show the new "merlande" partnership is going to work. There is little doubt it will; but as for greece...