Monday, February 13, 2012

Voters in Euro Zone Will Elect New Leaders, U.S. Voters Likely to Extend Gridlock

The Euro zone crisis is likely to lead to electoral defeats of ruling parties across the continent. They will be punished for implementing austerity measures. In contrast, here in the U.S. it is looking increasingly likely that incumbents will do well in the November elections. It seems probable most incumbents will be returned to office and that control of the the Presidency, Senate and House will remain split between the Democrats and Republicans. Gridlock will continue and hard decisions about the budget will be kicked down the road.

The election schedule for the Euro zone during 2012 is rather light. Among the countries that have been generating the most headlines in the financial press, only France and Greece have elections scheduled. In France, President Sarkozy appears to be headed for defeat at the hands of Socialist party candidate, Francois Hollande. A poll by the daily Le Parisien, showed Hollande remains the clear favorite, and predicted him easily defeating Sarkozy in a second-round runoff with 58 percent to 42 percent.

In Greece, Antonis Samaras, head of the New Democracy party, is the front runner to become the country's  next prime minister, replacing Lucas Papademos.

Given the turmoil in the Euro zone due to the debt crisis, it would not be surprising if parliamentary governing coalitions fall apart and snap elections are called in additional Euro zone countries. And even if their coalitions can hold together until required elections, Angela Merkel and Mario Monti seem unlikely to survive as heads of state after the 2013 elections in Germany and Italy.

In the Euro zone, the voters will probably kick out of office politicians that are attempting to rein in the huge budget deficits. In the U.S. the voters will probably reward the politicians that continue to ring up unsustainable trillion dollar deficits with another term in office. 

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  1. Why do we do that...repeatedly?

  2. The complacency regarding the U.S. debt and deficit seems unshakable. Despite the Predident's proposed budget with growing, not shrinking deficit, the U.S. 10 year note still has buyers at an interest rate of under 2%. However, Japan seems headed over the waterfall of excessive debt sooner than the U.S. Time will tell if debt caused economic problems in Japan will serve as a wake up call in the U.S. Somehow, I'm doubtful.