Sunday's elections in France and Greece were tantamount to a vote of no-confidence in the austerity programs imposed in the eurozone as the way out of its debt crisis, with angry voters ousting ruling parties that have stuck to their belt-tightening programs.
Nobel prize-winning economists Joseph E. Stiglitz and Paul Krugman both believe imposing fiscal austerity measures is the wrong prescription for the eurozone's problems at a time when it is suffering from a recession. Krugman has described such a move as "insane" and said it will lead Europe toward "economic suicide."
Greece, for example, has seen its unemployment rate soar to a record high following the implementation of its austerity measures, with the jobless rate among young people standing at 50 percent.
As most parties that won seats in the Greek Parliament Sunday are against the programs, efforts by the largest and second-largest parties to form a coalition government have failed. If a new government is not formed by May 17, a new election will have to be held.
A more urgent issue is for the Greek Parliament to cut another US$15 billion from the government's budget in June in order to continue to obtain bailout funds from the European Union and the International Monetary Fund.
In France, Socialist President-elect Francois Hollande has pledged to expand government spending and raise taxes in an effort to boost employment and economic growth. However, with France's deficit expected to reach 3.7 percent of its gross domestic product next year, it will be impossible to expand spending without increasing the deficit.
Unless a miracle occurs, Greece will likely be forced to exit the eurozone, triggering other debt landmines and eventually leading to the collapse of the eurozone. If European leaders can reconsider their austerity programs, Europe will probably avoid an "economic suicide." (Editorial abstract -- May 10, 2012)
(By Y.F. Low)