The heightened political uncertainty sent European stock markets tumbling and put pressure on French and Dutch sovereign debt, while Germany's government bonds benefited from inflows from spooked investors.
Events in France and the Netherlands were “reactions against incumbents’ handling of the crisis plus the poor economic outlook and prospects”, said Erik Nielsen, chief economist at UniCredit. “It takes time to restore growth after these kinds of crises but people are impatient.” In both countries, smaller parties hostile to deficit-cutting targets agreed by European leaders have gained in the polls. Mr Hollande’s threat to renegotiate the eurozone fiscal compact championed by Germany has also unsettled markets.
Fiscal austerity measures would reduce eurozone economic growth by one percentage point this year, according to Gilles Moec, European economist at Deutsche Bank. “That alone would not drive the eurozone into economic contraction, but we have a combination of fiscal austerity and a credit crunch. It is a self-inflicted recession – you don’t get the same combination of shocks elsewhere in the world.”
Full article (FT subscription required)
© Financial Times
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article