An end to austerity?

A tsunami is sweeping through, but not in Pakistan. Elections in Greece and France over the previous weekend have brought a fresh wave of volatility and turmoil to international markets.
In France, the anti-austerity campaign promises of the Socialist Party contender Francois Hollande have ousted Nicolas Sarkozy, whose exit appears to have slammed the brakes on the EUs drive to austerity that was spearheaded by Sarkozy and German Chancellor Angela Merkel.
After protesting in the streets against fiscal tightening by the government, Greek voters have also made their voices heard in that countrys elections. Among the major gainers is leftist leader Alexis Tsipras whose coalition has secured about 17 percent of the countrys votes and has been offered a chance to form the new government.
Far from ushering in stability, the elections have heightened chances of Greeces exit from the European Union. Such an occurrence could have far-reaching and drastic effects not just for that country, but for other EU member-states as well because the exit would almost certainly be followed by the nationalisation of Greek banks, restrictions on the movement of currency and stoppage of repayment of support funds received for economic stabilisation.
Sensing these dangers, Germany has already ratcheted up pressure on Greece. Europes largest economy has been the biggest contributor towards Greeces bailout, but on Tuesday Reuters reported that German politicians are now warning that Greece "would not receive a cent more of aid unless it fulfills all the conditions of its international bailout".
The EU is wobbling and international markets are feeling the jitters. European stocks including Germanys DAX and Frances CAC indices closed at their lowest levels in four months. Investors appear to be moving out of the euro and commodity prices including crude oil and gold are all softening. Even the markets of the Far East have not been able to escape the paranoia as the Nikkei started the week at a three-month low.
If the emerging left-wing coalition in Greece remains unable to form a government, or for that matter if it forms a government that is loath to austerity, the EU could soon see its geographical boundaries altered. That could sweep the rug from under the feet of international investors and European economies alike.