Ballots were bagged and ready for delivery to the polls on Thursday in Athens in advance of parliamentary elections on Sunday.
By STEVEN ERLANGER
France and greece vote Sunday in elections that will be closely watched for the future of the European Union and the euro. The votes will once again highlight the emerging crux of the euro crisis: Will democratic politics offer a solution to the economic crisis or just make it worse?
Anxieties are rising again over the shared currency, and these elections are likely to be another blow to a German-designed austerity plan to cure the euro zone’s debt and banking crisis. If the French Socialist candidate, François Hollande, wins the presidency, as the polls suggest, he plans to challenge Germany, vowing to renegotiate a European Union treaty mandating deficit and debt limits in order to add a new emphasis on economic growth.
“It’s not for Germany to decide for the rest of Europe,” Mr. Hollande said on the campaign trail. “If I am elected president, there will be a change in Europe’s construction. We’re not just any country: we can change the situation.”
He intends, he said in a fierce debate Wednesday night with President Nicolas Sarkozy, “to give a new direction to Europe.”
Mr. Hollande’s words may have a degree of campaign bravado, but he is riding a wave of political resistance to austerity that has brought down even the government in the Netherlands, one of the best-run economies in Europe and a close ally of Germany. Given France’s importance, if Mr. Hollande wins he might end up leading a sort of “growth bloc,” which would challenge the German medicine, or at least try to dilute it.
With the euro zone relapsing into recession and unemployment at 10.9 percent, a record high, the head of the European Central Bank, Mario Draghi, has already called for a “growth pact” in parallel to the fiscal pact.
“There is a race between politics and economic adjustment,” said Jean Pisani-Ferry, director of Bruegel, a Brussels research institution. “We see incumbent governments replaced by others that carry on with painful adjustments. But how long does it take for both sides to be discredited in public opinion by the pain of adjustment?”
The German chancellor, Angela Merkel, struck by the Dutch collapse and stirrings of unease among the opposition Social Democrats, appears to be listening, anxious not to be isolated in Europe and to make a gesture toward Mr. Hollande, should he win. She is talking herself about new ways to produce growth, including increased lending by the European Investment Bank and using European Union funds in a more targeted fashion.
“Growth” is easier to advocate than to produce, of course, and Germany remains opposed to sharp increases in public spending or higher targets for inflation.
Growth is already on the agenda of the European Union summit meeting in June, so that would be an easy place to give Mr. Hollande an early victory, however symbolic.
Ms. Merkel was never a great fan of Mr. Sarkozy, anyway. “We’ve all forgotten how much Merkel didn’t like Sarkozy and how quickly she’ll forget him now,” said Ulrike Guérot, a German analyst with the European Council on Foreign Relations. “Merkel has understood that this is not just about Hollande but about Greece, Italy, Spain and the Netherlands.”
But Greece remains a complicated wild card, its problems only marginally addressed by the outgoing technocratic government. Greeks vote Sunday in parliamentary elections in the middle of a recession caused by sharp spending cuts and tax increases. Both main parties, the conservative New Democrats and the Socialist Pasok, have been damaged by their agreement to the cuts and their past misbehavior, while more extreme parties have gained support.
Analysts say that the two parties together will be fortunate to have enough votes to form a working parliamentary majority. If they fall short, Greece will be thrown into further crisis, piling political chaos on economic pain, and new elections will be required.
“The elections in Greece could turn out to be more important than the elections in France,” said Daniel Gros, director of the Center for European Policy Studies in Brussels. “The Greeks have a fundamental choice to make: to stay in the euro or not. This is an extremely deep economic and political crisis, and there will be plenty of work for the next government.”
No matter what government emerges in Greece, however, the persistent question is whether it will enact the changes demanded by its European creditors, or whether, as before, promises will be half-kept or ignored.
Greece aside, “growth” is the word of the moment, but everyone favors it, even the Germans. They simply say that fiscal credibility must be restored, not that investment and structural changes should be postponed.
Mr. Hollande has advocated a series of mostly incremental changes to promote growth: strengthening the European Investment Bank, creating European “stability” bonds to finance infrastructure projects, imposing a financial transaction tax and getting the European Central Bank to ease up on its inflation targets. The red line for Germany is the bank and inflation, but Ms. Guérot believes that Ms. Merkel can live with the other ideas.
But Mr. Hollande is expected to face a quick test from the markets, with anxieties rising again over the euro and given Europe’s recession, Spain’s difficulties and the Dutch drama. He has been deliberately vague about his proposals, although he says he will spend an extra $26 billion in the first year on job creation and investment, and then raise $38 billion more. How he will do that is a mystery, but Matthieu Pigasse, the chief executive of Lazard Frères France and a prominent Socialist, insists that Mr. Hollande will behave responsibly.
“The left is more responsible in power, and the left in power is always reformist,” Mr. Pigasse said. “And I have no doubt about its ability to deal with the markets.”
Others are not so confident. The last and only Socialist president, François Mitterrand, came to power in 1981 with a strongly leftist agenda and ministers from the Communist Party. About 18 months later, he did an about-face, forcing through a competitive devaluation of the franc that allowed France to join what later became the euro. Mr. Hollande’s confrontation with market and European reality is likely to come much sooner.
Mr. Gros noted that France, with a cumulative debt approaching 90 percent of gross domestic product, had a chance to cut its deficit over the last few years but that Mr. Sarkozy did not do so.
“Today, it’s a little late, and the cost is higher,” Mr. Gros said. “Hollande has little margin of maneuver.”
Daniela Schwarzer, a European Union expert at Germany’s Institute for International and Security Affairs, said that “the circumstances in France don’t leave Hollande many options.”
After June’s legislative elections, she said, “I expect him to say, ‘I’ve had time to check the accounts, and Sarkozy has left us in tough shape, and that’s why I can’t do some of the things I promised in the campaign.’ ”
Mr. Pisani-Ferry of Bruegel said that Mr. Hollande will have a bit of time, since the markets have already priced in his victory. “But it will be a difficult period,” he warned, because, in fact, the French political campaign will continue for another month, through two rounds of legislative elections in June.
Mr. Hollande will have to be careful not to offend his voters too soon, or he may lose the parliamentary majority he needs to govern efficiently.
“The markets will have to understand that there is still an election campaign going on,” Mr. Pisani-Ferry said. “It will be a crazy, delicate month.”
