Hollande victory could impact US markets this week
Published: April 22, 2012 / Author: Christopher Rugaber
The following is an excerpt from an Associated Press article that quotes Finance Professor Jeff Bergstrand about the presidential elections in France and its effect on the global financial markets. This article appeared in numerous news outlets, including Businessweek, NPR, The Washington Post, The Street, MSNBC and FOX News. To read the entire article visit: Hollande victory could impact US markets this week
A strong showing by Socialist candidate Francois Hollande in the first round of France’s presidential election Sunday may rattle U.S. and global financial markets in the coming weeks.
Hollande wants to renegotiate a European treaty, agreed to just last year, intended to limit excessive government spending. He wants the pact to emphasize growth over austerity. He has also promised to roll back some deficit-cutting reforms put in place by his opponent, current President Nicolas Sarkozy.
Many economists fear that those steps would upset the delicate cooperation with Germany that has been key to Europe’s response to its financial crisis. Sarkozy has formed a partnership with German chancellor Angela Merkel on Europe’s debt crisis, so close that many commentators refer to them as “Merkozy.”
“Europe is not ‘fixed’ yet, but if you have France and Germany agreeing on certain policies, that makes it more likely they will fix it somehow,” said Jay Bryson, global economist at Wells Fargo Securities. Disagreement between the countries’ leaders raises the risks that Europe’s crisis could worsen, he said.
Still, Jeffrey Bergstrand, a finance professor at the University of Notre Dame, said the possibility that financial markets will drive up France’s borrowing costs will limit Hollande’s ability to sharply disagree with Germany or radically depart from Sarkozy’s policies.
“He can’t go rogue,” Bergstrand said. “There’s too much on the line.”