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Markets Drop On Greece, France Elections; Debt Crisis Uncertainty Spooks Investors (VIDEO)

CP  |  By Posted: 05/07/2012 1:19 am Updated: 05/09/2012 5:24 pm

Eurozone Markets Greece France
Businessmen look at a share prices board in Tokyo on May 7, 2012.Asian markets and the euro slumped on May 7 after voters in France and Greece voted out their ruling parties in a backlash against austerity measures aimed at battling the eurozone crisis. (YOSHIKAZU TSUNO/AFP/GettyImages)

LONDON - Renewed uncertainty over Europe's ability to deal with its spawning debt crisis following elections in Greece and France hammered stock markets Monday, with the main exchange in Athens down a massive 8 per cent.

Investors have been particularly spooked by the Sunday election in Greece, which has resulted in a split Parliament where no party looks like it will be able to form a government. The two parties that governed as a coalition for the past six months were pummeled to the benefit of more extreme parties of the right and left. The socialist Pasok party suffered the biggest retreat. Its share of the vote collapsed from around 43 per cent in the last election in 2009 to a little over 13 per cent.

A period of uncertainty looms for the bailed-out country, which is in its fifth year of recession and has over half its youth out of work following big spending cuts and tax increases in return for crucial international bailout funds. If no government can be formed that can command a majority in Parliament, another general election within the next two months seems possible.

"As for the Greek elections, they resulted in complete uncertainty with the possibility of another election taking place in the near future in order to try and put in place a government that can actually have some modicum of control," said Gary Jenkins, managing director of Swordfish Research.

With more than 99 per cent of the vote counted, conservative New Democracy led with 18.9 per cent and 108 of Parliament's 300 seats. Party leader Antonis Samaras, who backs Greece's bailout commitments for austerity, will launch coalition-forming talks later in the day.

Further weighing on sentiment is Sunday's defeat of French President Nicolas Sarkozy to his socialist rival Francois Hollande, who has campaigned on the need for more growth-generating economic policies and less reliance on austerity. Final results from France's presidential election show Hollande narrowly defeated incumbent Nicolas Sarkozy with 51.62 per cent of the vote.

Even German Chancellor Angela Merkel suffered a setback Sunday in a regional election in the northern state of Schleswig-Holstein. Merkel and her government have borne the brunt of the criticism over Europe's austerity drive.

"Election defeats for President Sarkozy, and for the main coalition parties in Greece and for Angela Merkel's party in Schleswig Holstein highlight voter backlash against austerity, economic contraction in unemployment," said Neil MacKinnon, global macro strategist at VTB Capital.

In Europe, Germany's DAX was down 1.4 per cent at 5,468, while the CAC-40 in France fell 1.2 per cent to 3,125. The FTSE 100 of leading British shares was closed for a public holiday.

Greek shares suffered worse, trading 8.2 per cent lower.

In the currency markets, the euro recovered some of its poise after falling to a three-month low against the dollar during Asian trading hours. It was up 0.4 per cent at $1.3018, having earlier fallen to a low of $1.2972.

Wall Street was also poised to open lower with Dow futures and the S&P 500 futures both 0.7 per cent lower.

Earlier in Asia, Japan's Nikkei 225 index plunged 2.8 per cent to close at 9,119.14 — its lowest finish in three months — with the market's export sector also sapped by a rising yen. Hong Kong's Hang Seng slid 2.6 per cent to 20,536.59. In other Asia markets, Australia's S&P/ASX 200 lost 2.2 per cent to 4,301.30 and South Korea's Kospi shed 1.6 per cent to 1,956.44.

Oil prices fell alongside equities, with the benchmark New York rate down 91 cents at $97.58 a barrel.

____

Pamela Sampson in Bangkok contributed to this report.

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LONDON - Renewed uncertainty over Europe's ability to deal with its spawning debt crisis following elections in Greece and France hammered stock markets Monday, with the main exchange in Athens down a...
LONDON - Renewed uncertainty over Europe's ability to deal with its spawning debt crisis following elections in Greece and France hammered stock markets Monday, with the main exchange in Athens down a...
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4eight5
62 Fans
10:56 AM on 05/07/2012
Markets??? Is there any such thing anymore? Shouldn't it be called the "manipulated market"? It doesn't take too many of the 1% to jiggle the markets and scare everyone over the French election. I think the French should break out the guillotine. The markets would run wild then.
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Aneesia
532 Fans
01:13 PM on 05/07/2012
I like the idea of the guillotine.....couldn't happen to a nicer group of people.
I also hope they go after the US for its blatant tactic of packaging junk loans into AAA rated packages....that contributed to the disaster over there. These Corporations should be destroyed....and the executives imprisoned and their assets seized.
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mikeydjd83
24 Fans
10:55 AM on 05/07/2012
Authority ignores democracy’s primary purpose by suspending the counting of presidential election ballots and appoints its preferred conservative candidate. The surprise to some is not its relation to Greek or French affairs but rather the US election of 2000.

Others wonder whether the US Supreme Court will continue its present course in judicially active big government.

What does the ordinary citizen need to know about Obamacare and Supreme Court Review? Experience Life among the Ordinary and read the second segment in a three part series at

http://lifeamongtheordinary.blogspot.com/2012/05/obamacare-and-supreme-court-review-part.html
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piceaglauca
The picture says it all....
295 Fans
 
09:56 AM on 05/07/2012
When the people are prepared to accept the austerity measures and get on with rebuilding then the pain will lessen. If not, another ten years maybe longer is most likely. The sad part this spin off directly correlates to other economic woes elsewhere which in turn just deflect back to its source.
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parrotfish
373 Fans
09:39 AM on 05/07/2012
It goes up it goes down. I have to go buy milk and bread later and go to the gym and play tennis and walk the dog real life stuff. What happens on wall street or bay street has no instantaneous effect on peoples lives as it is detached from reality so there is nothing I can do about it so whay do I have to hear about it every hour.
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piceaglauca
The picture says it all....
295 Fans
 
10:06 AM on 05/07/2012
Do I fell the same way or what? February is watch the waves month and walk the beaches. When I'm home I move the horses from paddock to paddock. Our dog is chasing the ball. I slip into town, have a quick breakfast then a bit of tv watching. Mauvy Povitch at 1:00 and Judge Judy aroung 3:00. Can't solve the problem. Tried. Voted but they keep doing what they want.
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Norma Ward
95 Fans
09:34 AM on 05/07/2012
Here is an article that outlines the greatest crisis facing Europe's economy:

http://viableopposition.blogspot.ca/2012/05/summary-of-europes-employment-dilemma.html

Within the EU, there are several nations that are suffering from Depression-era levels of unemployment, particularly among youth where unemployment in excess of 50 percent is noted in two nations.
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SeanMartin
Everything in moderation.
1439 Fans
08:11 AM on 05/07/2012
On one hand, I agree that austerity is about the only way to get these debtloads down. But the problem is that no one ever looked for a way to prepare everyone for it: it was just "okay, folks, we're going cold turkey!", in effect forcing a change literally overnight that would have consequences for the millions of little people out there who dont get to ding the government for $16 glasses of orange juice while on vaca — er, attending conferences.

If there had been some means of softening the inevitable blow, accompanying it with sound reasoning in the presentation, perhaps the people of Greece and France wouldnt have been quite so cranky with their elected officials. But no one in those two countries was even bothering to lead by example, and that's a voter-killer every time. The good folks in Parliament might want to take note and act accordingly before thinking of following this path.
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valar84
133 Fans
08:29 AM on 05/07/2012
I disagree with your first point. Austerity in a recession is not the only way to get debtloads down, in fact it is actually counter-productive. Austerity in this conjecture reduces the level of spending of the economy, which further contracts it as the private sector is unable to make up for this fall in government spending with increased spending from its own pockets. If the economy falls, the government gets less revenues and is forced to spend more on social programs just to keep people alive.

The best way to get debt burden down is to grow the economy (and maybe use controlled inflation). This is what was done to get rid of the debt following WWII. The nominal value of debt never fell, but the economy grew so that the debt burden was reduced by more than a half.
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SeanMartin
Everything in moderation.
1439 Fans
10:26 AM on 05/07/2012
The problem is that if you simply flood the economy with money on the level necessary for, say, the US, you run a *huge* risk of inflation setting in at rather serious levels. Frankly, comparing the post-war debt to what the US has now is ludicrous, because of the degree of magnitude. That's why these so-called "tax cuts" never worked: they never created jobs to the necessary scale, and they only furthered the debt load.

I believe people could handle austerity *if* it were implemented in a sound and judicious manner. There are countless places the debt could be cut if Congress had the political will — defence, for example, is spending way out of control. But until that happens, you're looking at untold generations of people paying this off.
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piceaglauca
The picture says it all....
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10:34 AM on 05/07/2012
Maybe so but during austerity programs I reduce my spending because I have less. If you are suggesting I should maintain my spending habits and maintain my debt load that's a disaster in the making. That's the weakness people want to continue their lives, they don't tighten their belt and they increase their debt. That's what Flaherty and Carney have been saying. You are also wrong about the private sector. Private companies have billions in profits but have chosen to delay expansion and hiring. This has been well known and has been talked about both on HP and the Globe and Mail. Yes the best way to reduce debt is to grow the economy but the gov't can't put itself in debt to do it since it can only drw so many tax dollars and the private sector right now isn't interested in expansion and hiring.
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piceaglauca
The picture says it all....
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10:28 AM on 05/07/2012
I think it is more like it won't happen to me. As for those it hasn't affected it is a wake up call out there for the masses. As for Greece the rich guys were lapping it up and the politicians kept handing out the golden hand shakes. What gov't gives out pensions at 50 or earlier and expects to eventually have the money to pay for it. The same thing will happen here as we move forward. Every time a politician gets his six years in he gets a pension. How many of these guys walk around right now receiving tax payers money? there is only so much money in the tub.
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foremergencyuseonly
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08:08 AM on 05/07/2012
"Debt Crisis Uncertainty Spooks Investors" The same investors that caused this mess in the first place!
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artbbcramer
380 Fans
07:59 AM on 05/07/2012
Great, let the G-d damn markets be spoked. What happens in these "markets" has NOTHING to how people actually live their lives. Stand tall, firm and strong peoples of France and Greece. Keep the bankers on the run! Hey Harper, are you taking notes?
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