A Critical Weekend for the Future of Europe

This post has been cross posted from Spend Matters UK/Europe. You can read the original post, authored by Peter Smith, here.

At some stage in the future, we may look back on this weekend as a turning point for the Euro, or even the whole direction of Europe and the integrated Europe ideal.

The Presidential election in France is the biggest event, but there is also the vital general election in Greece, local elections in Italy which will test the climate faced by the caretaker Prime Minster, Mario Monti, and a key regional election in Schleswig-Holstein which could weaken Angela Merkel's position in Germany.

If the socialist contender, Francois Hollande, wins in France, we will almost certainly see a move away from the purist "austerity is all" policy promulgated by the Sarkozy / Merkel alliance. At the very least, there will be a stronger focus on creating growth rather than purely cutting expenditure. Ironically perhaps, there is no chance of Hollande actually taking any of the classic measures to drive growth, such as de-regulation, opening up markets, or tax incentives for entrepreneurs. His prescription is re-negotiation of the EU fiscal pact, swingeing tax increase for the wealthy and more public works and other expensive job creation schemes.

Good luck with all that, Francois... that should work.

Then we have Greece. If their election ends with no clear winner, which seems quite likely, or in larger than expected votes for the frankly barmy extreme right and left parties in that country, then who knows what might happen. Certainly, a Greek exit from the Euro will increase in likelihood.

Meanwhile, the UK 's PMI manufacturing index was well below expectations, and other economic news from Europe has been uniformly bad over the last fortnight. While the US picks up – albeit slowly – Europe seems set to descend back into recession, where it's less successful members already sit.

There was also remarkably little comment in the UK last month at the fact that Government debt hit the £ Trillion mark. Here is a chart from the Spectator Coffee House website – shocking really. And even 2 years into the Coalition "cost cutting" programme, the UK government borrowed £126 Billion in 2011/12. That's over £2,000 borrowed for every person in the UK. Not as much as in Labour's last disastrous year in power, but it's still a number I find intensely shocking.

So, we wait with interest and not a little trepidation to see what transpires over the weekend. Most of the UK will probably be more interested in the FA Cup Final, but events from Paris to Athens will be a lot more important for all of us in the medium and long term.

We'll review the results next week, and get back to our core topic when we look at the implications for procurement people and their organisations.

- Peter Smith

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