• Inside Labour

    The 'casualisation' of the workforce is often a ploy to cut costs, says Terry Bell.

  • When drones go dancing

    Drone technology's future is about to come to life in Cape Town, says Arthur Goldstuck.

  • Testing times for Matona

    New Eskom CEO Tshediso Matona has his work out cut out for him, says Mzwandile Jacks.

Data provided by iNet BFA
Loading...
See More

French, Greek elections knock euro

May 07 2012 09:17 AFP

Related Articles

Upbeat ECB forecast lifts euro

Shares, oil slump after EU elections

Can Hollande save Europe?

French economy grinds to a halt

Shares down as eurozone fears grip investors

Eurozone manufacturing downturn deepens

 

Tokyo - The euro sank in value on Monday as the electoral defeat of ruling parties in France and Greece stoked anxiety in Asia about the fate of austerity policies designed to end the eurozone's debt crisis.

Among creditor nations in Asia, concern emerged in Japan and China about the zone's policy direction after Socialist Francois Hollande beat President Nicolas Sarkozy in France and Greek voters punished pro-austerity parties.

Sarkozy's defeat on Sunday was not necessarily a surprise, National Australia Bank said in a research note.

"However, it brings home the reality that incumbents following the (European Union's) prescribed austerity measures are going to find it difficult to remain elected," it said.

"What happens to these austerity measures now are what are weighing on (the euro)."

The single currency bought $1.2981 in afternoon trade in Tokyo, down from $1.3082 on Friday in New York. It also fell against the Japanese currency, dropping to ¥103.55 from ¥104.50 on Friday.

At one stage, the euro dipped to $1.2954, its weakest level since late January, while also slumping to ¥103.22.

On Asian share markets, Tokyo stocks dropped 2.63% in afternoon trade, while Hong Kong dived 2.43% and Sydney shed 1.88%.

The anti-austerity, pro-growth platforms of Hollande and left-wing opposition parties in Greece resonated with voters tired of strict belt-tightening under their incumbent governments.

The fate of restrictive policies aimed at curbing mountainous debts and deficits in the common currency area now hangs in the balance, and Asian governments with big holdings of eurozone debt are watching closely.

Japan's top government spokesman said Tokyo will "carefully monitor" how Europe reacts to the French election.

"The trajectory of the European economy greatly affects our economy," Chief Cabinet Secretary Osamu Fujimura told reporters, adding that Japan considered discussions between France and European powerhouse Germany "important".

In communist China the state-owned Global Times, which is known for its nationalistic tone, said the anti-incumbent results in France and Greece bore out the dangers of democracy running to "extremes".

"An administration change cannot generate the strong will needed to kick-start public debt reform in France," it added in an editorial.

"The change has to come from reflection of a wider scope. But protests against austerity measures from Greece to France have suggested that this much-needed reflection is far from coming.

"Statesmen are busy pleasing voters, not leading reflection."

Hollande had criticised German Chancellor Angela Merkel's insistence that deep cuts are the way out of the crisis, while the German leader had publicly backed fellow conservative Sarkozy.

In Germany itself, a state election on Sunday saw Merkel's Christian Democrats take only about 30% of the vote in Schleswig-Holstein, a setback ahead of national elections in 2013.

"Greece's elections may prove the more unstable, with the possibility of another in the near future," National Australia Bank said, noting that no one party had emerged dominant.

"As it stands there is no clear winner, but there are likely to be calls to ease up on the austerity reforms."

Credit Agricole analyst Kintai Cheung said markets were nervous that the entire programme of eurozone bailout policies could now be subject to review under Hollande and whoever takes power in Greece.

"With the growing influence of anti-austerity political blocs, tensions among the eurozone will likely be intensified and a wave of renegotiations for bailout programmes may be sparked," Cheung said.

france  |  greece  |  euro  |  europe debt crisis  |  markets
NEXT ON FIN24X

 
 
 

Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
1 comment
Add your comment
Comment 0 characters remaining
 

Company Snapshot

We're talking about:

Small Business

Expanding your business requires capital and banks have stringent lending criteria in place.
 

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...
Loading...