Is the austerity consensus falling apart in Europe?

With the probable election of the first socialist president in France in more than 15 years, and bond rates rising in Spain and Italy, investors appear to be questioning the committment of the euro zone to tackling budget deficits and the sovereign debt crisis. Markets were shaken after a first round of French presidential elections on Sunday put Socialist Francois Hollande, who wants the euro zone to focus on growth rather than austerity, ahead of incumbent Nicolas Sarkozy. The two contenders face off in a final vote May 6. Further undermining stability, the Netherlands' government collapsed yesterday after failing to reach agreement over austerity measures, placing its AAA credit rating at risk. But Spain still managed to lure strong interest in the auction with overall demand outstripping supply by more than four-to-one. The money raised was towards the top of its targeted range of €1-2 billion. But it had to pay a steep price. The borrowing rate leapt to 0.634% from...(Read Full Post)