Francois Hollande defeated Sarkozy in the run-off election for the French presidency to become the first socialist elected since 1981. Though he captured 52% of the vote, markets this morning are not embracing him with the June Euro dipping below $1.30 overnight. His platform of growth through government spending was popular with younger voters that are struggling with unemployment and declining benefits but given this plan may be difficult to execute, especially as Germany seeks a more conservative fiscal pact. Ongoing German support of liquidity and financial stability measures is crucial for surviving the recession with the Euro intact so he will have to drive immediate growth and deficit reduction to maintain a strong Franco-German relationship. The consequences of policy failure are the alienation of Germany, deterioration of investor confidence, rising sovereign debt yields, and an uncertain future for the currency.
