That increased risk, in turn, makes it more likely that investors in the United States will shift money to safer assets — U.S. and German government bonds, for example — and away from riskier holdings, such as stocks.
Francois Hollande
A strong showing by Socialist candidate Francois Hollande in the first round of France’s presidential election Sunday may rattle U.S. and global financial markets in the coming weeks.
Hollande wants to renegotiate a European treaty, agreed to just last year, intended to limit excessive government spending. He has also promised to roll back some deficit-cutting reforms put in place by his opponent, current President Nicolas Sarkozy.
Many economists fear that if Hollande wins a second-round election, to be held May 6, those steps would upset the delicate cooperation with Germany that has been key to Europe’s response to its financial crisis. Sarkozy has formed a partnership with German chancellor Angela Merkel on Europe’s debt crisis, so close that many commentators refer to them as “Merkozy.”
“Europe is not ‘fixed’ yet, but if you have France and Germany agreeing on certain policies, that makes it more likely they will fix it somehow,” said Jay Bryson, global economist at Wells Fargo Securities. Disagreement between the countries’ leaders raises the risks that Europe’s crisis could worsen, he said.
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