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Due to their highly significant policy implications, election outcomes in major countries do have a great potential to considerably influence world financial policies and machinations, and in turn, global financial and stock markets.
The elections held a few months ago in Greece, for instance, contributed immensely towards easing fears harbored by investors and analysts of an imminent financial crisis in Europe. Many had initially been concerned that Greece would abandon the Euro zone and in so doing,throw global financial markets into turmoil. But the success of pro-bailout parties in the elections went quite far in putting to rest fears of further default on the country’s part, and an eventual exit from the euro. Thus, the outcome of the election was indeed a huge relief seeing as the fears it dispelled had been causing the markets to rally, albeit briefly.
However, outcomes of subsequent elections in Greece where a parliament with a majority of MPs (Ministers of Parliament) from anti-bailout parties emerged, along with French elections, in which France voted for its first Socialist president in 20 years, have once again renewed fears that Europe will not be able to solve its debt crisis. As a matter of fact, world stock markets, including the UK stock market, have suffered an abysmal hit in light of all this. It would seem that voters in Greece voted the way they did here in a bid to punish the parties many Greek citizens hold responsible for highly unpopular austerity measures instituted to prevent the country from defaulting on its massive debts, and ultimately departing from the euro currency coalition. Meanwhile, in France, President Nicolas Sarkozy lost to Socialist candidate, Francois Hollande, who had launched a verbal campaign against the country’s austerity program and had promised to boost government spending. Thus, the election outcomes in both countrie scan in fact be attributed to wide spread antagonism among citizens of both countries, against austerity measures, and anything remotely resembling cut backs on government spending.
Several stock investors and traders are already overreacting to fears that Hollande will very likely back out of a pledge made by his predecessor earlier on to put an end to government overspending. Nevertheless, many believe that although Hollande has indeed indicated as much, he will not be able to actually do it. After all, it is against public and international policy for a new government to reject or re-negotiate a treaty entered into and duly signed by a previous government. Francis Lun, managing director of Lyncean Holdings in Hong Kong is quoted as saying that “even though Hollande indicated he will repudiate Sarkozy’s agreement with the European Union, in reality he cannot do it.”
