{"id":29692,"date":"2012-05-17T06:46:11","date_gmt":"2012-05-17T10:46:11","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/2012\/05\/eu-elections-causing-more-market-uncertainty\/"},"modified":"2012-05-17T06:46:11","modified_gmt":"2012-05-17T10:46:11","slug":"eu-elections-causing-more-market-uncertainty","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2012\/05\/17\/eu-elections-causing-more-market-uncertainty\/","title":{"rendered":"EU Elections Causing More Market Uncertainty"},"content":{"rendered":"

Article by Investment U<\/a> <\/p>\n

\"EU<\/p>\n

The sudden resignation of the Dutch prime minister two weeks ago, coupled with the presidential elections in France and parliamentary elections in Greece, has everyone on edge that the European debt crisis will return with a vengeance.<\/p>\n<\/div>\n

Even though the European Union had its problems over the past few years, there were still some things about it that we could depend on\u2026<\/p>\n

The countries in the North are the good kids who follow all the EU rules. The PIGS down in the South act like pigs and are punished for living way beyond their means. And Germany and France have a Mommy\/Daddy dynamic that keeps everyone in line.<\/p>\n

Well, the times are changing. The changes aren\u2019t the decrees of EU administrators, but for the most part, have a grass roots origin. People are voting in elections across the region, voicing their support or anger in response to austerity measures proposed or implemented. There will also be the need to create new coalitions to govern countries were the factions are nowhere near seeing eye to eye.<\/p>\n

Over the past few weeks, there were three specific political events that will probably weigh on financial markets for the rest of the year and beyond.<\/p>\n

The sudden resignation of the Dutch prime minister<\/a> two weeks ago, coupled with the presidential elections in France and parliamentary elections in Greece, has everyone on edge that the European debt crisis will return with a vengeance.<\/p>\n

Politicians and parties opposed to the austerity measures favored by Germany appear to be gaining momentum, advisers say. If new leaders reversed course and opposed the belt-tightening policies that were a condition for bailout funds, equity markets will suffer.<\/p>\n

We need to take a look at three situations going on now that could be big headaches later\u2026<\/p>\n

The Netherlands: Another One Bites he Dust<\/strong><\/h2>\n

Here\u2019s the problem. Almost two weeks ago, Dutch Prime Minister Mark Rutte’s party was unable to reach an agreement on \u20ac14 billion in necessary budget cuts. They have to bring the country’s deficit to GDP ratio down to 3% in 2013 from the currently forecasted level of 4.6%.<\/p>\n

Rutte submitted his letter of resignation to Queen Beatrix after entering into a governmental coalition with the extreme right-wing Freedom Party, led by Geert Wilders, which had refused to support the budget reduction.<\/p>\n

And when you hear the rhetoric, don\u2019t expect anyone from the Freedom Party to be won over anytime soon. According to Wilders, \u201cThe demands from Brussels are ridiculous. If we were to follow them then unemployment would only grow, and it is against the interests of my voters. We don\u2019t want to see our pensioners sweating blood for the sake of a dictator in Brussels. We will not let our elderly people pay for the Greek swindlers,\u201d<\/p>\n

That doesn\u2019t sound like \u201cwe\u2019re close.\u201d<\/p>\n

Up to this point, one of the few remaining success stories in Europe has been the Netherlands.<\/p>\n

This may come back to bite some of us because the uncertainty jeopardizes the Netherlands AAA rating. If the Dutch lose their rating, only German, Finish and Luxembourg debt would be top-rated.<\/p>\n

So realistically, Germany would be left as the only true credible backer of the EU.<\/p>\n

And due to its rating, many private money managers own Dutch debt as a hedge against the PIGS. A AAA rating allowed it to leverage a lot more. If Dutch sovereign debt tanks, you’ll see a lot more deleveraging of borrowed assets by hedge funds, banks and others.<\/p>\n

France: Finance, Be Afraid, Be Very Afraid<\/strong><\/h2>\n

Say \u201cadios\u201d to the Sarkozy administration in France. It\u2019s the latest EU government to fall by the wayside – like Spain, Ireland, Italy, the UK, Portugal, Greece and the aforementioned the Netherlands – in the past two years.<\/p>\n

French President Nicolas Sarkozy conceded defeat to socialist challenger Fran\u00e7ois Hollande<\/a> last weekend after polls closed in the final round of France\u2019s presidential election.<\/p>\n

Why is everyone on edge? Well, let\u2019s briefly go over the platform Hollande ran on:<\/p>\n