Washington - With Socialist leader Francois Hollande likely to become the next president of France, Europe's hot populist anger is about to confront the cold austerity measures required by the eurozone, with a predictable result: a storm that rattles the foundations of the European economic house.
Financial traders and treasury ministers this week are debating just how much damage this political-economic collision will bring. Some argue that it could take down the structure entirely. Others insist that Germany, for all its insistence on austerity, will never let the structure collapse - and will make the necessary concessions to keep the common currency intact.
Europe is a crisis that keeps on going, breaking through each firewall and emergency bailout. The reason is that under Germany's leadership, the Europeans have opted for a combination of austerity measures and rescue plans that has had the effect of financing ever-growing indebtedness. The European Central Bank is pumping in liquidity, which keeps bleeding out because the austerity measures don't allow the economies to grow and heal themselves. It's a perpetual motion machine of economic frustration.
"Liquidity can at best provide only temporary relief - it cannot substitute for the painful restructuring that is necessary to tackle solvency problems," argued Mervyn King, the governor of the Bank of England, in a speech last month.
So far, the crisis has been cast as a battle between a frugal, prosperous northern Europe and the profligate, debt-laden south. But soon, the decisive player will be France, arguably the defining country of Europe, which embodies at once the northern work-ethic and the southern propensity for debt. The economic future of Europe depends on which way France moves - and whether it can pull Germany with it.
If Hollande wins the May 6 runoff election and becomes president, as pollsters predict, he has promised to press Germany for a relaxation of Europe's new fiscal treaty. "Europe can't just impose austerity," Hollande told Bloomberg News Tuesday. "Of course, we won't depart from rigorous budget rules, but austerity in the sense that it's only a burden or pressure is unbearable for people."
Political protests have spread across the southern countries where budget cuts have been imposed, including Greece, Spain, Portugal and Italy. Even the Netherlands, normally one of Germany's strongest allies in demanding austerity, seems to be joining the dissidents. On Monday, Dutch Prime Minister Mark Rutte offered to resign after one far-right party in his center-right coalition rejected the budget cuts he proposed.