1st March 2012
The US, Russia and, possibly most importantly, France, with its key role in the European crisis, cannot afford to put their agendas on hold, but populations are unhappy with the austerity measures being taken to pay down debts and promises, whether they can be kept or not, are likely to be made in order to gain or retain power.
In France, the biggest threat to Sarkosy is Hollande who has polar-opposite views on what actions should be taken. While angry voters may get him elected, markets may well sway his actions in the end. Some of the European fund managers I have been speaking to have said they fully expect Hollande to win and take more than a few unsigned deals back to the table to argue over with Merkel. But the same managers believe it will be pressure from Asia and markets then forcing the issue, which would stop him from insisting on too may critical changes in the end. It's also worth remembering that neither the current Italian nor Greek leaders were actually elected.
Then we have the Russian election which is likely to see Putin return to power. No real policy changes to consider with that one but he's got a few angry voters to contend with himself.
And finally the USA. Elections are like touring West End shows the other side of the pond and certainly more time consuming – and expensive – than anything we ever see here. No one really expects any sensible decisions to be made until they are over but perhaps party leaders should be thinking about their own election austerity measures just to show willing. They won't, I'm sure. But again, as we saw with the last 11th hour agreement over debt issues, the markets will force even the US into action if necessary.
So market volatility will continue this year. Uncertainty will rear its ugly head each time a country has to refinance any debt or leaders increase yet another tax or take away another benefit, or GDP fails to bring hope.
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