The re-election campaign for Angela Merkel, as well as Germany's continued fiscal leadership in the European Union, took a major hit today as Francois Hollande won the French presidential elections over the incumbent Nikolas Sarkozy. But even more telling was the fact that in Greece, scene of many of the harshest austerity measures and sharpest demonstrations in the EU, decided today to throw out both of the traditional parties for a more fragmented government. The ramifications of the two elections may take weeks to unwind but the message is clear. Merkel's desire to ram through spending cuts on troubled economies in the EU will not continue as they have for the last months.
Ms Merkel is up for a third term in 2013, and by most observers is the favorite. But if weaker EU countries begin to spend more money, and their deficits begin to cross over the 3% threshold of GDP as mandated by the EU, then it will be very difficult for Merkel to justify to her constituency that the billions of EURO's poured into the weaker economies over the last months was the prudent thing to do.
Another blemish for Ms Merkel and her Christian Democratic Union came within her own country's borders this weekend. Though her coalition partner the Free Democratic Party scored 8% in Schleswig-Holstein, after many months of dismal numbers, the CDU lost many seats. It is at its lowest level there in more than 60 years. After these results, the CDU will control only 7 out of 16 states in Germany. Next up is the grand prize, North Rhineland-Westphalia, which has nearly 20% of the total population of Germany and has been a bastion of the Social Democratic Party (SPD), for many years. If Merkel's CDU were to lose this state then the calls to change leaders, and direction, would grow louder.
On a side note, the Pirate Party continued their wild ride and will enter the parliament of Schleswig-Holstein, making it three for three in recent state elections, showing a depth and diversity that continues to confound the pundits.