With more than half of the 17 Eurozone countries slipping back into recession in recent months and popular discontent reaching a crescendo, overseers of the European common currency may be more likely to heed the hurting countries' calls for stimulus spending now in hopes of generating growth to pay down debts later.
Elections in Greece and France that gave a resounding rebuff to painful austerity measures imposed by the European Union to protect the euro have raised concerns that citizens of countries with bloated government budgets may still be in denial about what needs to be done to bolster the euro.
The two Eurozone nations that voted out leaders supportive of the painful belt-tightening that has driven up unemployment and cut deep into public benefits did so for different reasons and with glaringly disparate prospects for success, say economists and political scientists who study Europe.
"Austerity measures are needed in most of these countries, especially Greece, Portugal, Ireland, because these countries have been living far beyond their means. There has been totally irresponsible spending by both the governments and the populations," said Ivan T. Berend, a Hungarian-born professor of European economic and political history at UCLA.
Berend blames the debt crises in the Eurozone on the easy credit extended to new members of Europe's powerful political and economic bloc, where financial markets treated states with deficits two or three times larger than their GDP "as if they were Germany."
In Greece, where bitter resentment of social spending cuts has led to unrest, at times deadly, voters scattered their ballots across such a wide array of political parties that observers fear it could be weeks or months before a governing coalition emerges. Popular support for staying in the Eurozone has eroded amid 20% unemployment and deep cuts in education, transportation and social services, making it "almost hopeless" that any coherent economic recovery strategy can be agreed to among parties that range from far left to neo-fascist, Berend said.
Radical change is needed in Greece in the mentality and culture of a nation where "it is a virtue not to pay taxes, where the state is an enemy, where corruption and clientelism and networking are the solutions for everything, not a legal system," Berend said.
Barry Eichengreen, a professor of economics and political science at the University of California at Berkeley, agrees that the political extremes gaining ground in Greece pose a danger to the Balkan nation's stability and long-term prospects. But he says the emphasis on austerity has failed and those treating the most indebted Eurozone economies need to try different medicine.
"The Europeans ought to provide not loans but an aid package, like the Marshall Plan we did after World War II," Eichengreen said of the U.S. investment in postwar Germany that provided support for a political center to develop in the social and economic ruins left by the Nazis.
"Plan A is not working. and everybody knows what Plan B would look like -- more fiscal stimulus now with more fiscal restraint later," said Eichengreen, a former policy advisor to the International Monetary Fund.
German Chancellor Angela Merkel, chief proponent of the policy of spending restraints and tax hikes, cautioned Greeks against reneging on commitments to cut spending in exchange for bailouts that began in 2010 and now exceed $320 billion.
"The most important thing is that the programs we agreed with Greece are continued," Merkel told journalists in Berlin as word spread that the biggest vote-getting party in Sunday's election, the New Democratic Party that polled about 19%, had given up on the prospects of putting together a governing coalition.
Merkel's closest EU ally in the quest for fiscal austerity went down to defeat in France's election Sunday. President Nicolas Sarkozy lost to Socialist Francois Hollande on the same tide of popular discontent that voted out Greece's traditional political forces.
Merkel congratulated Hollande and invited him to Berlin to discuss his economic objectives but warned that the fiscal restraints defined for France to keep the euro on track are "not up for grabs."
Analysts were less concerned about the French backtracking on protection of the euro and predicted the two main engines of the Eurozone, France and Germany, will find a strategic balance and devote some money to growth that could generate income to pay down debt later.
As Daniela Schwarzer of the German Institute for International and Security Affairs told The Times' special correspondent Aaron Wiener in Berlin, Germany and France recognize that they must refrain from public disagreements that could undermine confidence in their blueprint for a strong euro.
“If Germany and France appear divided," Schwarzer noted, "the credibility of promises to rebuild the Eurozone is harmed.”
International markets reacted with alarm at the electoral outcomes, but mostly recovered after the euro's key strategists weighed in with assurances that popular concerns could be addressed. The euro fell to a three-month low at one point Monday, to $1.2955, but rebounded by the close of trading.
International Monetary Fund Director Christine Lagarde, a former finance minister under Sarkozy, added her voice to the debate in a speech in Zurich later Monday in which she called for a balance of austerity and stimulus. Growth and stability are intertwined, she said, and shouldn't be tackled as an "either-or" prospect.
Photo: German Chancellor Angela Merkel after a news conference in Berlin. Elections across the Eurozone on Sunday dealt defeat to candidates backing the tough austerity measures she has endorsed to address the region's debt crisis. (John MacDougall/AFP/Getty Images)