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Nicolas Sarkozy Out; Europe's Crisis, America's Problems; Greek Crisis Election
Aired May 6, 2012 - 15:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
ALI VELSHI, CNN ANCHOR: A high-profile world leader has just lost his job. The voters have sent French President Nicolas Sarkozy to the unemployment line.
Welcome to this live edition of YOUR MONEY. I'm Ali Velshi.
Elections today in France and Greece. The consequences will be felt here in the U.S.
VELSHI (voice-over): In the U.S., politicians can't agree whether the government should cut or spend its way to economic recovery. And the debate isn't just in this country. Two important votes today, in France, and in Greece. At stake, drastic cuts in the face of massive debt. The burning question, does austerity lead to recovery? Increasingly voters across Europe say no.
In the last two years, 13 governments in the European Union have either collapsed or been voted out of power. Today, French President Nicolas Sarkozy is caught in a runoff with socialist rival Francois Hollande that cost him his job.
Under Sarkozy, France's unemployment climbing to 10 percent, while economic growth ground to a halt.
Also today, Greece, a national election taking place in a society crushed by debt. Greek unemployment now at 21 percent. Up from just 9 percent before bailouts and austerity brought protesters to the streets.
VELSHI: And as no other network can, we brought together CNN's best from around the world. Veteran business correspondent John Defterios joins us from Abu Dhabi. He's here to take this global story and break down exactly what you need to know. Jim Bittermann is live from Paris at the headquarters of now defeated French President Nicolas Sarkozy. He just conceded to socialist Francois Hollande.
Matthew Chance is in Athens at the center of an election that also took place today. Greek voters deciding whether they are willing to accept tough cuts to deal with the country's enormous debt. A Greek default could crush America's own slow recovery. Al Goodman is in Madrid, a country closely watching these election results with all of you. The unemployment situation is tough here in the U.S., in Spain it's much worse. Youth unemployment now above 50 percent. Diana Magnay is in Berlin. Up until now, Germany has been the backbone of Europe's economy and the main architect of austerity. Is it going to be the next one to fall into recession?
With me here in New York, breaking down exactly what Europe's crisis means for the United States, Christine Romans, host of "YOUR BOTTOM LINE," and Chrystia Freeland, editor for Thomson Reuters Digital.
Well, voters in France are furious over a struggling economy and high unemployment. So today they fired French president Nicolas Sarkozy. He will be replaced by socialist Francois Hollande. Sarkozy becomes the highest profile European leader ousted during the region's economic crisis.
CNN's senior European correspondent Jim Bittermann joins us live from Paris -- Jim.
JIM BITTERMANN, CNN SENIOR EUROPEAN CORRESPONDENT: Ali, you know how they always say you should have been here a day ago. Well, you should have been here about an hour and 15 minutes ago. This place was packed with Sarkozy supporters still believing that he had a chance to win and in fact he did not win. He got to concede defeat and he did it almost immediately after the figures came in from the television networks across the country, the exit polls.
Here is a little bit of his concession speech that he gave to the followers here.
(BEGIN VIDEO CLIP)
NICOLAS SARKOZY, FORMER FRENCH PRESIDENT (Through Translator): France has a new republic, a president. France has a new president. This is a Republican choice. Francois Hollande is the president of France and must be respected.
(END VIDEO CLIP)
BITTERMANN: And while the crowd here is thinning out, one of the things that Sarkozy said was that he was going to remain engaged in politics and that was a reference to something that's going to come down the line here in about five weeks' time. The 10th of June, the first round of the legislative elections here, and these people, the folks that were here supporting Sarkozy, it was a very narrow defeat for Sarkozy, and, in fact, they're going to be out working to win seats in the parliament here in France.
And that could lead to something that's even worse than what they think the Hollande government will bring and that is gridlock, because as you know in the United States when you have a Congress of one party and a president from another, not a lot gets done and it could look like -- it could looks like that that is what we're headed towards here in France if these legislative elections come out the way these people would like tonight -- Ali.
VELSHI: And, Jim, that is why we're doing a live show about this for our U.S. audience because many U.S. politicians are looking at Europe today to wonder what this means for us.
Stand by, Jim. We'll be back to you in a moment.
Take a look at this map of Europe. The countries highlighted in yellow are all back in recession, including Spain, Greece and the United Kingdom, notably France isn't there. Twelve European countries all together are in recession and that is raising concerns that our sluggish recovery could fizzle out. Europe taken as a whole is -- as large an economy as the United States.
So all eyes are on jobs. People losing jobs don't spend money. They certainly don't buy American made goods or services.
Christine Roman has come armed with numbers about the comparison in unemployment -- Christine in.
CHRISTINE ROMANS, HOST, YOUR BOTTOM LINE: Hi there, Ali. Well, unemployment here in the U.S. currently 8.1 percent as you know. But the situation in most of Europe is far worse. Take a look at the 17 countries where they constitute the eurozone and use the euro as the currency. Unemployment there is at the highest level overall since 1999. And Spain's jobless rate is above 24 percent. Italy is at a 12-year high, almost 10 percent. Greece, Portugal, Ireland, all above the 14 percent mark. Greece, 21 -- almost 22 percent.
Another three largest economies in the EU, though, are faring a little bit better, Ali. France has a 10 percent unemployment rate. Germany, 5.6 percent unemployment. Britain, which still, of course, uses the pound and is not a member of the eurozone but a very important demographic in all of this, it's at 8 percent.
Clearly tough times for Europe and the concern is if you have fewer euros or pounds in your pocket, Ali, you're not spending them on American made goods and that slows or hurts the U.S. recovery as well.
VELSHI: Right. And when we talk about a spillover effect, it's not like a cup of coffee that spills over and you've got coffee on you. It has to do with whether or not you as a country are doing the right things to brace for this coming storm.
Let's go to John Defterios. He's standing by in Abu Dhabi.
John, when it comes to the economy, Greece is a country that has quite possibly done about everything wrong. The government agreed to some tough cuts in exchange for being bailed out but voters are understandably not happy. Today they are expected to try and slow if not halt those cuts altogether.
So explain, John, to our U.S. audience the scope of the problem, just how much trouble is Greece actually in.
JOHN DEFTERIOS, CNN INTERNATIONAL EMERGING MARKETS EDITOR: Well, it's in a league of its own, if you want to put it that way, Ali. When you think of a recession in Europe or if you're thinking in the United States, you say 12 to 18 months of recession. Greece right now is in the fifth year of recession. It's hard to compete with anybody else in that sort of figure. Fifth year of recession, expected to contract another 5 percent in 2012 after contracting 5.5 percent last year.
Look at this number and this is quite shocking. This is the way you saw the Greeks going to that parliament square over the last six months, protesting against the austerity cuts. The GDP has lost 20 percent alone since 2009. Christine signaled out Greece there in terms of the overall European map of the unemployment situation. But if you single out the youth unemployment in Greece, it's extremely dire.
One out of two Greeks between the age of 15 and 24 without a job, 51.2 percent the overall unemployment rate at 21.7 percent. The big question right now, and this is why people in the United States have been focusing on this is, what happens next? Will Greece come out and see the light at the end of the tunnel?
If you look at the debt to GDP, the answer right now is no. 2011, the debt to GDP, the highest in Europe, at 165 percent. If you roll back the clock on the Greek debt to GDP, it was at 120 percent in 2008.
And look at this, Ali, roll the clock forward to 2020, and the Greeks will be where they started back in 2008 at 120 percent of GDP. So the Greeks on the ground today when they were voting and they used to have those two huge columns of the two major parties, New Democracy and Panhellenic, getting 80 percent or more, the early exit polls show they're getting just a third and that's the reason why.
DEFTERIOS: They say we have all this austerity and really nothing at the end of the tunnel to show for that austerity in a 10-year period.
VELSHI: Once again, a topic that's interesting to our U.S. viewers because if you are going to take some pain, many people would like to see a few years down the road that there will be some gains, some recovery, and that has been something so difficult for politicians to show the Greek people and it's a difficulty that continues right now.
John, stand by.
Joining us now overlooking Parliament Square in Athens is CNN's Matthew Chance.
Matthew, how is -- how is it going over in Athens right now?
MATTHEW CHANCE, CNN SENIOR INTERNATIONAL CORRESPONDENT: Well, it's been -- it's been a political earthquake here, nothing short of it. The traditional party as John was saying there that have dominated Greek politics for the past three or four decades, they have been essentially swept aside by the Greek electorate. They have polling just in -- just about making it in double digits. It's incredible the amount of support that's flowed away from them. The parties that have benefited are those that have been traditionally on the fringes of the Greek political debate. We're talking about the neo-Nazis, the communists, people like that.
It really is a huge protest vote against the austerity measures that Greek people have had to endure. This is the first time in two years that Greeks have had a chance to make their opinions heard at the ballet box and they've delivered an absolutely devastating message to those traditional parties, those supporters of the austerity measures, the ones that pushed them through and imposed them on on people of this country, they're looking elsewhere it seems for solutions.
VELSHI: Here is the problem, Matthew, our viewers will be more familiar with the unrest in Greece than anywhere else. It was more clear that voters in Greece didn't like any of this. You remember last year, we would see those riots in the streets of France.
What now happens? The Greeks have said we don't like this austerity, but their government is not going to be able to get any further in terms of loan guarantees. They owe so many people so much money. What happens now?
CHANCE: Well, look, I mean, much of it depends on what the outcome of this election is tonight. We haven't had the results in yet. We've just had exit polls. The votes are still being counted. It's a very complex political system as well. It's kind of proportional representation. The seats will be distributed according to the -- the percentage that each party has.
And so it's when we get those final seats we'll be able to add up the numbers. No single party will get an outright majority, but will there be enough seats amongst the parties that support austerity? They need more than 151 seats between them.
Will there be enough seats between them to continue Greece standard's path of austerity or is this country going to do a U-turn because if it's going to do a U-turn, and renege on its commitments, that is going to send shock waves not just through Greece, but throughout the rest of the world and certainly the United States.
VELSHI: Yes, very important question. It's not just what people want to happen, it's what's possible to happen.
Matthew, stand by right there as you rightly point out. We are still waiting for those results in Greece. We have them from France. Nicolas Sarkozy who you see here in his car driving away, has now conceded victory to Francois Hollande, a socialist. He was very fast to concede before all the votes were counted. He knew it was over for France, one of the largest economies in the world.
Very big questions as to whether Francois Hollande does what he said he's going to do and how the world and its markets and your 401(k) will respond to that.
Coming up next, some insight from Chrystia Freeland from Reuters. John Defterios in Abu Dhabi and Christine Romans. But later we're going to go live to Madrid and take a look at Spain. One country in Europe did most things right and still got dragged under by the financial crisis.
VELSHI: You're watching a special live edition of YOUR MONEY, covering the election results in France and Greece. If you've just joined us, the French president Nicolas Sarkozy has conceded defeat to his socialist rival Francois Hollande in Paris. We are waiting for final results in Greece. But it does seem that both nations are rejecting austerity. The idea of government cutbacks because of the pain that it's causing on the ground.
John Defterios is in Abu Dhabi for us bringing us a global perspective on this. Christine is with me in New York making us understand why this matter so much to you here in the United States. Chrystia Freeland, editor at Thompsons Reuters.
Chrystia, what, as you watch this, is going through your mind?
CHRYSTIA FREELAND, EDITOR, THOMSON REUTERS DIGITAL: To me, the most important question is, does this trigger a new round of the euro crisis because, you know, you've been making some parallels between the plight of a Greece, the plight of a Spain.
FREELAND: And the potential debt crisis in the United States. But there is a big difference. These guys do not control their own currencies. And if you control your own currency when you're in a situation like this, you can print money to pay off your debt or you can devalue your currency and that's a way to restore economic competitiveness.
FREELAND: They don't have that option now. Does this mean that you start a gain to have countries starting with Greece, say, actually this Europe thing it's not working for us.
VELSHI: And work that out for my viewer. What happens if the -- if the eurozone starts to come apart, if countries stop using the currency? What does that mean? Does that weaken that currency overall?
FREELAND: Well, I mean I -- what it could mean is, you know, there isn't -- the euro was sort of constructed like a roach motel. You could go in, but you couldn't go out.
FREELAND: And that was on purpose because the politicians who created it were real believers in Europe. They thought that this was the way to avoid another world war. So they wanted to create first an economic union and hoped a political union would follow up. If it starts to fall apart my fear and what I think actually President Obama's fear should be is, does it send shockwaves through the world economy, and we would feel those here in the United States pretty quickly.
VELSHI: Right. We learned this in 2008, John Defterios, that when a bank sneezes across the world, it could shut down your loan here in the United States. How much damage can a failed Greece do to the global economy?
DEFTERIOS: Well, it's ironic that we're talking about it because it's only a $300 billion economy as I noted here. It shrunk by 20 percent since the start of this crisis. But the fact is, and Chrystia makes a very good point, if one of the members of the eurozone, one of the 17, decides to duck out, it puts the whole project into question.
We should look back here on what happened, the fall of the Berlin wall 1989, Ali, led the European Union leaders to try to come together with union as a trade union, but also in 10 short years after that, introduce a single currency. The reality is we have a two-speed Europe, something that the architects of the Europe didn't want to have, where you have Germany, France, the Netherlands, even the UK, which is not a member of the eurozone, then the southern half of the continent, Spain, Portugal, Italy and Greece, unable to grow right now.
You have an unemployment rate of 21 percent in Greece. Youth unemployment of better than 50 percent. But the Greeks fell asleep during the first 10 years of having that currency. They had the benefit of low interest rates from Germany. So instead of reforming their labor market, they borrowed a lot of money, they had a lot of money come in to fund the building of the Olympics in 2004.
They were growing at 4 percent. That was the time to reform. And with all candor here, for the first ten years of the currency they didn't reform. So the payback right now is a very severe one. So it'd be ironic that the smallest economy in Europe could bring down the euro project going forward.
VELSHI: Yes. And that's why we're paying so much attention to Greece today when in fact France is a huge economy. The concerns about the French economy are very real. What you're looking at here is photographs -- video, live video of Francois Hollande. He is the president-elect in Paris.
Nicolas Sarkozy has been defeated and has conceded. You now see under police escort Francois Hollande, the next president of Paris, headed in a motorcade toward his headquarters where he will be greeted by remarkably jubilant supporters. Not just because he has won, but to many people who have felt crushed, crushed by the kind of austerity we're seeing in Europe.
Christine, in France, it hasn't been anywhere near how bad it was for citizens in Greece and yet they are coming and saying what you keep hearing in the United States, there are many people who say we need austerity, we need to balance and what you're seeing in France and Greece in this motorcade for a new president is a rejection of that. ROMANS: You know, living within your means, Ali, is something that everyone says they want to do, but these voters and these countries show that living within your means and how you do that can be very painful and voters reacting very, very strongly to that notion.
So what are the -- what are the messages for U.S. politicians? Well, in the United States, I would argue we haven't had austerity yet. We were still running this huge budget deficits. We have a debt, a national debt that's entirely the size of the U.S. economy still. And where we've had cutbacks, there's been budget cuts on the state and local level, and that has hurt. So Americans have a taste of this belt tightening but nothing like you've seen in Europe.
ROMANS: So the message for U.S. politicians is to do it properly, at the right time, or your electorate will revolt.
VELSHI: The message also might be don't take one extreme or another. The solution may be a little bit of all or a gradual move into austerity. These guys are paying the price for very rapid austerity that their citizens didn't care about.
We're going to take a quick break. We're going to look at what you're seeing there is the motorcade taking Francois Hollande, the new -- the newly elected president of France to his headquarters where he will deliver a speech.
When we come back, two recessions in three years. Al Goodman will join us from Madrid for a look at how Spain has been hit by the financial crisis, a country that didn't do it all wrong, now half its young people are unemployed.
You're watching a special live edition of YOUR MONEY. Stay with us.
VELSHI: To our viewers, you are looking at Francois Hollande, the president-elect of France, having just arrived at his headquarters in Tulle, France. He is about to give a -- well, he's not turning to speak because everybody is cheering for him.
He has defeated President Nicolas Sarkozy who has conceded. Let's listen in to the new -- the next president of France, Francois Hollande.
(CHEERS AND APPLAUSE)
FRANCOIS HOLLANDE, FRENCH PRESIDENT-ELECT (Through Translator): My dear citizens, fellow citizens, French people, this 6th of May, have just chosen change by bringing me the presidency of the French republic. I feel the honor, which has been given to me and the task, the important task faced beyond -- in front of you to serve my country. I commit myself to serve my country.
With devotion and (INAUDIBLE) of this function. The requirements and on this subject, I'd like to congratulate Nicolas Sarkozy who led this country for five years and who on this subject deserves all our respect. I express my deep gratitude to all those who, through their votes, have made this victory possible.
VELSHI: OK. We're going to keep an eye on that speech. We'll bring you all the relevant parts, that is Francois Hollande who just won the election, the presidential election in France.
And we're bouncing around a lot today. We've got France, we've got have Greece, but we're still waiting for results to come in, but it may look similar.
I want to bring in Spain. There isn't an election here but we keep talking about contagion. We keep talking about what happens to other countries. Spain is struggling with the aftermath of a housing bubble that went bust. But that's where the parallels end to the United States. Spain didn't do everything wrong like Greece did.
Christine Romans on this -- Chris.
ROMANS: Ali, take a look at this. We're at 8.1 percent unemployment in the U.S. Spain is above 24 percent for the national average. And for those under 25 years old, its youth, the people who are the future of the country, 51 percent unemployment.
Let's look at GDP for Spain. You can see here there was some growth, 2009, there was a long recession and then it kind of tried to pull out of it in 2010. But look at this, the last two quarters in the red, that is a shrinking economy. They're back in recession in large part because of austerity measures across Europe.
But despite all of these cutbacks, the country's debt is still projected to jump to its highest level in more than two decades in 2012. Spain's debt to GDP ratio will soar to almost 80 percent, that's below the European average, but a big rise from last year. Here is why it matters. It can affect interest rates on loans, on income tax rates, things every citizen in Spain cares about.
The youth unemployment in particular a real, real problem for Spain. That's the future.
VELSHI: Right. When we talk about debt, we talk about how much it costs the country to borrow. If it costs your country too much to borrow, it's likely going to cost you too much to borrow.
Let's go live to Madrid. Al Goodman is CNN's Madrid bureau chief.
Al, we just laid out the numbers on the economic crisis in Spain. If viewers in the U.S. are interested in these two elections, viewers in Spain and politicians are very, very interested. The debate all over Europe, austerity versus growth. What are you hearing?
AL GOODMAN, CNN MADRID BUREAU CHIEF: Well, this is very much the top story in Spain, right across all the Web sites of the main newspapers here because with a new government in power here, this situation that you see in France, a conservative replaced by a socialist, which just happened in France, six months ago it was a socialist replaced by a conservative.
The conservative government came in and they said they were going to clean up the economic mess left by the socialists, but they have bet on austerity more and more and more, basically following the German model of Chancellor Angela Merkel, basically saying if we can just cut, cut, cut, we will eventually get the growth here.
But the problem is left over from that real estate boom, and this is familiar to U.S. viewers, the banks here left with a lot of bad debt and so there is no credit, there's no money to be -- to be borrowing here. And so this is why the Spanish people, especially a segment of them have been so interested in what has been going on in France, because they feel that the president-elect of France Hollande has given signals that he will bet not just on austerity, but on growth.
And so this is a key issue here. You've got the unions which have been on the streets in force across the country in recent weeks, just two demonstrations last week, so far peaceful, so everyone here has got a stake in trying to see a change and get something going in this terrible economy -- Ali.
VELSHI: You bring a good point up. Austerity doesn't have to be the opposite of growth. Austerity can be one method that you use to achieve growth, stimulus is another method to achieve growth. And these struggles depend on other people sometimes. And that's the -- that's the puzzlement in Spain.
It's getting crushed under some of its own problems and some of other people's problems. And that's why this is an interesting conversation for our viewers here in the United States. Might we too get caught up in this.
Al, stand by. We'll be back to you.
When we come back the U.S. presidential election is six months away. And just like in Europe, the candidates, some of them, hostage to the economy. We'll take a look at why President Obama needs to be more worried about what's happening in Europe than in Ohio.
VELSHI: Well, here in the United States, this weekend, President Obama formally opened his re-election bid on Saturday, in Ohio, which is a key state in this fall's elections. The president touted his administration's rescue of big auto companies from bankruptcy during the recession and he blasted rival Mitt Romney's stance on the issue telling voters in Ohio, many of whom depend on big auto for their livelihood, quote, "When someone wanted to let Detroit go bankrupt, we didn't -- we didn't turn our backs."
Just like Europeans, Americans are debating whether stimulus or austerity can boost economic recovery. It's clear where Romney stands.
(BEGIN VIDEO CLIP) MITT ROMNEY (R), PRESIDENTIAL CANDIDATE: There's no question in my mind if this president were to be re-elected we will ultimately face a Greece-like setting where people will wander whether they want to loan money to America, and loan money to America at low interest rates.
(END VIDEO CLIP)
VELSHI: For more on the Republican view of what's going on in Europe, Wisconsin congressman, Paul Ryan, who chairs the budget committee said this. "What we're seeing here is what happens when politicians make so many empty promises to their citizens, and then they turn into broken promises when they can't keep spending other people's money."
There's a lot of stuff going on here. Let's bring Chrystia Freeland in, she's very good at simplifying this for our viewers.
I asked Nobel Prize winning economist Paul Krugman the other day when he was here, if the crisis in Europe is the proof that people like him need that austerity doesn't work. Here's what he said.
(BEGIN VIDEO CLIP)
PAUL KRUGMAN, NEW YORK TIMES COLUMNIST: Yes. If you were -- if there was -- I mean there was a big debate two years ago, a lot of people in Europe and here were saying cut government spending, that'll increase confidence, the economy will expand, well, look at Spain, look at Greece, look at Ireland, it doesn't work that way.
(END VIDEO CLIP)
FREELAND: Yes. All the Keynesians, which is the people who are in favor of stimulus.
FREELAND: Who believe that when you're in a recession --
FREELAND: -- you have to spend money, you know, so the Paul Krugman view is the reason -- you know, that the country's economy is not like your domestic budget. And so you have to take a different approach.
FREELAND: So when you're in a recession --
VELSHI: Let me just -- I just want to stop you there for a second. Your -- the country's economy is not like your domestic budget.
VELSHI: You know, it frustrates me when politicians refer to your credit card and running a balance on the credit card. FREELAND: Right. Right.
VELSHI: It is not the same thing.
FREELAND: Right. Right. So, you know, there is -- it is easy to think of a country's economy and think well, in my own house, I can't spend more than I earn, otherwise I get in huge trouble, so my country shouldn't do that either.
FREELAND: And that was sort of what happened in the 1930s. Keynes is a great economist, said, you know what, this is wrong. What have to happen in these moments when there is a recession is the government has to create demand. It has to go out there and pump money into the economy so that you have that spending, so that, you know, the economy starts working. And in a way, you know, an analogy could be, you know, like kick-starting the engine on your car.
FREELAND: And that's what Paul Krugman and his ilk are arguing, and actually the United States has been doing a lot more of that than Europe. So I think right now all of the believers in stimulus in the United States are going to be cheering because what they're saying is austerity has failed in Europe, the voters have rendered their verdict, and I think they're going to hope that the global political weather now shift.
FREELAND: And the conversation moves from deficits reduction, which I think is what a lot of us have been focused on, towards jobs, employment.
FREELAND: Get the economy going, worry about the deficits after the economy is running at full speed.
VELSHI: And John Defterios in a moment will tell us about how even in Greece, a lot of those wins have already changed irrespective of the election results, coming up.
When we come back, deciding votes in both France and Greece today as angry voters take charge of their future. We'll go back to Jim Bittermann live in Paris and Matthew Chance in Athens.
VELSHI: President Obama is attempting to make the case that tough times remain tough, things would have been worse without him. That's the strategy French President Nicolas Sarkozy attempted in defending his own economic record. Didn't work for him.
Sarkozy was defeated in today's election in France. He's the latest most high profile, most significant of the European leaders who have been swept from office during this economic crisis., or what to most of us has seemed like the recovery just in the last two years.
Sarkozy has often been called Sarko the American because of his pro- Washington stance.
Jim Bittermann joins us again from Paris.
Jim, you are in a hall that was very busy not 40 minutes ago. It appears empty. What's the story?
BITTERMANN: I'm all alone here, Ali. No, the fact is everybody has gone. Before they left, they had a few nasty remarks for the socialist who are going to take over and wished them good luck because they know what the economic problems are.
One of the things that's interesting is when you mention Obama and President Sarkozy in the same breath, the fact is that they have another similarity and it certainly was part of Mr. Sarkozy's defeat. And that is that there are some people in the country who absolutely do not like Mr. Sarkozy, just viscerally. They didn't like him. They didn't like the way he behaved, didn't like who he was, and as a consequence, there was a large anti-Sarkozy vote out there.
And I think you might get some of that, there -- I know there are some people in the United States who feel very strongly about Mr. Obama, not so much on his policies or maybe his policies but as well on the personality issue. So that's one thing I think that you may be looking for when you draw these kind of comparisons.
BITTERMANN: Another thing is that a lot of people left here tonight saying can Hollande deliver? Because he's made a lot of promises here. A lot of promises that are going to cost a lot of money. And of course he's going to be facing exactly the same problems as Sarkozy, economically -- Ali.
VELSHI: Yes, that's a good point, Jim. And that may be why we're -- you know, we're probably half an hour, an hour away from seeing how markets -- futures are going to react. But it may be why we're see a more muted response than you would think, because the business community was really furious that a socialist might take over in France. They might sit around and say he can only do so much. They are all to some degree hostages of the larger economy.
Jim, stay there for us. In Greece, angry voters are putting their foot down after two painful austerity measures that have left no family in Greece untouched. Exit polls in that country show that the ruling coalition is headed for a steep loss. While parties on the far left and the far right are making significant gains.
Greece is a complicated picture. Matthew Chance here to break it down a little bit for us -- Matthew.
CHANCE: Ali, thanks so much. Dramatic shifts taking place in Greek politics. The traditional parties that have dominated this country's parliament for the course of the past three or four decades really being dealt a powerful blow by the electorate, losing the vast majority of their support. The parties that are benefitting from that are the parties that have previously been on the fringes of the Greek political system, one of them is the coalition of the radical left.
And joining me now is Eykleides Tsakalotos, professor of economics at Athens University. Also a candidate for that party.
You must be very satisfied with the election today.
EYKLEIDES TSAKALOTOS, PROFESSOR OF ECONOMICS, UNIVERSITY OF ATHENS: We're very pleased. We think that the Greek election is very important not only for Greek politics, but with European politics. We believe that the Greek people are the first who have said resounding no to austerity measures. They're the first people who've said that this isn't leading anywhere, not only for Greeks but for Europeans that the vicious cycle of austerity measures leading to greater recession, leading to calls for more austerity measures is not leading anywhere.
CHANCE: Just very briefly, do you think that your party will be able to form an anti-austerity coalition in this country?
TSAKALOTOS: Well, the first party will be asked by the president of the republic to see if it can form a government. It has very small legitimacy. It's only marginally the first party. It's lost a third of its support. And I think it's going to be very difficult when the people have spoken and the people has said we want to return to social policies and want to return to democracy. We want Greek people to be able to decide on the things that matter for them.
CHANCE: All right, Professor Tsakalotos, thank you very much for being with us here.
TSAKALOTOS: Thank you.
CHANCE: Not altogether clear whether this left wing coalition could be formed. The most slightly scenario at the moment is still depending on the results coalition between the pro austerity parties, Greek may well continue down the same path.
VELSHI: All right. Matthew, stay by -- stay close.
We just heard from -- we were monitoring Francois Hollande's speech in France. And he has just said austerity can no longer be the only option for Europe. This is him concluding his speech in Tulle, France.
So, Christine, what we've been talking about here is that American, Keynesians, liberals are looking at Europe and saying, see, this is what happens.
VELSHI: Watch out, Romney. Watch out, Republicans. This is what's going to happen if we listen to you and balance budgets and impose greater austerity. You say that the Republicans could be taking a message out of this.
ROMANS: Yes. And they could be looking at the same events in Europe and saying, look, this is what happens when you don't get your fiscal house in order and you do it properly. And they're saying, we've got to get our fiscal house in order or we're going to have so much debt, we're going to have the world looking at us and bond markets looking at us, and saying, you know what, we're not going to loan you money, lend you money at such low, low interest rates anymore.
And this whole era of the U.S. being able to borrow so much to live with that, outside of its means at very cheap interest rates that those days would be over. So you've got the Republicans -- they're the people on the right that live within the means crowd, saying exactly the opposite of what the Keynesians are saying, they're saying look, Europe is proof that the U.S. has to fix its mess now or we will be like them.
VELSHI: And, John, coming off that interview with Matthew, Greece is a little bit of that proof. I mean it's -- it is evidence that you can get yourself into more of a pickle by not doing some of the right things early on.
DEFTERIOS: No, in fact for the first 10 years of the membership of the euro, they didn't do anything, Ali. And this is the biggest challenge they had. Low interest rates from the new euro and they borrowed like crazy to get their debt up to 120 percent of GDP, even while they were growing. They should have reformed.
But there's been a marked change and I think this is something worth underling for our U.S. audience, in the last 48 hours, some very major names falling on the back of Francois Hollande and his call for the fact that it can't be all about austerity. Gerhard Schroeder, the former chancellor of Germany, is suggesting that if Europe does not grow at all, it will get lost between the number one economy in the world, the United States, and the number two economy and China and not contribute to global growth. Mario Dragu, who's the new head of the central bank in Europe, the European Central Bank, is suggesting we now need a growth pact as well.
They're even talking about a marshal plan which you had after World War II in Europe to start spending on infrastructure. Now there's been a negative reaction to this in the markets from Francois Hollande, and you were suggesting maybe that the euro would lower as a result.
This may be an overreaction by everyone. He's suggesting maybe 1 percent of GDP be spent when he comes into the first year of office. They're also suggesting that it comes from Europe to raise money through euro bonds on spending on infrastructure and using the so- called European Investment Bank.
So he's going to be very prudent. There is even discussion with him as president, Ali, that he may pick somebody like Jean-Claude Trichet to be the prime minister in office or something. That's sort of financial respect that the markets in the United States and global investors could support. So it will be a tilt towards growth and not austerity, but I don't see them scrapping anything that will put the euro into trouble.
VELSHI: All right, John, thanks very much. John Defterios in Abu Dhabi.
He just mentioned Gerhard Schroeder, the former chancellor of Germany. We've talked a lot about Germany but it's the largest economy in Europe and has been main proponent of these cost cutting measures that we've have short-handed into austerity. What happens there if anti- austerity candidates are elected in key European countries. Can the eurozone and its currency survive and what does that mean to everybody else including you?
We're going live to Berlin next.
VELSHI: German Chancellor Angela Merkel staked her European policy on cutting spending across the fiscally troubled eurozone. The fate of that policy and its bailouts may now be in jeopardy with those political changes that are taking place in France with which it partners, and Greece which owes it a lot of money.
Let's go to Berlin. CNN's Diana Magnay.
Diana, Angela Merkel and Nicolas Sarkozy were in sync trying to foster fiscal discipline across Germany. Now what?
DIANA MAGNAY, CNN BERLIN CORRESPONDENT: Yes. Well, Markozy is their little partnership was called is no more. I don't know what you have now. Is it Merkande (ph). But yes, Francois Hollande and his campaigning has always said, you know, growth is what we must follow. Growth, austerity doesn't have to be inevitable is what he just said in his speech. And there were questions about whether that would set him on a collision course with the German chancellor, who's always talked about belt tightening, fiscal discipline. He said that he wanted to renegotiate this fiscal pact that she so carefully constructed with Nicolas Sarkozy.
But really in the last couple of weeks, probably because Berlin sees the writing on the wall, Ali, Merkel has been talking about growth. In fact the foreign minister came out and said, you know, we will talk about a growth pact. But the question is, how do you achieve that kind of growth? She says growth doesn't come through expensive stimulus programs. It doesn't come through spending more.
She says it comes through structural reforms. And that doesn't really seem to be the way that Francois Hollande sees growth. He thinks it's about stimulating the economy. You know, you just have to look at the measures that he wants to do in France. He wants to build up the public sector. He wants to create more jobs there. He wants to do things like lower the retirement age.
You know these are -- these are not really the way that the two countries operate. But that Franco-German alliance is so key, of course. And they are going to have to find common ground.
And Ali, I think what's important here is if you look at the two characters of Mrs. Merkel, Mr. Hollande, they're both pragmatists. They will make it work because they know they have no other choice.
VELSHI: Pragmatist is maybe what they world needs.
Diana, thank you for that.
Chrystia, you've got views on Germany and how it plays into this?
FREELAND: Well, I think Diana is absolutely right. I think that Germany is the key player right now. And the thing is that, you know, as we saw from Christine's charts, the Germans are the only Europeans doing real well right now.
FREELAND: And that's because the whole European construct favored the German economy. A good way to think about Germany is it was the China of Europe. It had export-led growth. It was able to export into the rest of Europe. And thanks to the euro, the -- the currency that Germany had was lower, less highly valued than the Deutsche Marc would have been.
FREELAND: Putting some muscle behind --
VELSHI: So it gave them an advantage.
VELSHI: A competitive advantage.
FREELAND: The same way that Americans complain about China keeping its currency artificially low --
FREELAND: -- to export to the rest of the world.
VELSHI: The euro did that --
FREELAND: So Germany has one.
FREELAND: But the southern Europeans have really, really suffered because of this arrangement.
VELSHI: And it went the other way for them.
FREELAND: And the question is, are the Germans prepared to rebalance Europe.
FREELAND: Which would cost Germany a lot of money. German exporters would be less competitive.
FREELAND: But that is going to be the price for keeping the 50-year European story together.
VELSHI: John Defterios in Abu Dhabi, you look at these two situations in France and Greece. Bring it home to my American viewers. What should they take away from this?
DEFTERIOS: Well, it's interesting, I was at a conference in Switzerland this weekend and I had the chairman of HSBC, the chairman of Liquidity (ph), a commodities group and the chairman of Emphasis, the big Indian group, and they all favored the European model of spending more, they liked the decisiveness that we saw in America. And taking a page from Ruchir Sharma, the chief economist of Morgan Stanley, he said only the flexible survive in the future right now during tough times.
The Europeans have not been flexible minus the Germans, who restructured about six, seven years ago. The rest have not been flexible when it comes to the labor markets and dealing with their debt. They need to do so now. With probably a tilt towards growth and less austerity. Something to watch in America.
VELSHI: All right, John, we will be watching it very closely. This is probably the most-watched French or German election in the entire world. Because as Christine said earlier, very astutely, everybody watching this is taking a message away that might be very different from their political opponents.
Stay with us. We'll be right back. You're watching a special live edition of YOUR MONEY.
VELSHI: Now the concert in Tulle, France, celebrating the victory of Francois Hollande over French President Nicolas Sarkozy, who lost the election, and has conceded defeat.
Christine Romans with me.
Christine, I was just checking my Twitter feed on the break. What on earth did you say? Because you have some people mad.
By the way, @Christineromans and @Alivelshi.
VELSHI: Send your nice tweets to me. What -- what did you see?
ROMANS: I just illustrated or articulated the right -- the view from the right in this country, which is that they're looking at what's happening in Europe and saying, this shows that you have to get your fiscal house in order. You can't spend beyond your means forever or you'll fall apart like they are.
Where people in this country are also saying, look at what's happening in Europe. You cannot have austerity like this, or you --
ROMANS: Or you're going to lose in the polls. And this shows that both sides can point to what's happening and embolden their position on it. What I would say about this, Ali, is the very near term, you've got -- you've got Spain, you've got Italy, you've got a couple of countries there that really bear watching. And these new governments are going to have to -- they're going to have some really hard, hard choices to make here in the very near term.
VELSHI: All right. Christine, thank you.
Follow this with us. Christine and I will be back on at 7:00 tomorrow morning Eastern Time to talk about this. Thanks for joining us on this special edition of YOUR MONEY.
Time now to take it back to the newsroom in Atlanta. Fredricka Whitfield -- Fred.