IEEJ: May 2012 All Right Reserved
Special Bulletin
A Japanese Perspective on the International Energy Landscape (87)

May 7, 2012

Implications of French Presidential and Greek Parliamentary Election Results forEnergy Situation
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn May 6, two key elections took place in Europe, bringing about various implications forthe future course of the European economy and the entire world. They were the French presidential
and Greek parliamentary elections.
In the presidential runoff in France, Socialist challenger François Hollande defeatedincumbent President Nicolas Sarkozy by a narrow margin of 51.6% to 48.4%. Even though themargin was narrow, the defeat of incumbent President Sarkozy indicated that French voters as awhole disapproved of the Sarkozy administration’s policy management over the past five years.
Hollande will assume the presidency upon the inauguration ceremony on May 15. The FrenchSocialist Party obtained the presidency for the first time in 17 years since François Mitterrand.
In the Greek election, two major parties (the Greek Socialist Movement and the New
Democracy party) in a ruling coalition before the election suffered a crushing defeat, losing theparliamentary majority. The Radical Left Coalition (SYRIZA), which had harshly criticized theruling parties’ austere budget policy, posted an upsurge and became the second largest party in theparliament. After the elections, the New Democracy party, which won the largest number ofparliamentary seats, failed to form a coalition with any other party. Instead, SYRIZA, the second
largest party, is seeking to take leadership in organizing a coalition. But whether any coalition could
be formed remains in the balance. A new election could be held with coalition formation efforts
failing.
As pointed out by many media organizations, citizens’ discontent with economic
conditions and policies in the whole of Europe including France and Greece has been behind theresults of the two elections – the defeat of the incumbent president and the crushing defeat of theruling majority coalition. Particularly, the French and Greek election results indicated a combinationof voters’ discontent with and criticism against European credit crisis countermeasures and policies
as the most painful part of the economic conditions and policies.
In Greece where the European credit crisis emerged, the government accepted andimplemented a severely austere budget, including substantial cuts in pension benefits and public
servant wages, in exchange for assistance from the international community including the EuropeanUnion. But Greek citizens grew discontent with the severe economic situation including economic
deterioration and growing unemployment, leading to frequent strikes by workers. In the Greek
general election, voters declared “no” to the austere budget policy.
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In an attempt to overcome the European credit crisis, French President Sarkozy cooperated
closely with German Chancellor Angela Merkel in calling for austere budget policies in heavily
indebted countries, promoting austerity for the whole of Europe. But the austere budget policies
failed to attain support from many citizens amid economic deterioration including growing
unemployment and widening social gaps in France. Hollande attracted voters by pledging to givepriority to growth policies as well as austerity, to consider positive measures including the expansionof public servant employment and to reform austere budget policies for the whole of Europe. While
the French and Greek situations have differed from each other in various ways, their election results
can be interpreted as commonly indicating that voters’ growing discontent with the incumbent
leaders has led to their demand for new moves.
While the election results are interpreted as reflecting voters’ discontent with theincumbent leaders and their demand for new moves, however, what policies new governments undervoters’ mandate could take and whether they could implement new policies are very uncertain orlargely unforeseeable. In response to the election results, the European situation, including credit
crisis measures, could grow more unstable and uncertain.
As a matter of course, the fate of the European credit crisis problem could exert great
impacts on the international energy landscape. Under the first possible impact, financial market
turbulence on a resurgence of credit and banking crises could spill over to the commodity market.
On May 4 before the two elections, the West Texas Intermediate crude oil futures price in the UnitedStates stood below $100/barrel. On May 7 after the elections, the WTI futures price fell further to$97.94/barrel in tandem with a stock market decline mainly in Europe. In this respect, developments
in stock and other financial markets may attract great attention. We may have to pay attention to the
new Greek government’s policies and new French President Hollande’s actual economic policy
management including proposals for reforming the Germany-led austerity policies for the whole ofEurope. Depending on developments in the European situation, markets now in a wait-and-see mood
could fluctuate wildly, leading to the resurgence of credit crises and sharp crude oil price falls.
The second possible impact would be closely related to the abovementioned point. If aEuropean credit crisis resurges and deteriorates, it may exert great influences on the real world
economy. In such event, the influences may spill over from Europe to the entire world, greatly
affecting future energy demand. These influences may spread to China and other economies that
depend on exports to Europe. We may have to pay attention to future developments that could affectthe real economy and energy demand.
Lastly, I would like to pay attention to France’s future energy policy after the presidential
election. This is because Hollande during the presidential election campaign described nuclear power
generation’s share at 75% of total French electricity output as too high and pledged to reduce theshare to 50% over a long term, while endorsing nuclear power generation as an important mainstay
energy source. After his remark on nuclear energy, however, the abovementioned economic
problems emerged as the biggest issue in the presidential race. Since the economic problems grewdominant with any nuclear power generation change expected to affect employment, Hollande
refrained from taking up the nuclear energy problem. It was unclear whether Hollande specifically2

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disputed Sarkozy’s plan to maintain and expand nuclear power generation. Therefore, we may haveto pay great attention to what energy policy the new president would adopt. The policy would be
important for energy/electricity supply and demand not only in France but also in all Europeancountries that are closely cooperating under their wide electric grid network. This is because France
exports nuclear-based electricity to other European countries and plays a key role in supplying
electricity in the all of Europe. As noted above, Hollande might have accepted and recognized
nuclear energy as an important electricity source. How the new administration’s choice would affectnuclear power generation in the world will attract great attention.

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