Europe starts to unravel?

Stock markets have posted heavy falls. The Dutch Prime Minister has resigned. Under considerable voter pressure, Nicolas Sarkozy, is now wooing more than 6m French voters who supported far right-wing Marine Le Pen.

The European Project looks a mess. But whether its Sarkozy or Hollande that wins the French election, the markets will give a swift verdict.

Crack up?

That verdict has already been partly passed in the steep market falls seen on Monday - a €20bn Hollande spending programme has not gone down well with investors when much of the rest of Europe is consuming pretty thin economic gruel.

Hollande's threatened hikes in corporation tax, higher taxes for the super-rich - and a pension age threshold of just 60. Sarkozy, on the other hand, has proposed hiking the minimum age for retirement to 62 from 60 by 2018.

Pensions are a big fault line. Currently French men and women can retire at 60 if they've paid out social security contributions for 40 years. And public sector workers generally retire on 75% of their final salary.

When it comes to protecting the French way of life, many French voters are happy for the State to keep spending, racking up the debt.

German concern

What must Angela Merkel be thinking? How could she work with Hollande, if elected? Unless he followed a path more akin to socialist Francois Mitterrand, who eventually championed French entrepreneurship and privatisation.

Meanwhile in Spain there is increasing pressure on its own politicians to hack back its deficit commitments (like the Dutch). That means that the EU pact to enforce budgetary discipline - agreed in December - looks pretty tattered.

And while the French go to the polls on 6 May, so too do the Greeks, who get a chance to review EU Bailout II. Long-term, there aren't many choices for much of Europe, despite lots of cheap EU money. Just ask the German taxpayer.

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