Europe's Austerity Battle

Recent elections in France and Greece pose significant challenges to the strict economic austerity policies Germany has called for in response to the eurozone sovereign debt crisis. Still, Germany has resolutely rebuffed any efforts to alter the European fiscal compact agreed to late last year, explains CFR's Sebastian Mallaby. "There's a battle coming up between Hollande and his European partners as to quite what a growth agenda might mean," he says. At the same time, the political situation in Greece is "more potentially cataclysmic in its consequences," Mallaby argues, because it could not only signal a Greek exit from the eurozone, but also undermine European financial institutions and facilitate further sovereign debt contagion.