Sarkozy defeat stokes jitters in Asian markets

Jun Azumi, Japanese Finance Minister The Euro sank in value yesterday as the electoral defeat of ruling parties in France and Greece stoked anxiety in Asia about the fate of austerity policies designed to end the Eurozone's debt crisis .
Among creditor nations in Asia, concern emerged in Japan and China about the zone's policy direction after Socialist Francois Hollande beat President Nicolas Sarkozy in France and Greek voters punished pro-austerity parties.
Sarkozy's defeat on Sunday was not necessarily a surprise, National Australia Bank said in a research note.
"However, it brings home the reality that incumbents following the (European Union's) prescribed austerity measures are going to find it difficult to remain elected," it said.
"What happens to these austerity measures now are what are weighing on (the Euro)."
The single currency bought US$1.2981 in afternoon trade in Tokyo, down from US$1.3082 on Friday in New York. It also fell against the Japanese currency, dropping to ¥103.55 from ¥104.50 on Friday.
At one stage, the euro dipped to US$1.2954, its weakest level since late January, while also slumping to ¥103.22.
On Asian share markets, Tokyo stocks dropped 2.63 per cent in afternoon trade, while Hong Kong dived 2.43 per cent and Sydney shed 1.88 per cent.
The anti-austerity, pro-growth platforms of Hollande and left-wing opposition parties in Greece resonated with voters tired of strict belt-tightening under their incumbent governments.
The fate of restrictive policies aimed at curbing mountainous debts and deficits in the common currency area now hangs in the balance, and Asian governments with big holdings of Eurozone debt are watching closely.
Japan's top government spokesman said Tokyo will "carefully monitor" how Europe reacts to the French election.
"The trajectory of the European economy greatly affects our economy," Chief Cabinet Secretary Osamu Fujimura told reporters, adding that Japan considered discussions between France and European powerhouse Germany "important".
In communist China the state-owned Global Times, which is known for its nationalistic tone, said the anti-incumbent results in France and Greece bore out the dangers of democracy running to "extremes".
"An administration change cannot generate the strong will needed to kick-start public debt reform in France," it added in an editorial.
"The change has to come from reflection of a wider scope. But protests against austerity measures from Greece to France have suggested that this much-needed reflection is far from coming.
"Statesmen are busy pleasing voters, not leading reflection."
Hollande had criticised German Chancellor Angela Merkel's insistence that deep cuts are the way out of the crisis, while the German leader had publicly backed fellow conservative Sarkozy.
In Germany itself, a state election on Sunday saw Merkel's Christian Democrats take only about 30 per cent of the vote in Schleswig-Holstein, a setback ahead of national elections in 2013.
"Greece's elections may prove the more unstable, with the possibility of another in the near future," National Australia Bank said, noting that no one party had emerged dominant.
"As it stands there is no clear winner, but there are likely to be calls to ease up on the austerity reforms."
Credit Agricole analyst Kintai Cheung said markets were nervous that the entire programme of Eurozone bailout policies could now be subject to review under Hollande and whoever takes power in Greece.
"With the growing influence of anti-austerity political blocs, tensions among the Eurozone will likely be intensified and a wave of renegotiations for bailout programmes may be sparked," Cheung said.