France and Greece elections deliver major protest votes

Sunday May 6th may go down in history as the biggst anti-EU protest vote to date. Voters in Greece and France turned their back and voted away from austerity and the 2012 version of the EU.

This confirms our thesis that European politics is spinning out of control. The division between voters and the 2012 version of the EU is bigger than ever. This is the EU where there's no price to pay for extend-and-pretend, where everything will be ok as long as you go to church on Sundays.

Well, today the voters went, not to church, but to the polls, and almost 30 years to the day that swept Ms. Thatcher to power, the voters decided to protest rather than put in a place a government for reform.

Greece - big upset for coalition, while extreme parties gain the most

The key take away from Greece is that the opposition party which went into the election asking for a mandate was given it. Zyrisa looks to be second in the vote and their program was simple and direct:

1. Write off Greek debt and stop all payments
2. Greece is and will remain part of Europe
3. The wealthy will have to pay more
4. Welfare for poor takes priority

Look and sounds a lot Hollande in France. The big polical upset is the Neofacist party which will be elected to Parliament. It seems even the most absurd protest parties are gaining ground.

It will be difficult to form a government in Greece and its not unlikely that we will have a second election - and soon. The protest was expected but the coalition government is bleeding more than they wanted and expected creating, once again, uncertainly about Greece's future - which, with or without this election was destined for additional help as the economic climate continues to collapse.

A friend of mine commented to me when I was in Greece last week: Greece is a poor country with rich people. Well, not for long my friend.

Poor French voters; they were offered two bad alternatives

In France Hollande looks a safe winner - the exit polls got him at 51,9 vs. 48,1 per cent. The reign of Sarkozy is over but Hollande as a replacement does not exactly give investors and French voters hope for change and better days. I have said again and again: both are bad for Europe but, most importantly, terrible for France.

The market and French business will not like this result. I expect increase capital flow out of Paris from tomorrow - watch the CAC40 tomorrow for a big down-day. The market expected a Hollande victory but hoped for Sarkozy - the disappointment will be clear for all to see.

The key things to watch for over the next 24 hours will be:

• The stock market performance in Greece and France.
• The interest rate spread between Germany and Greece/France.
• Which coalition government can be formed in Greece?
• What does Hollande say on EU - the fiscal/growth pact. Will Merkel accept his call tonight?

Conclusion

Nothing has changed economically between the market close Friday and now, but the political will and the support for it has collapsed in "core Europe" as France decided 'enough is enough Mr. Sarkozy'. The dirigisme will continue, unfortunately, but not for long as the divide between politicians and their voters has reached its second phase. First, there is general acceptance as it does not impact me. Then comes the protest votes as it begins to impact me. Finally, it'll be the phase called REALITY where everyone feels the crisis - or as Harry S. Truman said: It's a recession when your neighbor loses his job; its a depression when you lose your own.

In sum, Bearish CAC40 vs. DAX.