No need to panic over European elections

Suddenly, Europe is talking about growth and not just austerity.

The French and the Greeks have followed voters in a series of other European countries in rejecting a pro-austerity government. The Greeks just denied their ruling parties a majority vote in the parliamentary elections, throwing into question the country's commitment to structural and fiscal reform. And the French elected Francois Hollande, who will be France's first Socialist president in 17 years.

America has a large stake in European prosperity. Twenty-two percent of U.S. exports are sent to Europe and the two economies are stitched together with cross-border investments, interdependent capital markets and a shared view of global economic governance. Our mutual dependence has grown to the point that when either economy catches cold the other one risks more than a mild sniffle.

Kent H. Hughes

The European elections add a degree of uncertainty for American companies thinking about investing in slow growth economies. But the impact is likely to be short-lived. As Europe goes through the process of finding a way to combine some growth with long-term deficit reduction, U.S. exports are likely to suffer.

As expected, the Hollande victory and the political upheaval in Greece triggered strong reaction from markets around the world. European banks that have been harboring reserves are likely to be even more cautious going forward. And again, there is talk of Greece having to leave the eurozone.