By Carlos Guillen

Equity markets are experiencing some instability today as news from Europe is causing investors to once again worry about the likelihood of a possible failure of the European Union.

As it is evident by now, Francois Hollande defeated French President Nicolas Sarkozy to become the first Socialist in 17 years to control Europe's second-biggest economy. Investors initially appeared to be horrified by the news as this new French leadership has pledged to push for less austerity in order to promote more growth in the region.

However, investors are coming to understand that it will be unlikely that France will make drastic changes to its current financial plans. In fact, European stocks rose the most in more than a week after German Chancellor Angela Merkel said she will receive French president-elect Francois Hollande with open arms as they work together to tackle the debt crisis. The Chancellor held firm that government stimulus was not the way to spur economic growth in Europe.

Over in Greece, election results gave a serious punch to the ruling party that kept the nation from breaking away from the union for two years. It is clear that the people of Greece are not willing to make the sacrifices need to get back on fiscal track, and have voted so. And now, the word is growing that Greece may eventually be shown the door to the European Union. In fact, Citi now sees a significant potential for the new Greek government to miss the next round of targets and sees a rising risk of a Greek exit from the euro within the next 12 to 18 months; Citi increased its probability of a Greek exit from 50 percent to between 50-75 percent.

After the jobs data posted this past Friday, the news from Europe today has certainly raised doubts in investors' minds of whether global growth will be able to continue. Quite surprisingly, the Dow Jones Industrial Average has been able to regain most of the losses from earlier in the session and is now trading flat. However, now that the focus is back on Europe, we can certainly expect more volatility in the day to come.

Greece Back with a Vengeance?
By David Urani

Certainly France's socialist turn is a worry in the grand scheme of things, but what we should really be looking out for concerning our more immediate future is the Greek election. Greece has also taken a leftist turn, and that has given the New Democracy and PASOK, two pro-bailout parties, a majority. Certainly if the country is to take a more bailout-oriented stance then their financial situation will take a back seat to Keynesian growth. That means we could be a little more likely to see Greece abandon the Euro in favor of trying to jump-start the economy.

That's significant, because Greece isn't exactly flush with cash at the moment, in fact the Finance Minister expects them to run out before July if there's no government in place by then. Nevertheless, if a more liberal government gets formed you have to wonder how long their subsequent budget would carry them. The first order of business, however, is passing an immediate $11 billion cost cut to fulfill its proposed June bailout from the EU/IMF. That plan seems to be in general agreement so far.

Greece has stayed quiet for a few months but now there will be concern as to which direction they want to take. We suspect any efforts to spend their way out of recession will be frowned upon by those with the most skin in the game (particularly Germany). And as we know, their bailout agreements have already been fragile in the first place.

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