(MoneyWatch) EU voters have had it with austerity budgets and are pushing their governments to try spending their way out of the economic crisis. However, funding these pro-growth efforts means cash-strapped nations have to borrow money when no one wants to lend to them.
Last week, political upsets in France and Holland changed the debate about how Europe should tackle its financial problems. France's pro-austerity President Sarkozy got a minority of votes in the first round of presidential voting. He is the only incumbent ever to fail to get a majority of the vote. The Dutch government fell after a key minister resigned rather than support an austerity plan.
By the end of May, Greece and Ireland will have national votes on whether to keep cutting government spending. The Greek vote on May 6 will likely give power to parties from the extreme right and extreme left who are stridently opposed to the EU imposed austerity efforts. On May 31, Irish voters will decide whether to approve the EU treaty setting limits on deficit and debt levels. At one point, passage of the treaty seemed like a sure thing, now it is too close to call.
Even in Germany, whose economy is doing fine, ratification of the treaty is also no longer the sure thing it once was. Additionally, Italy will hold partial local elections on May 6 and 7. A likely strong showing by anti-austerity candidates would have a huge impact on national politics.
The anti-austerity sentiment should not be considered an irrational backlash by the citizenry. Most EU nations that have cut government spending have seen their GDPs shrink. As Martin Wolf of the Financial Times writes: "There is no evidence here that large fiscal contractions bring benefits to confidence and growth that offset the direct effects of the contractions. They bring exactly what one would expect: small contractions bring recessions and big contractions bring depressions."
However, voting for these policies is far easier than getting the money to fund them. Foreign investors have been fleeing Europe for some time now. It is only intervention by the European Central Bank that has kept most of the European banking system functioning. The ECB has said repeatedly that it will not start buying EU sovereign debt -- and no other funding source has presented itself.
How will the EU's voters react when they find out the markets' votes are the only ones that matter anymore?