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The elections in Greece and France have shifted the debate in Europe. Up to now, the French were among the leaders in pushing austerity on debt-burdened nations. The Greeks were, however, unhappily going along. Now, some expect a new approach, especially since France's new President-elect Francois Hollande was elected, to a large extent, because of his anti-austerity rhetoric.

But reality may not match his rhetoric, as NPR's John Ydstie reports.

JOHN YDSTIE, BYLINE: His rhetoric aside, Hollande is not rejecting austerity. In fact, he pledged to balance France's budget by the end of his five-year term, just one year later than his opponent Nicolas Sarkozy. That's one reason the bond market reaction to Hollande's victory was a yawn.

Jacob Kirkegaard, a fellow at the Peterson Institute for International Economics, says the market correctly perceived that the president-elect is not going to embark on some huge stimulus program in France. Kirkegaard says that's likely to disappoint many of Hollande's supporters.

DR. JACOB KIRKEGAARD: Because he has led them to believe that he is going to usher in this new era of spending and the end of austerity through his rhetoric. But I think the reality is very, very different.

YDSTIE: Never the less, says Kirkegaard, Hollande will push Europe to add a growth component to its strategy.

KIRKEGAARD: Which is something that in recent weeks, you know, Angela Merkel and many other German leaders have actually been positive about.

YDSTIE: But the growth strategies being considered don't involve boosting government spending at the member-state level. Rather, they involve growth-friendly moves like reforming labor regulations, to make it easier for workers to cross borders and work anywhere in the EU. Other strategies include expanding the European Investment Bank, and funding infrastructure projects with bonds backed jointly by all EU countries, but most importantly, Germany.

DR. MOHAMED EL-ERIAN: What I agree with is this notion that Europe cannot solve its problems through austerity alone.

YDSTIE: That's Mohamed El-Erian, CEO of the giant bond fund PIMCO. He's concerned about too little growth in Europe, but also about too much debt.

EL-ERIAN: And what bond investors are looking at, in order to put in more capital, is a set of policies that addresses both the too little growth and too much debt.

YDSTIE: Bond investors apparently felt Hollande's victory was a move in that direction. In fact, interest rates on France's 10-year bond fell to a seven month low following the vote.

There was greater market discomfort with the results of parliamentary elections in Greece. There, moderates lost ground to fringe parties on the right and left, amid demands to renegotiate the Greek bailout package with its tough austerity measures. The Greek stock market fell and its banks were especially hard hit.

Jacob Kirkegaard says the results in Greece raise the odds that it may leave the eurozone, but he says the country's fortunes are unlikely to affect the world in same the way they did last summer.

KIRKEGAARD: This is really a fight between the taxpayers of Greece and the taxpayers in the rest of the euro area. This will be volatile, but ultimately, I don't think it will have the really huge contagious effect that we saw last year.

YDSTIE: Kirkegaard says that's because under the most recent bailout package, the big losses on Greek debt where already distributed. And he says Europe's banks are in better shape now than they were last year.

John Ydstie, NPR News, Washington.

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