MIAMI (CBSMiami) – South Florida’s lifeblood is the tourism industry, with foreign tourists making up a large portion of the travelers. That’s why France’s election and a new sentiment popping up in Europe could impact South Florida and both political parties in the United States.
France elected Francois Hollande who came to power thanks to his demonization of austerity. In economic terms, austerity is deficit cutting, lowering government spending and reducing benefits and public services provided by the government.
Europe has led the charge in austerity, despite previous economic theory saying that during a recession or depression it is necessary for the government to spend and run deficits to spark the economy.
In Europe, several countries have gone through austerity and none have seen their economic situation improve in the least. Greece has been the biggest example as austerity has sent the country plunging into possibly decades of recession.
Greek elections mirrored France’s where the big winners were those who rejected austerity. The big target is Germany, which has led the austerity charge. Former French president Nicholas Sarkozy joined Germany’s push, but without Sarcozy, Germany may be going it alone.
South Florida has been able to sustain itself, especially the housing market, thanks to Europeans who have more money to spend due to the Euro being worth more. But, if the Euro continues to plunge in value, it hit a low Monday of $1.29, it will curtail some European spending and tourism.
If France or other countries shake up markets with calls for changes to fiscal austerity, it will have a significant impact on the U.S. due to Europeans consuming large portions of U.S. exports and vice-versa, according to the Associated Press.
“You’re going to see a bumpy ride ahead for 2012,” said Josh Mungavin of Evensky & Katz. “We’ve not only got what’s happening in Greece and France with some concerns about reigning in their spending after the recent vote. But we’ve also got an upcoming Presidential election in the U.S> and some tax laws that might be changing around the corner.”
While not to the level of European austerity, some of the massive budget cuts called for on both sides of the political aisle in Washington could do further damage to the U.S. recovery, according to economist Paul Krugman.
It all presents a challenge for both President Barack Obama and his Republican challenger, Mitt Romney. Neither candidate has weighed in much on the recent wave of European elections and the growing call to reject austerity measures.
Both candidates and both parties are watching Europe to see if the austerity measures can work in the face of the Great Recession, and if the opposition to massive spending cuts will jump the Atlantic and start to take hold in the United States.
All of it is making the 2012 election even more challenging for President Obama and former Governor Romney.
As for your retirement and investment accounts, some local money managers said the chaos in this country and abroad mean it’s critical to diversify your investments among stocks, bonds, and savings.
(TM and © Copyright 2012 CBS Radio Inc. and its relevant subsidiaries. CBS RADIO and EYE Logo TM and Copyright 2012 CBS Broadcasting Inc. Used under license. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)