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Is the Age of Austerity Over?

Investors should expect more turbulence as elections in France and the fall of the Dutch government are shaking Europe's political footing.

Europe wobbled a bit this week from the delicate balance-beam act it has been walking. Since the beginning of the debt crisis, the unwritten deal has been that Germany (in concert with the European Central Bank and the International Monetary Fund) was willing to use its strength to backstop failing countries in return for the adoption of aggressive austerity measures and agreements for further structural reforms.

There has been some pushback against this model (notably from Greece), and Germany isn't willing to go as far as issuing jointly secured eurobonds, but for the most part the agreement has held up. Some political rumblings this week, however, are a reminder that not everyone is happy with the compact. The crisis could very well flare up again as Europe adjusts to its new political reality.