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Elections in France, Greece likely to rock Europe again

These are stories Report on Business is following Wednesday, May 2, 2012. Get the top business stories through the day on BlackBerry or iPhone by bookmarking our mobile-friendly webpage.

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Europe on the ropes Crippling levels of unemployment and massive austerity cuts promise to shake up European politics and rock the euro zone anew.

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Speculation is mounting that French and Greek elections will lead to a backlash that would threaten fiscal agreements already made, sparking more turmoil in global markets.

Greece votes May 6, and the French hold their second round the same day.

In France, Socialist hopeful François Hollande may well topple Nicolas Sarkozy, who, with Germany's Angela Merkel, has led the austerity drive in the 17-nation euro zone.

In Greece, the latest betting points to an election that leaves no clear majority winner, suggesting a coalition.

"The most likely outcome is a parliament in which no single party has a majority, which means tough negotiations will ensue among the parties to form a governing coalition," said Pierre Fournier and Angelo Katsoras of National Bank of Canada.

"Once, and if, this hurdle is overcome, the even more difficult challenge will be to pass further austerity measures in the face of very hostile opposition coming from both the newly empowered anti-austerity parties and the recession-weary public."

If Mr. Hollande were to take the second round of the presidential elections, they added, that could mean a "one-two geopolitcal punch" for markets.

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"As of late, the European Union has had plenty to worry about," they said in a report today.

"Economic conditions are deteriorating, with worries having spread to Spain and Italy. On the political front, meanwhile, the increasing likelihood of a victory by the Socialist candidate, François Hollande, in the second round of the presidential elections, coupled with the collapse of the government in the Netherlands, has also raised alarm bells. Hollande wants to renegotiate Europe's fiscal pact so that it is less austerity-focused, setting France on a collision course with Germany, the leading proponent of austerity. The Dutch government collapsed when one of its coalition members refused to approve significant budget cuts."

The report came as fresh numbers showed unemployment in Europe has reached even higher levels, particularly among youth.

"In contrast to the manufacturing indicators from Asia and the U.S., the latest crop of data from the euro area offers a bleak picture of a region slowly sliding deeper into recession, with Spain and Italy in particular experiencing an accelerating decline," said James Nixon of Société Générale.

The overall unemployment rate hit 10.2 per cent in March in the European Union, the Eurostat agency said, with the level even higher, at 10.9 per cent, in the smaller euro zone. Almost 25 million people are struggling to find work in the EU.

"Since the current deterioration phase began over a year ago, Europe has now seen over 1.7 million people becoming unemployed over that interlude," said Mark Chandler, chief of fixed income and currency research at RBC Dominion Securities.

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Clearly, a lost generation is taking shape, with youth unemployment now at almost 23 per cent in the EU.

That overall youth jobless rate - there are more than 5.5 million young people without work in the 27-nation EU - masks the extreme differences among the countries.

In Germany, Austria and the Netherlands, for example, youth jobless levels are below 10 per cent. But in countries such as Greece and Spain, they're running at more than half the work force, the Eurostat agency reported today.

Barrick boosts dividend Barrick Gold Corp. hiked its dividend by 33 per cent today as it posted a slight gain in first-quarter profit.

The Canadian gold producer said its quarterly dividend will rise to 20 cents (U.S.) a share.

The dividend hike came as Barrick reported a 3-per-cent increase in first-quarter profit to $1.03-billion or $1.03 a share, from $1-billion or $1 a year earlier.

"We made good progress on a number of areas in the quarter," said chief executive officer Aaron Regent.

"We had good operating performance, which translated into solid financial results and further advanced our projects under construction," he added " … We also progressed our exploration program, which continues to increase our resource base, improved our liquidity and returned more capital back to shareholders with a further increase in our dividend."

Loblaw posts lower profit Loblaw Cos. Ltd. posted a 22-per-cent dip in first-quarter profit today, reflecting money spent on technology and a shift to new store formats, The Globe and Mail's Marina Strauss reports.

Profit slipped to $239-million or 45 cents a share from $303-million or 58 cents a share a year earlier, while revenue rose 0.9 per cent to $6.94-billion.

"We are confident that our ongoing investments in infrastructure will enable efficiencies and expense leverage, setting the stage for future earnings growth," said executive chairman Galen G. Weston.

Intact strikes Jevco deal Canada's Intact Financial Corp. today unveiled a $530-million deal to acquire Jevco Insurance Co.

The deal comes as many executives in Canada's property and casualty insurance business have been predicting a wave of consolidation, in which the larger players will gobble up the smaller ones, The Globe and Mail's Tara Perkins reports.

Jevco specializes in insuring recreational vehicles such as motorcycles and snowmobiles. It is currently owned by Westaim, a publicly-traded holding company. The deal to sell it to Intact is expected to close this fall.

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About the Author
Report on Business News Editor

Michael Babad is a Report on Business editor and co-author of three business books. He has been with Report on Business for several years, and has also been a reporter and editor at The Toronto Star, The Financial Post and United Press International. His articles have appeared in major newspapers around the world. More

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