Political changes in the eurozone

This is a rush transcript from "Special Report," May 7, 2012. This copy may not be in its final form and may be updated.

BRET BAIER: There you see a look in Paris. Francois Hollande beating incumbent president Nicolas Sarkozy to become the first French socialist leader in 17 years. He ran on anti-austerity and promised to tax the rich up to 75 percent, lower the retirement age, and he won big. We're back with our panel. What does it mean for Europe? What does it mean for the U.S.? Charles?

CHARLES KRAUTHAMMER, SYNDICATED COLUMNIST: I think the general interpretation is correct. This is revolt of the people in Europe who don't have a lot of say when the EU is doing business, against austerity, which has been decreed by the Germans and the French leadership as a response to the crisis in Greece and elsewhere.

The problem is this -- it did bring down the government. Austerity brought down the governments in Portugal, Italy and Ireland, in Spain and in Greece. But you can vote to change the leadership on austerity, but you can't vote against mathematics. Hollande is a socialist, he says he wants no austerity, he wants growth. That is a way of saying tax and spend. He wants to reduce the number of cuts in spending. He wants to tax the rich, those that make over a million euros a year at a rate of over 75 percent. I guarantee you that the treasury in Paris will get less net revenue as the rich leave, the rich are able to move a lot easier than the poor, as happened in other countries.

The problem is that in the end if he does all that he says he will do, increase the taxes and not do the cuts, the markets will squeeze the French the way they've squeezed the Greeks and the Spaniards, and the Portuguese. You can vote to have a new government but you can't have a new economy unless you do your cuts and you balance your budgets, which he doesn't want to do, obviously.

BAIER: Chuck, I mean, does it translate here?

CHARLES LANE, EDITORIAL WRITER, WASHINGTON POST: Well, we haven't had austerity yet. Quite the way some countries are had in Europe, which translates here is we're broadly speaking of the same problem, not as acute or immediate, but we have to balance our budget. We have to get our welfare state in more modern, efficient shape.

And in that regard, I don't know what austerity that Mr. Hollande is complaining about in France. They raised the retirement age from 60 to 62, which is still five years less than it is in Germany. That one fact alone suggests some of the reasons why there may be a little difficulty dealing with Germany if Mr. Hollande walks in with the position that I'd like to reduce my public's retirement age to substantially lower than yours.

BAIER: Steve, there is concern about Europe overall that the economy there is very fragile and that it potential ricochets over here to the U.S. and directly to the markets here.

STEVE HAYES, SENIOR WRITER, THE WEEKLY STANDARD: It is and it could. I think people are right to have that concern. But what I find amusing in this whole affair is if you look at the newspapers today, you look at the aftermath of what happened in France, the Greek elections, the municipal elections, the local elections in Britain, and now everybody wants to draw lessons from Europe. So you have a series of elections and commentators here, the conventional wisdom here is whoa, this is really meaningful for the United States.

On the other hand, we've had decades of economic policy for which we don't want to draw any lessons apparently, or at least many of our leaders don't want to draw economic policy. I would say the lesson from Europe goes back decades and involves the inexorable growth of the state rather than two years of austerity or in some cases fake austerity.

BAIER: Charles?

KRAUTHAMMER: I think that is what is remarkable. The austerity in France has not actually happened. There has been some change in the weekly work hours, no real cuts. And as Chuck indicates, when they raised the retirement age -- this was a big deal in France -- from 60, to 62, there were riots in the street. Students who have no job and who would not be affected for 40 years to have two extra years of work were rioting and smashing windows in the streets of Paris over this. It tells you how subjugated and coddled the population is. Imposing austerity on a population used to a cradle to grave government is going to be extremely hard. And that's why the socialist won. But in end you can't repeal economics.

BAIER: That is it for the panel. But stay tuned to see how times have changed.

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