NEW YORK (PNN) - April 24, 2012 - Europe’s backlash against austerity gained momentum in a challenge to German Chancellor Angela Merkel’s budget-cutting prescriptions for resolving the debt crisis.

French President Nicolas Sarkozy lost the first round of his re-election bid and a revolt against extra spending cuts in the traditionally budget-conscious Netherlands propelled Prime Minister Mark Rutte’s coalition toward an early breakup.

Together with anti-austerity rumblings in a campaign for elections in Greece, the shift in grassroots sentiment at the heart of Europe generated fresh doubts about the German-driven strategy for getting to grips with the two-year-old financial crisis.

“We have organized the track of discipline; that’s very good and we have to continue on that, but we need desperately also to organize the second track, the track of growth, solidarity, investment,” said former Belgian Prime Minister Guy Verhofstadt, now a member of the European Parliament.

The euro fell as bond investors moved money into Germany and out of the Netherlands, Belgium, Spain and Italy, amid concern that a consensus over the crisis response is fraying. The yield on Germany’s five-year bond fell to a euro-era low of 0.61%, while the premium that investors demand to hold Dutch bonds over bunds rose to the highest level since 2009.

Political tensions coincided with a report of a greater than expected decline in services and factory output in April, equipping opponents of austerity with evidence that budget cutting zeal may cast the 17-nation euro region further into Depression.