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This is just a short comment. There are more knowledgeable people here than I whose comments would be interesting.


The starting point is that European demand is important to China and China is vital to us. Central to European demand is getting its debt problems etc sorted out. And central to that are France & Germany.

France & Germany have been working together fairly closely on the range of European problems, with both their governments being loosely of a centre right persuasion.

That could be about to change however with a strong challenge from the Socialist candidate in the French presidential elections, Francois Hollande. The contest is being referred to as President Bling vs President Bland, Mr Sarkozy being the former whose lovely wife might be seen as his most obvious item of bling.

The bland tag applied to Hollande may be meant as a personality jibe but it also could have some context in the colour of his politics, maybe a kind of Brezhnev grey. He is for instance promising a 75% tax on the "rich".


Sarkozy is by no means assured of re-election as Hollande grows in appeal. If there is a change in France it may not be so easy for Germany to impose its "solution" to Europe's problems with who knows what consequences.

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The board of the Reserve Bank has warned that any new escalation of the eurozone debt crisis remains the biggest risk to the Australian economy.


In the minutes from its March 6 meeting, the board provided a reality check on the still fragile state of the global economy and Australia's exposure to Europe.


"The clearest downside risk to the outlook for Australia remained a sudden worsening in the situation in Europe and its flow-on effects to the rest of the world through trade, financial and confidence channels," the RBA minutes warn.


"Members noted that a sharp slowdown, particularly in east Asia, would have significant implications for commodity prices and demand for Australian exports.


The central bank says that a resulting "flight from risk" in global markets would see significant changes in credit conditions, the exchange rate and confidence.


While the RBA believes a worst-case scenario from Europe is now less likely, it warns "this downside risk could still materialise".ÃÆâ€â„¢ÃƒÆ’ƒâ€Â ÃƒÆ’¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒ¢Ã¢â‚¬Å¾Ã‚¢ÃƒÆ’ƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâ€Â¦ÃƒÆ’‚¡ The board minutes show that although the RBA believes the current cash rate setting is appropriate for now, it still has "ample scope" to ease policy as long as inflation remains contained.


The central bank left interest rates on hold at 4.25 per cent this month, citing improved conditions in Europe and comfort about inflation in Australia.


The RBA twice cut rates by 0.25 per cent late last year - in November and December - as fears about Europe intensified.

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He's ahead of incumbent Nicolas Sarkozy in polls and he would like to become France's next president. If elected, Socialist Party candidate FranÃÆâ€â„¢ÃƒÆ’ƒâ€Â ÃƒÆ’¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒ¢Ã¢â‚¬Å¾Ã‚¢ÃƒÆ’ƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚§ois Hollande says in a SPIEGEL interview, he will seek to renegotiate the European fiscal pact agreed to by Merkel and Sarkozy. He also wants to introduce common European "project bonds".


French presidential candidate FranÃÆâ€â„¢ÃƒÆ’ƒâ€Â ÃƒÆ’¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒ¢Ã¢â‚¬Å¾Ã‚¢ÃƒÆ’ƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚§ois Hollande has not allowed himself to be provoked by the German chancellor's refusal to meet with him ahead of elections in France. In an interview with SPIEGEL to be published on Monday, Hollande said: "I understand that Mrs. Merkel supports Mr. Sarkozy. After all, they're within the same conservative family of parties." At the same time, the center-left Socialist Party candidate said he isn't necessarily convinced that this support actually benefits the president.


After news emerged last week that Merkel and other conservative leaders in Europe planned to shun Hollande, the first thing the French asked themselves, the challenger to conservative President Nicolas Sarkozy said, was "why this intention existed" in the first place. Besides, he added, it isn't "foreign leaders who will make the decisions for the French people." Perhaps those who didn't want to meet with him "have done me a service without knowing it," Hollande said.Hollande said he had "simply indicated (to Merkel) my availability in case the possibility to meet before the election could have been given to us." He added that he had not received any official refusal. "But I think it doesn't make sense to insist."


Hollande said confidently: "Now everyone knows my position on the fiscal pact, and they will have to take it into consideration after the election." If he becomes president, he added, "France will not pursue the same policies as under (current President) Nicolas Sarkozy.


'We're Not Quite at a Point at Which We Combine Our Last Names'


Hollande told SPIEGEL that he wants to "renegotiate" the European fiscal pact. What is most important, he added, is that "the necessary budget discipline needs to be accompanied by growth."


Who seriously believes, he asked, "except perhaps a few people in Germany, that we can reduce our deficits if there is no growth?" He also said he is opposed to the European Court of Justice having the power to encroach on national fiscal sovereignty, as is currently stipulated in the fiscal pact.His goals include "introducing euro bonds as a tool against speculation." He specified that he did not want euro bonds to mutualize the entire debt of the euro zone. This was possibly only in the long term, Hollande added. He said he preferred "project bonds" for targeted investment in growth projects.


When asked whether he would replace the "Merkozy" tandem by a "Merlande" combination in the event of an election win, the candidate responded coolly: "We're not quite at the point yet at which we combine our last names."

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  • 4 weeks later...

Some interesting comment from Der Spiegel on, inter alia, the state of the French economy:


A Post-Election HangoverThe sense of paralysis that characterizes this election campaign has much to do with a largely unspoken truth: No matter who wins, within just a matter of days after the election all of the candidates' political programs will prove useless. On May 7, after the post-election celebration, the French will wake up with a hangover.


Economically speaking, France is a sick country. It has a national debt that is running at 90 percent of gross domestic product (GDP), and the country hasn't had a balanced budget since 1974. France has the highest public spending ratio of the euro zone: 57 percent of its economic output depends on life support from the government. Unemployment is at 10 percent and there is an entire generation of immigrant children who are growing up in ghetto-like suburbs and have little contact with the labor market.


The country has already lost its triple-A credit rating from Standard & Poor's, and many experts and politicians fear that the financial markets could next attack the second-largest economy in the euro zone. Although France's situation is not remotely comparable with that of Greece or Spain, the country has been hard hit and rising interest rates on its sovereign bonds would significantly exacerbate the euro crisis.


During the election campaign, little has been said about the country's dramatic situation -- particularly with regard to the austerity measures that would be necessary to resolve France's problems. While government auditors are calling on France to save ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâ€Â¦ÃƒÆ’‚¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚¬100 billion ($131 billion) over the next five years, Hollande has announced new expenditures of ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâ€Â¦ÃƒÆ’‚¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚¬20 billion and, in the traditional socialist manner, would rather increase tax revenues than reduce public spending. Although Sarkozy says that he intends to make cutbacks, he has already missed that opportunity over the past five years in office.


Image of a Powerful France


Instead of addressing these issues, the candidates are trying to woo voters with the familiar image of a powerful France that can flex its political muscle across Europe. Hollande plans to renegotiate the European fiscal pact that has been signed by 25 countries. Sarkozy has threatened to withdraw from the Schengen Agreement unless more is done to stop illegal immigration. This reflects France's longing for a greatness that is jeopardized by precisely the economic weaknesses that the candidates appear virtually powerless to overcome.


No one better exemplifies the unrealistic proposals being tossed around in this election campaign than left-wing populist candidate Jean-Luc MÃÆâ€â„¢ÃƒÆ’ƒâ€Â ÃƒÆ’¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒ¢Ã¢â‚¬Å¾Ã‚¢ÃƒÆ’ƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚©lenchon. Opinion polls show that MÃÆâ€â„¢ÃƒÆ’ƒâ€Â ÃƒÆ’¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒ¢Ã¢â‚¬Å¾Ã‚¢ÃƒÆ’ƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚©lenchon, representing the Left Front, is poised to receive up to 17 percent of the vote during the first round. Thanks to MÃÆâ€â„¢ÃƒÆ’ƒâ€Â ÃƒÆ’¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒ¢Ã¢â‚¬Å¾Ã‚¢ÃƒÆ’ƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚©lenchon's success among left-wing voters, Hollande could end up trailing Sarkozy on Sunday's first round of voting.


MÃÆâ€â„¢ÃƒÆ’ƒâ€Â ÃƒÆ’¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒ¢Ã¢â‚¬Å¾Ã‚¢ÃƒÆ’ƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚©lenchon wants to raise the minimum monthly wage to ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâ€Â¦ÃƒÆ’‚¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚¬1,700 -- and he's calling for a 100-percent tax on all personal income above ÃÆâ€â„¢ÃƒÆ’ƒâہ¡ÃƒÆ’‚¢ÃƒÆ’¢Ã¢Ã¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒâ€¦Ã‚¡ÃƒÆ’‚¬Ãƒâ€Â¦ÃƒÆ’‚¡ÃƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚¬360,000. What's more, he says that France should withdraw from NATO. MÃÆâ€â„¢ÃƒÆ’ƒâ€Â ÃƒÆ’¢Ã¢Ã¢â‚¬Å¡Ã‚¬Ãƒ¢Ã¢â‚¬Å¾Ã‚¢ÃƒÆ’ƒÆ’â€Å¡Ãƒƒâہ¡ÃƒÆ’‚©lenchon is a charismatic speaker. At his campaign rallies -- held at places like the Place de la Bastille in Paris -- tens of thousands of supporters wave red flags and sing the left-wing anthem "The Internationale."


His success has made him into something of a pop star. The YouTube hit of the past few days has been a spoof pop video of a scantily-clad blonde singing: "Take power over me, Jean-Luc."

(full article http://www.spiegel.de/international/europe...,827770,00.html




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  • 3 weeks later...

With division in the ranks will the eurocrats be able to stop Greece plunging us all into a nightmare?


AAP: PRESSURE is building on president-elect Francois Hollande to stand by France's austerity vows, with Germany's Angela Merkel saying Europe is counting on them to resolve the bloc's debt crisis. Mr Hollande's first foreign trip as president will be to Berlin next week.


Dr Merkel, in a letter to him that was released by her office, noted that he was assuming power in the European Union's second-largest economy "at a time full of challenges".


"It is up to us to take the necessary decisions for the European Union and the eurozone, to prepare our societies for the future and protect and advance prosperity in a sustainable way," she wrote.


But she also made clear she had no plans to renegotiate the fiscal pact setting tough budgetary rules for EU states that she spearheaded, despite Mr Hollande's call to rework it to do more to foster growth.


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Yesterday, Japan joined those raising concerns about his plans, as Finance Minister Jun Azumi warned Mr Hollande to keep France's fiscal discipline in place.


"We want (France) to do what has been decided so far," Mr Azumi told a regular news conference, according to Dow Jones Newswires.


"I don't know whether Mr Hollande will immediately act on what he has said in heated debates during the election campaign," he said.


"But realistically, I think it is impossible (for European nations) to give up on fiscal-rebuilding efforts."


And a German member of the European Central Bank's board also warned France to honour its fiscal commitments.


"I expect France to implement the fiscal pact unchanged," Joerg Asmussen told the German daily Handelsblatt in an interview published today.


"In addition, I expect the new government to respect the promise to reduce the public deficit next year below the three per cent (of GDP) mark."


Mr Hollande promised cheering supporters on Sunday that he would reopen talks to ensure the EU fiscal pact focused on growth rather than simply imposing deficit-cutting austerity rules.


EU president Herman Van Rompuy announced yesterday that the bloc's leaders would meet on May 23 for an informal dinner ahead of an EU summit on June 28 and 29 that is expected to focus on growth.


Mr Hollande's transition chief Pierre Moscovici said the Socialist would not give up on his plan for "a European project that is more favourable to growth" and that France's partners would budge.


"We will find a compromise. And I am convinced that things are starting well," Moscovici told RTL radio.


The uncertainty generated by Hollande's election and the political turmoil in Greece, where election gains by hard-left and extreme-right parties stripped the ruling coalition of its majority, have riled international markets.



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The uncertainty generated by Hollande's election and the political turmoil in Greece, where election gains by hard-left and extreme-right parties stripped the ruling coalition of its majority, have riled international markets



One of the matters of great concern has to be that quite suddenly the reactions of Mr Average in France and Greece to austerity (read reality) have ignited wild political swings that hold massive implications.


We see in a matter of hours all sorts of questions being posed eg who remains in what currency etc etc, what many fear is that attention will now swing to have closer look at Japan and the US---with the same outcomes as on the Continent, one wonders is the final day of reckoning about to dawn--will EVERYBODY be forced into repaying debt--and what might that entail---OR will those still holding debt laden assets have just one more chance to go liquid (sell) via a QE3 type liquidty push initiated by the US to ensure Obama's election?

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I look into my crystal Ball and I see the shit hitting the fan late 2015 - 2016. Whilst painful it will one of the best things that could ever happen from a finance educational point of view.
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  • 2 years later...

Ultimately, ..it is all about confidence and investors are confident that the global recovery is on track and that the world's major central banks will be cautious in their removal of the accommodative stance in monetary policy.


Recent economic data suggests this optimism is warranted. Take for example an economic indicator from Europe, namely commercial vehicle sales, which have risen 9.1% over the past year.


When companies are confident about the future they buy a new truck, when they are not, they don't! Such sales fell off a cliff in the dark days of the euro crisis from 2010-2012.

Jonathan Pain

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Agree in part ... but ...

If the truck sales had fallen off a cliff for 3 years running, there simply comes a time when continuing with the old ones becomes counter-productive, and you simply have to replace the oldest bombs. I don't know how big an impact that kind of scenario has on the overall figures, but the thought is enough to make me cautious and not join the cheer squad too soon.

Have a look at the DAX over recent weeks ...

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