Eurointelligence Daily Briefing, 23 de Abril de 2012. Enviado por Domenico Mario Nuti.

Polls hold up for Hollande after first round victory

  • Francois Hollande wins first round of French presidential elections – 1.5pp ahead of Nicolas Sarkozy;
  • Marine Le Pen is surprisingly strong, Jean-Luc Mélenchon and Francois Bayrou is surprisingly weak;
  • latest polls show Hollande ahead in the second round with 54% against 46%;
  • Le Pen now styles herself as France’s opposition leader;
  • Günter Nonnenmacher says France is in real trouble with one third of the voters against the EU;
  • Thomas Hanke says new French president will have a nightmare job;
  • Olli Rehn’s calls on the next French president to respect deficit rules;
  • so does Jens Weidmann;
  • Geert Wilders rejected the budget cuts,  a decision likely to trigger new Dutch elections;
  • Wilders is likely to return to his anti-establishment roots, political analysts say;
  • latest poll suggests the country is likely to remain politically fragmented;
  • Antonis Samaras promises lower taxes, and higher social spending;
  • Olivier Blanchard appeals to Germany to accept higher inflation and eurobonds;
  • Spain has taken a decision to set up real estate companies to manage the banks’ property portfolios;
  • Paul Krugman says a euro exit would be similar to the abandonment of the gold standard in the 1930s;
  • Wolfgang Münchau warns against underestimating the politics of eurozone-wide bank resolution regimes;
  • Gavyn Davies, meanwhile, says the eurozone may have lost its ability to shock, but ability may soon return.

Please note, due to a technical error, the link to the article of Yanis Varoufakis displayed no text. This is now fixed. We are reposting the link:

Eurointeligence Comment and Analysis


An ECB debt redemption bond, a programme to address investment and internal imbalances, and the creation of a genuine single banking market is all that it takes to solve the eurozone crisis. And it is doable without Treaty changes.


The surprise of the first round of the French was not Francois Hollande’s relative victory, but the position of the loosing candidates, with the right significantly ahead of the left. For details and French analysis see and The latest official figures are: Hollande 28.59% and Sarkozy 27.09%, Marine Le Pen (Far Right), 18.06%, Jean-Luc Mélenchon (Communist) 11.11%, Francois Bayrou (centrist) 9.11%, and Eva Joly (Greens) 2.27%. Mélenchon and Joly urged their supporters last night to vote for Hollande in the second round.


Hollande will beat Sarkozy by 54% to 46% on May 6, according to a poll done after the first round



According to a poll by Logica Business for Le Monde and other media undertaken after the first round’s results were announced Francois Hollande will win the run-off elections against Nicolas Sarkozy in two weeks with a margin of 54% to 46%. The poll found that 60% of Marine Le Pen’s voters will cast their ballot for Sarkozy, 18% for Hollande with the rest abstaining. 86% of Jean-Luc Mélenchon’s voters will vote for Francois Hollande and almost all the rest will abstain. One third of Francois Bayrou’s voters will vote for Hollande, one third for Sarkozy and one third will abstain.


Le Pen calls herself France’s real „opposition leader“



After a result that surpassed all polls, the extreme right and anti-euro candidate Marine Le Pen called herself France’s real „opposition leader“, reports. According to the paper Le Pen has now solidly established herself and her Front National party as the country’s third political power. With last night’s result she even surpassed her father’s result when he made it into the run-off elections with 16.86%. The article says that she is now in a position to become a real danger for Nicolas Sarkozy’s centre right UMP party in the next presidential elections in 2017. The paper quote Marie-Christine Arnautu, the Front National’s vice president who says: „This was a professional campaign compared to 2002. In 2002 it was a protest vote. Today this is no longer the case.“


Some comments from Germany



Commenting the first round’s results in Frankfurter Allgemeine Zeitung political editor Günther Nonnenmacher says that France has a „scary political landscape“, with one third of voters united in extremely nationalist anti European basic beliefs. Handelsblatt’s Paris correspondent Thomas Hanke writes that Hollande is due to take over a country that is about to slip into the second division. He will have catch up with Germany in terms of reforms, convince the impatient investors, and satisfy his voters at the same time.“


Euro policy makers think that France’s new president will be litmus test for the new fiscal rules of the currency zone



Speaking to Financial Times Deutschland Olli Rehn indirectly warned France’s next president to respect the eurozone’s new fiscal rules. „It is very important that the new economic governance rules are used and produce results“, Rehn said on the margins of the IMF spring meeting. „We have had several cases like Belgium, Cyprus, Malta und Poland where the governments have adopted additional measures in order to reach their fiscal targets. Hungary has decided to do otherwise. The Commission then recommended the suspend payments from the cohesion fund and the council of ministers followed that recommendation.“ Although Rehn did not mention explicitly France, it was clear from the questions that this was what he was referring to, FTD writes. The paper also quotes Jens Weidmann who said at the IMF meeting that it was crucial that France sticks with its obligation to get the deficit down to 3.0% in 2013. According to the IMF, France will only be at 3.9% if it does not take decisive additional measures.


New Dutch elections likely after Wilders rejects budget



Budget talks in the Netherlands collapsed over the weekend, with elections now likely to happen, creating uncertainty over the pace of budget cuts and the Dutch support for the fiscal pact.  The catalyst for the crisis was Geert Wilders, who refused to agree to €14bn-to-€16bn of budget cuts needed to bring the budget deficit under the 3% limit. Seven weeks of budget talks, Wilders suddenly backed out just when a deal appeared close.  Attempting to explain why he walked out, Wilders lashed out at the European Union, saying the Netherlands should not blindly obey commands from Brussels. The PVV is ‘against Europe, against the 3% and against the euro,’ Wilders told reporters following the collapse of the negotiations on Saturday.  


Reuters reports that prime minister Mark Rutte will first try to reach an agreement with the opposition, including the pro-Europe Labour Party, on crucial budget cuts after his ally Geert Wilders refused to do a deal.  But even if Rutte does manage to stave off an immediate budget crisis, elections within weeks or months are most likely.   “Elections are to be expected now. I will talk to parliament (on) how to get through this situation,” Rutte told reporters on Saturday. The events also put a question mark over whether parliament will approve a new fiscal pact in the euro zone.



Uncertainty over whether the Netherlands can now push through crucial budget cuts and much-needed reforms of its labour and housing markets, as well as the prospect of elections, is likely to rattle financial markets. Last week, ratings agency Fitch warned that the Netherlands, one of just four euro countries with a coveted triple-A rating, was on the verge of a downgrade in its credit status due to high debt. 


Commentators say Wilders must realise he will be alone and not be part of any future coalition government, even with the VVD. The Volkskrant said in its analysis that Wilders now has his hands free to do what he wants – carry out an election campaign but that he is paying a high price for his freedom. Radio Netherlands says Wilders might be back to the anti-establishment profile he became popular with in the past, but his party’s lack of structure and its complete reliance on one-man rule makes it ineffective. An opinion poll published on Sunday showed the Netherlands remains highly fragmented politically, suggesting that it could prove difficult to form a new coalition quickly and that Wilders’ chances of forming a new government were slim. 


Samaras pledges tax cuts and social spending increases



Greek conservative leader Antonis Samaras promised on Sunday to cut taxes and increase social spending, without missing the targets set by international lenders, if he wins the May 6 national election, Reuters reports. Samaras, presenting his economic programme two weeks before the vote, said taxes should start falling, starting with a single corporate tax rate of 15%, down from 23% now, to stimulate consumption and hiring and spur economic recovery after five straight years of recession. At some point in the future, the top VAT rate should be cut to 19% from 23% now, and the top income tax rate to 32% from 45%, he said. This would reverse some of the austerity measures the country agreed to last month. But Samaras said he would respect the aim of cutting the budget deficit to 7.3% of GDP this year and further beyond. He promised spending increases of €550n on low pensions, farmers and child benefits to be paid for by savings in state-run companies and a tax on new games. Samaras insisted that he would not accept the scrapping of the 13th and 14th monthly salaries, according to Kathimerini.


Blanchard appeals to Germany to accept eurobonds and higher inflation



Olivier Blanchard appealed to Germany to accept the progressive introduction of eurobonds and temporarily higher inflation as a means to resolve the crisis and to stabilize the currency union. „When there was no fiscal pact and other instruments to ensure fiscal discipline the Germans had good reasons not to want to accept responsibility for irresponsible budgetary decisions of other countries“, the IMF’s chief economist told Financial Times Deutschland. „Now we have the fiscal pact. Therefore the Germans should accept a movement towards eurobonds.“ Blanchard also advocated temporarily higher inflation in Germany than in the rest of the eurozone. „Should the Germans wish to continue to produce at potential but with reduced current account surpluses they must accept a price level that rises more quickly than in the rest of the eurozone“, he said.


Spain’s real estate resolution company take shape



We reported about the idea of real estate resolution companies in Spain last year, but El Pais now reports that the decision to move in this direction has been taken. El Pais said the measure is undertaken to ensure foreign investors, who believe that the €53bn in property-related write offs are not sufficient, given the recession and the likely increase in non-performing loans, and further falls in house prices. The article said the Bank of Spain does not agree with that assessment, but accepts that it cannot go against the market, and have consequently drawn up the guidelines. Many details have yet to be worked out.  The model to be followed is to create several real estate companies, depending on the type of assets that are transferred: land, housing under construction, completed developments, etc. The article has lots of details of how the scheme would work. The most important aspect is that it is not a true bad bank – in other words the government is not guaranteeing its losses.


Paul Krugman compares eurozone exit with an exit from the gold standard in the 1930




In his New York Times column, Paul Krugman writes that the policy imposed on Spain were “insane”. His main point is that the present policy are more inconveivable than a eurozone exit.


“What is the alternative? Well, in the 1930s — an era that modern Europe is starting to replicate in ever more faithful detail — the essential condition for recovery was exit from the gold standard. The equivalent move now would be exit from the euro, and restoration of national currencies. You may say that this is inconceivable, and it would indeed be a hugely disruptive event both economically and politically. But continuing on the present course, imposing ever-harsher austerity on countries that are already suffering Depression-era unemployment, is what’s truly inconceivable.”

Wolfgang Münchau on the politics of a eurozone-wide bank resolution scheme



In his FT column, Wolfgang Münchau writes that a consensus has been emerging among experts that a combined eurozone-wide bank resolution, supervision, and deposit insurance scheme is what it would take to eliminate one important element of the crisis. He says advocates of such a scheme make the mistake to think that this would be much more acceptable politically than a eurobond. Münchau says he also favours such an approach, but adds the political obstacles are at least as big, if not bigger, than those to a eurobond because of the political nature of European banking, and in Germany’s case also because of the role of the banks in the supplying generous finance to the corporate sector.  He also makes the point that this could only ever be a partial solution if the agreement is unfudged, which again is very unlikely to happen.


Gavyn Davies says eurozone has lost capacity to shock – for now



Writing in the FTGavyn Davies says the eurozone has lost its capacity to shock the rest of the world, as the link between eurozone bond spreads and global asset prices, which was strong last year, seems to have broken down. The reason is the perception of a significantly reduced liquidity crisis, as the ECB is likely to inject further liquidity into the system, having already revealed its preferences through the LTRO. But Davies warns of two negative trends. First, the LTRO has a potentially negative effect on bank balance sheets, leaving banks exposed to a further sell-off by international investors. Second, banks have every incentive to reduce their assets, and bring about a credit crunch that turns a mild recession into a depression. The capacity to shock would then return quickly.


10-Y Spreads, Forex, ZC Swaps and Euribor-Ois



Not good at all. Italian and Spanish spreads above 4%, and also notice the gradual creep of French spreads.










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Source: Reuters




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