Eurointelligence Daily Briefing, 24 de Abril de 2012. Enviado por Domenico Mario Nuti

Shocked, shocked

  • Financial markets react badly to the dual whammy of an Hollande victory in the first round of the French elections, and the offer of resignation by Dutch PM Mark Rutte;
  • French 10-year spreads were approaching 1.6% last night, and Dutch spreads rose to their highest levels in over three years;
  • Italian and Spanish were well over 4%, while German 10-year yields fell to 1.558%;
  • Dutch finance minister Jan Kees de Jager spent part of his day yesterday explaining why the Netherlands was not a basket case after all;
  • some commentators are now concerned that the now likely defeat of Sarkozy, political instability in the Netherlands, and uncertainty about the Irish referendum make the fiscal pact more uncertain;
  • Nicolas Sarkozy and Francois Hollande are luring Le Pen voters promising that they will take up their concerns;
  • Erik Izraelewicz in Le Monde argues Marine Le Pen is the real winner of the first round; 
  • Bild sees the Eurozone curse bringing down one government after the other;
  • June 27 is considered to be a possible date for the Dutch elections;
  • Bundesbank writes that Germany will need between 150.000 and 200.000 immigrants per year if the country wants to maintain its growth;
  • Spanish GDP contracts 0.4% in Q1; a third Irish trade union has called for a rejection of the fiscal pact;
  • Eurostat included for the Irish deficit last year some €5.8bn or 3.7% of GDP of capital injected into the two State-controlled banks;
  • Hans-Werner Sinn, meanwhile, says Greece would have a very quick recovery if it left the eurozone.

Readers of Eurointelligence would not have been surprised that Francois Hollande had done well in the first round of the French election, and that the Dutch government was heading for the rocks. The markets, however, seemed shocked, shocked by these events. Thus, the some of the most predictable events in European politics have triggered a market rout.


As of last night, French spreads were approaching 1.6%, with Spanish and Italian both above 4%. The euro held up at over $1.31, which suggests that investors took flight into the safety German bunds, the proto risk-free security in the eurozone now. Dutch spreads (the first time we ever felt the need to report them) rose to 78bp, the highest level in three years. German 10-year yields are now at a vertigo-inducing 1.558%. Oh, and equities also dropped across the board.


The big event yesterday was the offer of resignation of Mark Rutte as Dutch prime minister, the logical consequence of the collapse of his minority government after Geert Wilders decided that he can get more political leeway out of campaigning against the EU and the eurozone. Rutte offered his resignation to Queen Beatrix, who is still pondering her options.


The really funny bit about the events in the Netherlands was the attempt Jan Kees de Jager, probably Europe’s most self-righteous finance minister, to defend his country against allegations that it has joined the ranks of Greece. “There is no correlation whatsoever between the Netherlands and the countries of southern Europe. [Our] sovereign debt is in the region of 65 percent, which is way below the euro zone average,” De Jager told Reuters. (He omitted to say that Spain’s debt to GDP is also below the eurozone’s average.)


Reuters also quoted an analyst from Nomura who said that the events in the Netherlands would make it more difficult to pass the fiscal pact – which may also now become a factor in the calculation of investors.


The Netherlands is now likely to head for general elections, with June 27 named as one possibility.


(Given the fragmentation of Dutch politics, and Wilder’s discovery of a new populist subject other than immigration, it is not clear at all what the outcome of a Dutch election will be. We also believe that a shift away from the austerian political centre – to both the right and the left – is likely to make the passage of the fiscal pact harder to achieve, at least without further amendments.)


Hollande and Sarkozy are luring the Le Pen’s voters

Nicolas Sarkozy and Francois Hollande were back on the campaign trail yesterday trying to win over the 18% of the French that voted for the extreme right and anti euro candidate Marine Le Pen, reports. „This is a vote of suffering“, Sarkozy said in his campaign headquarter in Pairs. „When one suffers one has the right to make the choice one wants to make“. And the conservative incumbant went on to conclude: „I tell you: I hear you.“ Hollande was campaigning in Brittany where Le Pen had come in first of all candidates in many places. „We need to listen to them (Le Pen’s voter)“, the socialist challenger said stressing that „those men and women don’t know anymore where to look for solutions“.


Marine Le Pen is the real winner, Erik Izraelewicz says

Le Monde’s editor Erik Izraelewicz thinks the major event of France’s first round is the impressive result of the extreme right candidate Marine Le Pen. „The historic performance of the National Front’s boss (more than 18% of the votes) ist he major event of this Sunday“, he writes. „With her personality, her style and her proposals the daughter of the FN’s founder has managed to dediabolize her party as she has tried to do for a couple of years. Better than Jean-Luc Mélenchon she has managed to benefit from the fears of the most vulvernable part of the population that is affected by the crisis and to benefit from a protest vote which is looking for a strong expression. Certainly she will not stop at this. Whoever wins May 6 will have to take this into account.“


Concern across Europe after Le Pen’s strong results

The strong 18% vote for France’s extreme right candidate Marine Le Pen caused concern across Europe, reports. Angela Merkel’s spokesman said the chancellor was „preoccupied“ with the result but added that she thinks that the problem will „be solved in the second round“. Foreign minister Guido Westerwelle said he was satisfied that „two certified democrats“ had made it to the run-off thereby indirectly denying Le Pen the label of a democrat. José Manuel Barroso’s spokesperson appealed to the French not to give in to the „populist temptation and to continue to advance a Europe of peace and growth“. Also the governments of Denmark, Finland, Sweden, Austria, Luxemburg and Belgium expressed worry and unease about Le Pen’s electoral success.


Bild sees a „euro curse“ bringing one eurozone government after the other down

The mass market daily Bild is talking about a „euro curse“ that is bringing down one eurozone government after the other. Referring to Nicolas Sarkozy the paper tells its 10m daily readers: „The closest partner of chancellor Angela Merkel could be the next European top politician who falls over the crisis. It will be a weak consolation for Sarkozy that before him many others in Europe have known the same fate“. Bild then enumerates all the euro countries that saw there governments fall as a result of the crisis: Ireland, Portugal, Italy, Greece, Spain, Slovakia and Slovenia.


Bundesbank argues for strong economic immigration to Germany

In its monthly report for April the Bundesbank argues that Germany will need between 150.000 and 200.000 immigrants per year over the next years to fill jobs if the country wants to maintain its growth potential, Financial Times Deutschland writes. The German central bank also argues that child care must be improved so that people with „family obligation“ can better participate in the labour market. The Bundesbank also argues for a longer working hours. The central bank argues that scarcety in the labour market also threatens price stability since it will very likely „lead to a stronger wage growth“.


Spanish economy contracts 0.4% in Q1

El Pais reports that Spain is now officially in recession, according to the often used measure of two consecutive quarters of negative growth. In the latest economic bulletin, the Bank of Spain estimates that the quarterly rate of GDP has fallen by 0.4% between January and March, after a 0.5% fall in Q4, 2011. Official confirmation by the National Statistics Office is due within a week. Forecasts for the current year decline in GDP are for -2%. A breakdown of the data shows that the decline is due mostly to domestic demand. Exports, which held up well until recently,  decreased slightly by the slowdown in growth across Europe, while imports were down more substantially. The governing body of the Spanish central bank express dismay at the salary increase of 2.2%, given the present economic conditions.


Eurostat includes bank capital injection into deficit calculation

EU statistics office Eurostat said Ireland’s headline deficit was 13.1% last year, including some €5.8bn or 3.7% of GDP of capital injected into the two State-controlled banks. Its inclusion in the deficit figure was a surprise, writes the Irish Times.  Eurostat expressed a specific reservation that the banks’ restructuring plans have yet to be finalised and the office calculated €5.8bn of the €15.4bn injected into the two banks as a “deficit-increasing capital transfer”. The Department of Finance said the State bank recapitalisations in July, totalling €16.5bn, had been reflected in the general government debt reported by Eurostat in September so Ireland was “no worse off”. “This is simply a statistical reclassification from financial transaction to capital transfer for deficit purposes. There is no impact on our debt position.”

The underlying deficit, excluding bank bailouts, was 9.4%, compared with the 10.6% target set under the EU-IMF programme.


Third Irish union calls for ‘no’ vote in EU referendum

Reuters has the story that the Technical Engineering and Electrical Union has became the third union to reject the fiscal pact in an upcoming EU referendum. The union said it was becoming increasingly obvious that austerity is not working. “The right-wing agenda of Chancellor Merkel might make sense in Germany but it is a death sentence for our economy and people,” Reuters quotes TEEU General Secretary Eamon Devoy as saying. The other two unions to oppose the pact are the UNITE crafts union and the Mandate retail union. Ireland’s largest union SIPTU, which represents around 10% of the workforce, is supporting the pact.


Hans-Werner Sinn says Greece and others should quit the eurozone for their own good

Helpful as ever, Hans-Werner Sinn said Greece will never restore its competitiveness while it remains in the eurozone, and the same was true of other indebted countries. He said if Greece stayed in the euro, there will be continued mass unemployment. But if they exit, all will be well. “They will see a very sudden recovery,” he said, according to Reuters. Sinn also made the point that there are limits to internal devaluation.




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