France - Ivestors are relieved that the sky has not yet fallen.


The euro has rallied. So has the CAC 40 index of equities. Risk spreads on French debt have narrowed.

Did they not hear the primordial scream of the French nation? Almost two thirds voted for blocs dominated by “anti-regime” parties. They did so amid the highest turn-out in over 40 year

“We are in a very unstable situation that has been building up for years and it’s becoming more and more volcanic. It could flare up at any moment, and anything could be the catalyst,” said General Bertrand Cavallier, a former top commander of the gendarmerie.

The late Coralie Delaume, author of Sovereignty, Europe, and the People, long argued that France’s democracy suffered serious damage below the waterline in the early 2000s, when the nation rejected the European constitution in a referendum only to see it smuggled through later, without a vote, under the guise of the Lisbon Treaty

It is not obvious to me why markets think that deadlock would be better for French assets than a Rally government with an absolute majority, eager to work with big business and prove itself better than a menagerie of crackpots and economic illiterates.

To the extent that Mr Macron succeeds in forming an electoral pact with his enemies on the Left to block Le Pen, he ensures France will not have a functioning government able to stop runaway fiscal deficits or to grasp the nettle on anything.

“The average budget deficit in Germany has been 0.5pc since 2012. In France it has been 4.7pc,” said Professor Thomas Mayer, author of Europe’s Unfinished Currency.

German finance minister Christian Lindner fired a cannon shot last week, warning that any move by the European Central Bank to rescue France by propping up French debt would raise serious “legal and constitutional” questions.

Indeed it would: France fails all five legal conditions for use of the ECB’s anti-spread shield (TPI).

His mad electoral gamble has killed any chance that Germany will agree to eurobonds and fiscal union, and without joint debt issuance his beloved euro is on borrowed time.

Ambrose Evans-Pritchard Telegraph 2 July 2024

Reinfeldt stöder fiffigt förslag av van Rompuy om att ändra i ett protokoll som formellt sett ligger vid sidan om Lissabonfördraget

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