STOCK MARKET WATCH -- Monday, 1 October 2012

[Ghost Dog]

19. Another domino falls as Hollande pushes France into depression

... "To save the dogma of single currency, they are imposing absurd hyper-austerity on France," said Marine Le Pen from the National Front, France’s unlikely apostle of Keynesian doctrine.

France now joins Italy, Spain, Portugal, Greece, Ireland, and parts of Eastern Europe in synchronized tightening, with the Netherlands and Belgium cutting too, all dragging each other down in a 1930s slide into the political swamp.

Mr Hollande has not been entirely passive. He threw his weight behind the Latin revolt earlier this summer, forcing German Chancellor Angela Merkel to sanction mass bond purchases by the European Central Bank. This would not have been possible in the Merkozy era, when Nicholas Sarkozy sacrificed all else on the altar of the Franco-German unity. But he has not followed through and there were in any case two quid pro quos to this deal with Germany. One was that Spain and Italy must submit to Troika Hell before the ECB buys a single bond. The second was that France must submit to fiscal Hell.

Mr Hollande has his own motives for bowing to austerity demands. He learned the lesson as an aide to François Mitterrand that you cannot deviate too far from Germany if you share a currency peg. There will be no repetition of 1983, the epic U-turn or `tournant de la rigueur’...

... A French-led growth bloc can strike back by inflicting an intolerable level of inflation on Germany. It can if necessary cause the North Europeans to walk out of EMU altogether -- the optimal solution for the North and South respectively.

For that, Mr Hollande must be willing to abandon the Franco-German condominium, the central tenet of French foreign policy for almost sixty years. The cautious, plodding Enarque from the Limousin is not the type for fireworks, but give him time.

/... http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/9577674/Another-domino-falls-as-Hollande-pushes-France-into-depression.html