Single Currency, Omnishambles

Omnishambles is a future cliché in the making, but for now it’s a handy word to describe where things stand in the euro zone after the weekend.  

In the Netherlands the government has now resigned, and nobody seems to know when the next election is going to be held (June? September?) and what its consequences will be.

The Guardian takes up the story here:

For the past 18 months, the finance minister, Jan Kees De Jager, has been the loudest advocate of the most rigorous austerity for the bailed out countries of the eurozone and of the punitive new fiscal rules. Hoist on its own petard, his government has fallen because it cannot agree on the spending cuts required to meet the new rules by next year. But the Dutch economy is fundamentally sound and prosperous with low unemployment. The head of the national office of budget forecasters, Coen Teulings, says the government simply needs time to make the structural changes required to comply with the rules. To insist that all this be done within a year, entailing huge savings and cuts that will make a relatively benign situation worse, represents a triumph of dogma over pragmatism.

Which is what the single currency always was…

Meanwhile, the Economist explains why Hollande is likely to win in France:

Many of Ms Le Pen’s voters, therefore, will not simply swing behind Mr Sarkozy in the run-off. However much he may try to court their vote by sounding an even harder line on immigration than he has already, these are people who simply do not like the man. One poll suggests that only 40% of her voters will now back Mr Sarkozy; 27% would support Mr Hollande; and 33% are undecided or would abstain.

In other words, Mr Sarkozy has far less of a potential extra second-round vote than the raw numbers might suggest. This is why Mr Hollande looks so strong. He gets 44% simply by adding up all the left-wing vote, both from Mr Mélenchon and other assorted anti-capitalists. Unlike the votes on the “right”, these look safe for Mr Hollande. Last night Mr Mélenchon called on his supporters to vote for Mr Hollande, as did Eva Joly, the Green candidate, who got 2.3%. 

So all Mr Hollande needs is a small proportion of Ms Le Pen’s votes, and the rest from [ centrist candidate] Mr Bayrou. This is why, however well Mr Sarkozy does in the televised debate, due on May 2nd, his chances now look slim. Early second-round polls give Mr Hollande an eight-point lead in the second round, and not a single poll during the campaign has put Mr Sarkozy ahead.

The Daily Telegraph’s Bruno Waterfield takes a look at some different numbers:

Public spending is already running at 56pc of GDP, more than any other eurozone country. Unemployment is at its highest level in 20 years and French exports, in stark contrast to Germany, are stagnating…Whether he likes it or not, Mr Hollande needs the markets to smile on his policies because 59pc of government debt is held overseas by foreign investors, who have little sympathy for “la vie Française” or French Socialism. Even worse, France needs to raise cash equivalent to more than 18pc of GDP this year just to pay the interest on its debt. Next year the cost rises to 19.5pc of GDP, a figure that would increase under a Socialist administration.

Hollande of course wants to increase spending.

Mrs. Merkel is unlikely to be a very happy chancellor today.

In the Daily Telegraph Open Europe’s Mats Persson gets to the dark heart of the problem:

Beyond short-term electoral politics, the shifts in France and Netherlands are yet another reminder of the tension at the heart of the eurozone. When European Union leaders forged the euro they gambled on two hugely unpredictable factors: that economic forces could be kept in check, and that national democracies could be managed. Crucially, they wagered that, should an economic crisis necessitate a more integrated economic and political union, national voters and parliaments could be counted on to play along and vote the “right” way.


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