Things seem not be working out too well for France’s thuggish president. Even Germany’s former Chancellor Schroeder (a Social Democrat) is weighing in:
“The election promises of the French president are going to shatter on the walls of economic reality”.
Part of the problem, of course, as Schroeder knows, is that, thanks to the madness of the single currency, Germany could well up with a large part of the tab for Hollande’s ancient leftist faith.
Ambrose Evans Pritchard reports:
The government will tighten fiscal policy by 2pc of GDP next year, with two-thirds coming from higher taxes. This ignores the lessons of reform around the world over the last half century that tax rises to do more damage in a slump than spending cuts.
The French state is gobbling up 55pc of GDP, similar to Sweden and Demark but without their free market system. Nothing is being done to tackle this.
The word you hear again and again these days in the City is that France is on borrowed time. Nobody knows when that shoe will drop, but the economy will almost certainly crash into recession over the winter, if it has not already. It will then remain stuck in perma-slump, much like Italy. The housing bubble will deflate a lot further (unlike Italy, which never had a housing bubble)
And remember, France no longer has its own currency and sovereign monetary control levers. It is at the mercy of others.
As of today, 10-year Italian bond yields are 262 basis points over French yields. Why?
And still Merkel rejects the Northern Euro. Astounding. She needs to remember that she is Angela of Germany, not Patsy of Brussels.