‘Gloom’ After French Vote

The Washington Times (of all places) carries a UPI text about a Deutsch Bank research note on the economic consequences of the French ‘no’:

France’s rejection of the European Union constitutional treaty by a majority of 54.9 percent is a severe blow to European integration and threatens to depress European economy back into eurosclerosis as in the 1980s, warns Deutsche Bank in a research analysis published Monday.”

“Financial markets have put pressure on the euro. The new member states, and particularly Turkey, are at risk of being affected in terms of an increase in exchange rate volatility and a widening of interest rate spreads,” warns the report by Germany’s biggest bank

and then comes the really interesting bit:

Speculation among some observers that the French no may put the European monetary union at stake are exaggerated, the bank emphasizes. All 12 member countries are firmly committed to the EMU. A break-up would not only involve enormous costs in terms of lower growth due to dampened trade and higher interest rates, but also in terms of the technical costs of changeover

Clearly Deutsch bank are right, monetary union is not at stake, in this moment. I don’t think anyone is suggesting it is. And obviously no-one in their right minds is suggesting that the ten members are likely to sit down and call it a day. The question is: will pressures on the monetary union mount to such an extent, that one member or another may be forced out. The point is if you attack a straw man, it’s easy to win the argument. It is more difficult to address the real issue.

Having said that, what is astounding is how this topic is going the rounds, even at the level of naysaying. As I said in a previous post what the French vote has done is move Euro break-up from being a taboo topic, to being a question which can be freely discussed on its merits. A threshold has been crossed.

Symtomatic of the change is the tone of this piece in : MS GEF by Joachim Fels today

political disunity within Europe raises doubts about the long-run viability of the euro. It is important to remember that, rightly or wrongly, the euro?s founding fathers envisaged it to be a stepping stone towards a European political union. The idea was that by creating a single currency, national governments would over time be forced to cooperate more closely on economic, fiscal, and other policies, culminating in a single political entity that would back the single currency. Yet, in the last several years, serious cracks have opened up in Europe?s political compound, suggesting that political union will remain a pipe dream“.

Note again, Fels says, long run viability.

This entry was posted in A Fistful Of Euros, Economics and demography and tagged , , , , , , , by Edward Hugh. Bookmark the permalink.

About Edward Hugh

Edward 'the bonobo is a Catalan economist of British extraction. After being born, brought-up and educated in the United Kingdom, Edward subsequently settled in Barcelona where he has now lived for over 15 years. As a consequence Edward considers himself to be "Catalan by adoption". He has also to some extent been "adopted by Catalonia", since throughout the current economic crisis he has been a constant voice on TV, radio and in the press arguing in favor of the need for some kind of internal devaluation if Spain wants to stay inside the Euro. By inclination he is a macro economist, but his obsession with trying to understand the economic impact of demographic changes has often taken him far from home, off and away from the more tranquil and placid pastures of the dismal science, into the bracken and thicket of demography, anthropology, biology, sociology and systems theory. All of which has lead him to ask himself whether Thomas Wolfe was not in fact right when he asserted that the fact of the matter is "you can never go home again".

7 thoughts on “‘Gloom’ After French Vote

  1. It is ironic that in rejecting the Constitution the French anti-free/open market brigade are making the situation worse and increasing the likelihood of economic downturn in France. At this rate France will again be busting the ?uro rules to keep pace with welfare payments as tax revenues fall – another opportunity for Chirac to ditch the G&S Pact again, sack another Prime Minister, and do his facial impersonation of a proctologist’s reluctant patient.

    As Deutsche Bank Research state so clearly in Talking Point ? France says ?non? –

    {{{ – According to Eurobarometer polls European citizens above all expect jobs, growth and social stability from European integration. On these issues, major parts of the (old) EU, including France, simply cannot deliver anymore. Support and acceptance for the European project will not recover unless the economic prospects improve, which in itself requires a sound overhaul of the European social model in the big member states Germany, France and Italy.

    The EU should focus on open market strategies in order to cope with the challenges of globalisation and avoid falling back into eurosclerosis as in the 1980s. It is also essential that President Chirac is not allowed to block further market integration, e.g. in the liberalisation of services, in order to improve his political prestige. The EU services directive should remain a key element of the Lisbon Agenda. Furthermore, financial market integration might also be affected by the French no, both in terms of implementation of measures agreed within the framework of the Financial Services Action Plan as well as further opening of markets (e.g. concerning retail banking). – }}}

  2. Dog bites man.
    We are surprised that a corporation uses any random piece to news to claim that corporations should be given more leeway to do as they wish?
    Next up: “China means European law should be changed (pro-corporation)”; “Housing bubble means European law should be changed (pro-corporation)”; “Oil running out means European law should be changed (pro-corporation)”.

    Sure they don’t say it directly, but come on, that’s the subtext here; it always is. They provide the “un-biased technical economic analysis” and their flacks will interpret it for us peons as meaning that various aspects of the social contract have to be ended ASAP.

  3. Should it surprise anyone the French of all people voted no? 🙂 Kidding aside, I’d be surprised if Europe is ready to be that united. The Euro is helping with trade because it’s natural a common currency will do that. But I’d have to admit the blurring of national identity would be nerve racking for any citizen. The weaker economies would stand to gain but the stronger economies have a lot to lose and I’m sure those with a lot to lose vote in large numbers. From an outside point of view a united europe sounds like a great idea to the corporate elite. I just think you’re a long ways away from working out the bugs with the common citizen. Hell, here in the states we’re struggeling with the free trade zones with Canada and Mexico. A lot of us are pissed over the loss of U.S. jobs to those two countries. Especially us union members! I can’t imagine the loss of jobs to any single european country with so many nations for a corporation to move them to! I’d urge every working man and woman to really think over the Constitution and it’s repercusions both economically and to national identity.

  4. Go France. Were that the U.S. labor class was as educated about corporate power moves. No, we say ‘go ahead and destroy any remaining vestiges of human decency, what do we care just so long as you promote the bible’. Maybe the powers that be will eventually build a gladitorial arena where we can have televised fights to the death. The winner earns the right to a job that pays a living wage.

  5. Stephen,
    There is no right to other peoples money (i.e. time). Try being more useful?

    Perhaps you think the entitlement to exploit employers (and thus lower the likelyhood of them employing someone) is a good thing?

    Perhaps if you removed financial success fines such as income tax you’d be better off? Why? Well your wage would go up, and the amount needed to pay others to do work on your behalf would go down.

  6. I gauge my reaction to such items as the French vote on the EU constitution by Bloomberg and CNBC. They were very upset by the vote, so I decided that it must be a GOOD thing that the French had turned down the ratification. Anything that CNBC promotes as being good for labor, usually ends up to be h**l. They are a very reliable indicator.

  7. Shorter Rob Read;
    ‘Fuck you and the whole world Stephen, I got mine’

Comments are closed.