| Hollande Wins Round One But Euroskeptic Le Pen Steals the Show; Strange Bedfellows; Can Sarkozy Win Round Two? Posted: 22 Apr 2012 07:25 PM PDT As expected Francois Hollande and incumbent Nicolas Sarkozy will square off on May 6 in round two of the French presidential elections. However, there was a huge surprise in spot number 3 as extreme right wing candidate Marine Le Pen pulled in 18% of the vote running on a dump-the-euro platform.
First Round Totals - Hollande: 28.6%
- Sarkozy: 27.1%
- Le Pen: 18%
Please consider Le Pen voters to arbitrate Hollande-Sarkozy duel The centre-left Hollande narrowly beat the conservative Sarkozy in Sunday's 10-candidate first round by 28.6 percent to 27.1 percent, the Interior Ministry said with 99 percent of votes counted, but Le Pen stole the show by surging to 18.0 percent, the biggest result for a far-right candidate.
Her breakthrough mirrored advances by anti-establishment Euroskeptical populists from Amsterdam and Vienna to Helsinki and Athens as anger over austerity, unemployment and bailout fatigue deepen due to the euro zone's grinding debt crisis.
"The battle of France has only just begun," Le Pen, 43, daughter of former paratrooper and National Front founder Jean-Marie Le Pen, told cheering supporters. Declaring that her wave of support was "shaking the system" of mainstream consensus politics, she said: "We are now the only real opposition."
The gravel-voiced blonde, who wants France to abandon the euro currency, said she would give her view on the runoff at a May Day rally in Paris next week. But she saved most venom for Sarkozy, aiming to pick up the pieces in any recomposition of the right and hoping the Front can enter parliament in June.
More than one third of French voters cast their ballots for protest candidates outside the political mainstream.
The deeply unpopular Sarkozy, the first sitting president to be forced into second place in the first round of a re-election bid, will have to do the splits to attract both far-right and centrist voters he needs to win the May 6 runoff.
SARKOZY DEFIANT
Sarkozy struck a defiant tone after his setback, steering to the right to try to attract Le Pen voters by vowing to tighten border controls, stop factories leaving France, make work pay and uphold law and order, rather than reaching out to centrists.
He challenged Hollande to three live television debates over the next two weeks instead of the customary one. But Socialist aides said Hollande, who has no ministerial experience and is a less accomplished television performer than Sarkozy, had made clear he will accept only one prime-time debate, on May 2.
Polls taken on Sunday by three institutes suggested that between 48 and 60 percent of Le Pen voters planned to switch to the president, while Bayrou's backers split almost evenly between the two finalists, with one third undecided.
Melenchon, whose fiery calls for a "citizens' revolution" drew tens of thousands to open air rallies, urged his followers to turn out massively on May 6 to defeat Sarkozy, but he could not bring himself to mention Hollande by name.
Greens candidate Eva Joly endorsed Hollande, who can also count on the modest votes of two Trotskyist also-rans.
"Sarkozy is going to be torn between campaigning in the middle ground and campaigning on the right. He'll have to reach out to the right between the rounds, so he'll lose the centre," said political scientist Stephane Rozes of the CAP think-tank.
If Hollande wins, joining a small minority of left-wing governments in Europe, he has promised to renegotiate a European budget discipline treaty signed by Sarkozy. That could presage tension with German Chancellor Angela Merkel, who made the pact a condition for further assistance to troubled euro zone states. Can Sarkozy Win Round Two? Unlikely, unless Hollande makes a major gaffe in the debate. He avoided the first major mistake already by only agreeing to one debate, just 4 days before the election, perhaps as most minds are already made up. Given that Le Pen took the opportunity to blast Sarkozy it appears likely that her votes will splinter, probably far more than the far-left candidates. Strange Bedfellows On an issue-by-issue basis it would seem to make more sense for Le Pen to back Sarkozy than Hollande. Certainly Sarkozy is courting Le Pen voters. So what is her game? I think it's easy to spot. The eurozone is likely to splinter apart faster and easier with Hollande as president than with Sarkozy back at the helm. Thus, backing Hollande, and perhaps even winning some real concessions (as opposed to lies from Sarkozy), makes more long-term strategic sense as well as short-term tactical sense. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
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| European Splintering Escalates: Dutch Government Falls; Slovakia Government Collapsed in March; Czech Government Collapse Coming Right Up Posted: 22 Apr 2012 11:57 AM PDT The Netherlands government has officially collapsed in a dispute over austerity measures. Elections likely in September. Meanwhile, the Czech government is also on the verge of collapse, for the same reason: austerity measures. The Financial Times reports Dutch government falls over budget talks The Dutch governing coalition collapsed on Saturday when far-right politician Geert Wilders pulled out of budget cut talks, saying it was not in the Netherlands' interest to meet the deficit limit of three per cent imposed by the new European fiscal pact.
EU-imposed austerity measures have cost leaders in southern European countries, including Greece, Italy and Spain, their jobs. With the fall of the conservative Dutch government, and the possibility that Nicolas Sarkozy may lose the French presidential election that begins on Sunday, the damage seems to have spread to Europe's prosperous north.
Highlighting widespread voter anger over EU-imposed budget cuts, Mr Wilders said he could not allow Dutch citizens to "pay out of their pockets for the senseless demands of Brussels".
"We don't want to follow Brussels' orders. We don't want to make our retirees bleed for Brussels' diktats," Mr Wilders said.
The loss of Mr Wilders' support left the conservative government of Mark Rutte, prime minister, with just over a third of the seats in parliament.
Mr Rutte and other party leaders said that made new elections inevitable. He is expected to offer his cabinet's resignation to the Dutch Queen on Monday, but leave the cabinet in place as a caretaker government until elections are held, probably in September.
Exiting the government at this stage will allow Mr Wilders to disclaim any responsibility for unpopular budget cuts. But the biggest winner in elections could be the far-left eurosceptic Socialist party, which has seen its support rise to as much as 20 per cent of the electorate over the past year.
Meanwhile, Dutch analysts said the inability of even the prosperous, deficit-averse Netherlands to generate voter support for Europe-directed budget cuts called the sustainability of the EU fiscal pact into question. Czech Government Collapse On the Way Please consider Czech protesters stage anti-government rally The Czech government faces a test of its ability to continue governing after an ambitious fiscal tightening programme splintered the ruling coalition and brought tens of thousands of protesters on to the streets of Prague at the weekend.
Petr Necas, premier, has set a Monday deadline for a breakaway group from Public Affairs – the smallest of the three parties that made up his centre-right coalition – to demonstrate that it has the support of at least 10 MPs, which would give him a working majority in the 200-member parliament.
Mr Necas has sacrificed much of his popularity after introducing a series of tax increases and benefit cuts in order to keep the budget deficit below 3 per cent next year. The additional measures were brought in after the Czech Republic posted worse than expected growth numbers – largely a consequence of the slowdown in the eurozone, the country's largest export market.
"We cannot behave in a populist way and we must continue our policy of budget responsibility and debt reduction," Mr Necas told reporters after one of the largest demonstrations in the Czech Republic's post-communist history filled the streets of the capital on Saturday to protest at his policies and to show disgust with political corruption.
Organisers estimated that about 120,000 people attended, many of them jangling keys as a signal for the government to go – an echo of the protests that ousted the communists in 1989. Slovakia Government Collapse In case you missed it, the right-wing Slovakia government collapsed in March. The Guardian reports Central Europe's centre-right teeters under corruption claims Austria, Slovakia, Croatia and Czech Republic gripped by sleaze allegations involving senior politicians and governing parties.
Ruling parties, political elites and former ministers in a string of EU countries are embroiled in cash-for-influence scandals that are exposing widespread allegations of corruption, triggering public revulsion and a voters' backlash.
Hunting parties, expensive gifts, drunken car crashes, secret police wiretaps, paper bags stuffed with money and public budgets being treated as private accounts all feature in the lurid revelations and allegations being leaked daily on to the front pages of central Europe.
Austria, Slovakia, Croatia and the Czech Republic are in the throes of sleaze allegations involving senior politicians and governing parties said to be funded by dirty money.
Tales of criminality, thuggery, and vast amounts of cash flowing to politicians from companies, lobbyists, and middlemen are dominating the newspapers and blogosphere across central Europe. In contrast, successful prosecutions are extremely rare for a political class that often seems to operate with impunity. Austria, Slovakia, Croatia, and the Czech Republic are in the throes of major sleaze allegations involving senior politicians and governing parties said to be funded by dirty money.
In Austria a special parliamentary committee investigating political corruption is questioning serving and former ministers this week about a convoluted web of alleged bribery and profiteering from government tenders and skewed legislation.
In an election this month next door in Slovakia, the new prime minister, Robert Fico, won a landslide after support for his rivals on the right collapsed when secret police files about the buying and selling of MPs were unearthed by a Canadian journalist and posted on the internet.
The secret police files, codenamed Gorilla, featured wiretaps of leading financiers meeting discreetly with centre-right governing politicians to trade government tenders for cash.
the latest scandal to rock the region centres on a Czech businessman and a former Prague mayor who are accused of in effect controlling the city's €2bn budget between them.
The businessman, Roman Janoušek, had long been labelled the "shadow mayor" owing to his close links with city hall, but it was not until transcripts of what are believed to be wiretaps of conversations between him and his long-time ally, former Prague city mayor Pavel Bém, were published in the daily Mladá Fronta Dnes that the scale of their alleged rigging of the city finances started to come to light.
The conversations appear to include discussions about influencing sales of city and public property, arranging expensive gifts for city officials and fixing high-ranking official posts. On May 6 the Greek government is likely to collapse, and Nicolas Sarkozy will be ousted as president of France. Meanwhile New "Temporary" Border Controls are tantamount to a Vote of No Confidence in Europe Other than four ousted governments, Troika imposed governments in Greece and Italy, huge budget misses in Spain, increased protectionist measures in France, border controls, bickering between the ECB and the German Central Bank, the Bundesbank proclamation " Not ECB's Job to Tackle Spain's Problems", Europe is holding together quite nicely. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
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| Point of No Return: "Australia is Screwed" Posted: 22 Apr 2012 09:19 AM PDT Point of No Return My friend "Brisbane Bear" from down under says ... Hey Mish,
I think we are well past the point of no return.
Woolworth's, one of our biggest retailer/supermarket companies, just had their worst quarter in 13 years. Woolworth's is about as bullet proof a company as you can get in Australia. It is the bluest of blue chip companies.
The banks aren't lending and will pay one hell of a price when the economy implodes.
Regards
Brisbane Bear "No One Is Borrowing" Brisbane Bear passed along this article on The Age by Ian Vettender: Banks playing risky game with rates Put yourself into the shoes of thousands of Australians who own small businesses across the country right now.
You're faced with a serious drop in demand for your product, and you need to get turnover moving quick smart, to start shifting that product off the shelves.
What do you do? You don't need to be versed in the subtleties of economic theory to work it out. The answer is simple. You cut your price, or at the very least offer a better, more competitive service.
That is exactly what is happening across Australia and throughout the developed world.
Our retail malls, once proudly displaying two discounted sales a year, now are permanently emblazoned with discount banners, promising 30 per cent, 50 per cent or even more off the "regular" price.
Our banks are faced with the very same dilemma. Month after month, the Australian Bureau of Statistics unveils figures detailing a drop in lending for new housing and for business, falls to levels not seen in decades, sometimes of a magnitude never before recorded. No-one is borrowing.
But the response from our lending institutions has run counter to the most fundamental laws of economics and logic and, in so doing, they may well be laying the foundations for serious financial problems for themselves and the nation.
Rather than cut their margins, and lower their interest rates in an effort to spur demand for new lending, they have spent the past few years raising the cost of money to existing customers to compensate for the lack of growth in their lending. Misunderstanding Fundamental Laws of Economics Vettender bemoans "lending has run counter to the most fundamental laws of economics". Mish says, what a bunch of nonsense. Australian banks will not admit so, but they are capital impaired or soon will be (and they likely know it). I suggest banks have loans on the books that will not be paid back and they do not have adequate loan loss provisions. Vettender notes: "a drop in lending for new housing and for business, falls to levels not seen in decades, sometimes of a magnitude never before recorded. No-one is borrowing." Mish Theory of Unsound Businesses and Unsound Minds Yes indeed "No-one is borrowing". Vettender cannot figure out why. I offer this explanation to Vettender: Any Australian businesses in good shape (and in sound mind) would be out of their freaking mind to expand now. And they aren't. However, desperate businesses deep in the hole as well as businesses struggling to stay afloat, just might want loans. The sad reality is many of those businesses will not survive, and some would not survive even on interest rates of zero percent. Raising rates is the smart thing to do because only unsound businesses or unsound minds want loans! Unfortunately this surge in rational behavior by banks is too little, too late, exactly the opposite of what Vettender proposes. Australia is Screwed In short, Australian banks are screwed, retailers are screwed, home owners are screwed, home builders are screwed, those long Australian stocks will be screwed, and those expecting strong commodity prices to bail out Australia will also be screwed. For more on the latter, please see 12 Predictions by Michael Pettis on China; Non-Food Commodity Prices Will Collapse Over Next Three to Four Years; Nails in the Hard Landing Coffin? Note that things would be worse, not better, if banks listened to Vettender, because at this point the greater the lending, the greater the losses. So, if you get the general idea that "Australia is Screwed" then you have come to the correct conclusion. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
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| EIB Inserts Drachma Clauses in Loans to Greek Firms; Troika-Backed Coalition has One-Seat Majority in Poll for May 6 Election Posted: 21 Apr 2012 11:02 PM PDT I keep pleading for someone, anyone to put Greece out of its misery. Greek voters have a chance on May 6th to do just that. Please consider Greek ruling parties to get wafer-thin majority The two main parties in Greece's ruling coalition would together get just a one-seat majority in parliament if elections were held now, a poll showed on Thursday, less than three weeks before the May 6 vote.
The conservative New Democracy and the Socialist PASOK party, which both back the government of technocrat Lucas Papademos, have seen their ratings drop over recent months because of the unpopular austerity measures imposed in return for a new EU/IMF bailout.
They would jointly win 37 percent of the vote or 151 of the 300 parliamentary seats - a result which would just allow them to renew their coalition, according to a survey by pollster Pulse for Pontiki newspaper. Lovely Isn't It? Somehow 37% of the vote will translate into a tad over 50% of the parliament, just enough for the Troika imposed clowns to retain control. Deadlocked Elections However, Evangelos Venizelos, the former Greek Finance minister most responsible for selling Greece down the river, now admits Elections are Leading to Deadlock PASOK leader Evangelos Venizelos admitted on Saturday that next month's elections are leading to a deadlock and promised to ask for an extension from two to three years for the application of the measures to collect an extra 11.6 billion euros.
In an interview with Skai television Venizelos said that "the elections ahead of us have our very existence at stake and should leave Greece standing and stable. Opinion polls are showing that we are heading for a deadlock. We need to go to a national agreement. The first place is a necessity for PASOK," said the former Finance Minister.
He added that the crisis is far from over and the risk of exiting the eurozone and returning to the drachma still exists, as "Europe does not decide rationally."
He said he will push for the measures for the collection of 11.6 billion euros in 2013 and 2014 to be spread across three years instead and stressed there will be no extra tax burden and no horizontal cut to pensions.
On Saturday former minister Stefanos Manos, the head of small liberal party Drasi, accused PASOK and New Democracy of ruining the country saying "they should not even get 20 percent between them."
Manos has been elected on both New Democracy and PASOK tickets in the last 25 years. EMU Fed Up With Greece (and Vice Versa) Venizelos can push for the moon but that does not mean he is likely to get it. Brussels is plenty fed up with Greece. Moreover, any thinking Greek citizen should be fed up with Brussels. Those of us waiting for the inevitable are fed up with the delays getting to the inevitable. What if the Coalition Holds? Inquiring minds note the IMF Sees Greece Deficit Over 7 Percent in 2012 The budget deficit this year will be greater than the Greek government has forecast, according to a report published on Tuesday by the International Monetary Fund, which also stresses the need for additional spending cuts of at least 15 billion euros (7.7 percent of gross domestic product) between now and 2017.
The IMF expects the deficit to end the year at 7.2 percent of GDP, up from a forecast for 6.7 percent as seen in the supplementary budget passed by the government in February. The Washington-based Fund's report that accompanied the new memorandum Athens signed with its creditors in March had forecast a deficit of 7.3 percent.
The new government to emerge from the May 6 elections will have to decide on measures amounting to 11.6 billion euros for 2013 and 2014. However, yesterday's report seems to suggest that the fiscal adjustment will continue well beyond 2014 and will have to rely almost exclusively on spending containment: From 48.9 percent of GDP, spending will have to go down to 41.2 percent of GDP by end-2017. First Task of New Government is More Spending Cuts Assuming the Troika sponsored coalition holds (or even if it doesn't), the first task of the new government will be more spending cuts, more firings, more pension cuts, and higher taxes. Is that going to fly? EIB Inserts Drachma Clauses in Loans to Greek Firms While the election drama plays out, EIB Inserts Drachma Clauses in Loans to Greek Firms in preparation for a hard default and Greek return to the drachma. The European Investment Bank is hedging itself against a Greek exit from the eurozone by inserting drachma clauses in the loan deals it signs with Greek enterprises.
The first such deal was two weeks ago when the management of Public Power Corporation (PPC), the country's electricity giant began negotiating with the EIB about a 70-million-euro loan to fund its new natural-gas-powered plant at Megalopoli in the Peloponnese.
The EIB proposed for the first time two new terms, one of them being the possible renegotiation of the agreement should Greece leave the eurozone or should the common currency area break up. The second was placing the agreement under British law, in case of any irregularities in the payback process.
Sources suggest that the bank has made it clear to the political leadership of the Finance Ministry that the whole of the new contracts for loans to Greek companies will have the so-called "drachma clauses" and will be under British law.
The EIB has committed itself to issuing loans of 600 million euros up to January 2013 to the Greek market, to climb to 1.4 billion euros by the end of 2015. Laughable Clauses Pray tell what good are clauses if there is a total default? The proper course of action is to prepare for the inevitable and stop making loans to Greece at all. Moreover, the proper course of action is for every Greek citizen to pull all of their money out of Greek banks immediately. Greece is going down, and going down soon. It makes no sense to pretend otherwise. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com
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