As Falls Sarkozy, So Falls Europe: The Full Story Behind The Upcoming French Election

Tyler Durden's picture

Just a week ago we brought readers' attention to the fact that Francois Hollande, the Socialist Party candidate who is leading most opinion polls in the French presidential election, was extending his lead; well the lead is growing, to now 58-42 in the second round. In a must-read discussion this evening, George Magnus of UBS points to the significance of the French elections and how Hollande's victory could unleash 'a new wave of instability and uncertainty, and that the relative calm or optimism in financials markets since the turn of the year would prove short-lived'. Specifically Magnus highlights how the politics of Europe could well trump the liquidity of the ECB as the main determinant of the Euro Area's prospects. While not playing down the role of the initial (and forthcoming second) LTRO, the UBS senior economic adviser has grave concerns of the much bigger and less tangible issues of sovereignty and national self-determination that will not only impact Greece (very shortly) but also Germany, France, and the Euro-zone itself. The French election could be a catalyst for Franco-German (Merkande? Hollel?) divisions which 'would not sit comfortably inside the ECB or in the minds and actions of investors' and is evidently an unpriced and under-appreciated risk in global markets currently.


Enter Francois Hollande, Stage Left

George Magnus, UBS

The French Socialist Party candidate for the presidency has recently nailed his colours unequivocally to the mast, with a bellicose approach to the cult of finance and financial firms, a promise to promote state-funded industrial policies and employment growth, including an additional 60,000 teaching jobs and 150,000 subsidised jobs for the young, and a proposal to reverse the recently agreed rise in the retirement age from 60 to 62 years. He intends to continue the programme of budget deficit reduction, but wants to boost state spending by EUR20 billion by 2017, though within the context of largely tax-related measures on banks, higher incomes and wealth.


The presidential contest is focused on both sensitive social issues and France's sense of economic and political vulnerability in a globalised world. This year, for example, China will displace France as Germany's biggest trade partner, while the latter has roughly 5 times as many firms doing business in China. But in many ways, the election is almost like a plebiscite on France's role and future in Europe.


President Sarkozy represents continuity. Francois Hollande wants to renegotiate the current European fiscal compact that was hatched in Brussels in December. At an economic level, he wants more emphasis on economic growth and employment goals, an integrated European energy policy, a bigger agricultural budget, and measures to counter unfair trade competition. But at a political level, his support for more activist ECB monetary and financial policies, the introduction of joint and severally issued E-bonds, and a well-resourced bail-out fund contrasts sharply with the stated position and constraints expressed by Germany, and to which Sarkozy has lent his imprimatur.


If he wins and intends to press his strongly held campaign opinions and intentions, a new rift could open up between France and Germany over how to manage the sovereign debt crisis and in the medium-term, to reshape Europe. Like other Eurozone countries, France feels pressured by the rising power of its large neighbour to the east. After the December Heads of State summit in Brussels, Hollande, and the overtly anti-Eurozone Front National leader, Marine Le Pen, both accused the President of betraying French sovereignty and democracy. If Hollande, as leader of the Eurozone's second economy, were to try and stand up to the German government, he would not only feel he had a popular mandate to do so, but doubtless act as a lightning rod for a wave of sympathy and Euro-angst from other Eurozone countries, such as Italy, which are becoming increasingly worried about the character and consequences of the current German-dominated approach to the Eurosystem crisis.


Italy, in fact, has made a remarkable come-back since Mario Monti took over as leader, pending national elections in April 2013. He was won the trust of Angela Merkel, and the admiration of Europe's political elite. While Italy's economy may be in poor shape, the country has regained respect and seriousness. So much so, that Monti's clever statement at his meeting with the German leader, reported in the Financial Times (16th January), was poignant. After acknowledging Germany's example of fiscal discipline, he said, presumably referring to Italy's recent initiatives to follow suit, maybe others too:


'If this strong movement towards discipline and stability is not recognised as taking place, and a certain approach to financial aspects does not gradually evolve, then there will be a powerful backlash in the countries which are being submitted to a huge effort of discipline.'


This is surely a polite way of saying something to the effect of 'Thank you for your trust. I'm trying to do my best but if you don't help and change your behaviour too - cue another reference to symmetric adjustment - then promising my people perpetual austerity will backfire spectacularly at home, and probably on you too'.


Mario Monti is a serious and talented operator. But having France on board would make a big difference. And then what?


The key point is that any sort of rift between France and Germany, or inconclusive negotiations or weakening of resolve on the current fiscal compact in general, would immediately go down like a lead balloon at the ECB, which would doubtless feel more constrained. Beyond, the central issue would be the reaction and behaviour of Germany, and Angela Merkel's government in the face of a French agenda, key components of which would be politically difficult and resisted. German national elections are, after all, not that far away, in the autumn of 2013. Would Germany accommodate France and cross more red lines, accepting an implicit demand for higher inflation as part of balanced economic adjustment, and giving in on matters of fundamental political and constitutional significance to the Federal Republic? Or would it dig in its heels, deeming French demands to be an unacceptable intrusion into its own sovereignty and democratic processes?


There is much at stake here. For financial markets, the French elections are one of Donald Rumsfeld's known unknowns. Sarkozy could yet win, sustaining the leadership status quo, but not really clearing up any of the current imponderable or impossible challenges to the future of the Eurozone. But if Hollande wins, the difficult progress towards European fiscal integration, including the building of firewalls, could become mired in new arguments, or stall. This would have important consequences for Europe, and not least for the newly pro-active ECB, which would have reason to doubt that politicians were fulfilling their pledge to create permanent fiscal discipline.

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ACP's picture

Comedy, bitchez!

(as opposed to the Greek trajedy)

HedgeAccordingly's picture

Euro green tonight.. gold bidding.. where is my baguet

Michael's picture

4:52? Israel has hundreds of nuclear missiles? WTF?

Ron Paul On Fox's Off The Record Talking Foreign Policy 02/06/12

French Frog's picture

Does anyone else think that Mr Hollande is about to suffer the same fate as DSK (Dominic Strauss Kahn, former head of the IMF) and find himself hunted out of office (even before he got there)?

If memory serves me right, DSK was 'removed' when he was about to get too 'vocal' about the IMF's + the Fed's roles in helping Greece/Euro?

expert urls's picture

I am a tutorial on Vietnam flights. I better wait for the next reaction of  Mr Hollande. The end result will be clear.

Response from the instructor on Vietnam flights

trebuchet's picture

an interesting twist. 


A clear contributory factor to  EU unwillingness to act on Greece in 2009 was Sarkozy's unwillingness to give DSK credibility at  home for being a saviour for Europe - I heard that from the UK chancellor at the time who made it clear that ecofin had put French domestic concerns ahead of the growing evidence that Greece needed a bailout. 

one might speculate on DSK's demise and replacement by Ms Lagarde.... who knows?

what is clear is that the EU is and will always remain a platform for resolving national political agendas in a cartel like manner as the Europen alternative, as Ms Merkel pointed out, has been conflict. 

All the major wars of the world for the last 2000 years originate within Europe, almost all having as a significant ingredient, domestic political concerns in one state being given support on the european stage to the clear detriment of Europe as a whole.

.. So Hollande, French elections, if a source of instability, could be a problem that some might seek to solve the DSK way..... shurely, not Ed??????


Colonial Intent's picture

Is the above post sarc?

Wikipedia isn't a source, its an opinion.

n2dark's picture

No, not this one.
A few entries are indeed nothing more than mere opinions, some are a little more than that, but most are a quite reliable source of encyclopedic reference. In this case it's a collection of information from almost 200 sources, which elevates it quite a bit above the 'opinion' level.

The Deleuzian's picture

Who knows how many 'Nukes' Israel has...More than 1...Seems like the good doctor hit it out of the park again though...

The Deleuzian's picture

Unsure and can't confirm...Are there US boots on the ground in Libya?...Seems the Libyans are not digging the Central bankers or their central planning...

The Big Ching-aso's picture



"......reason to doubt that politicians were fulfilling their pledge to create permanent fiscal discipline."

Politicians?  Fulfill?  Pledge?  Discipline?    Man, this is some LMAO stand-up comedy.    Does this writer work for SNL on the side by any chance?


Colonial Intent's picture

Lets see,

6-8 Boomer subs that holds at least 20 warheads so say 1:3 ratio and you have at least two subs playing hide and seek somewhere in the world.

Thats 80-150 inc spares, add some fixed location sites and they still number under 200.


Am i worried about religious fanatics in Iran getting nukes?

No more than i am about the religious fanatics in Israel having them.


BorisTheBlade's picture


Europe was a beautiful princess from Argos. Europe was born in Asia and was the sister of Cadmus, the founder of Thebes.

Europe was playing with her girlfriends in the fields when king of the gods Zeus passed by and noticed her. Amazed by her beauty, he took the shape of a white bull with golden horns to abduct the maid.

Europe noticed the bull among the herd and playfully mounted him; together, they traveled until Crete. Only when they arrived in Gortyn in Crete, Zeus revealed his true identity and Europe laid with Zeus under a platan which became evergreen.

Forgiven's picture

Be French...Surrender bitchez!

francis_the_wonder_hamster's picture

"Quiche eating surrender monkeys".....I forgot the source of that quote (bonus points to anyone who remembers it so I don't have to google it).

Mike North's picture

I'm not sure but I know they didn't add red and blue to their flag until 1946

Grimbert's picture

Groundskeeper Willie, and it's cheese, not quiche

Bossuet's picture

"Cheese-eating surrender monkeys"

Après toutes ces années, (la propagande éhontée et mensongère de vos dirigeants de l'époque, Bush et compagnie, en matière d'armes irakiennes est un sommet de désinformation ne serait-ce que par la manière dont vos médias se sont fait abuser) la France a montré à travers le discours de Dominique De Villepin qu'elle avait tout simplement raison. Qu'avez-vous gagné dans tous ces conflits ?

Quant à la référence de votre voisin à 1946 et sa considération sur la France capitularde, voilà qui témoigne d'un singulière myopie ne serait-ce que pour cela : 

1918 : "1 315 000 soldats français décomptés morts soit 27 % des 18-27 ans". Au fait, essayons d'imaginer le nombre de soldats français victimes du syndrome post-traumatique après 1918, ce devait être vertigineux et je ne parle pas des traces dans les mémoires collectives, le front se situait dans NOTRE pays et un peu en Belgique. Venez visiter les régions nord, nord-est de la France et vous y verrez d'innombrables cimetières militaires dont ceux de Vimy et de Romagne-sous-Montfaucon d'ailleurs.

Enfin, certains de nos fromages sont excellents. Je vous les recommande.


spankfish's picture

+1 for making the coffee come through my nose  - "Cheese-eating surrender monkeys" ... had not heard that gem in a long time.

nmewn's picture

              For Sale

One Lebel rifle, never shot. Only dropped once.

Make offer.

francis_sawyer's picture

Do they use DIEBOLD machines in France?

Narukami's picture

what realy get on my nerves is that a lot of ppls keep taliking about ww2 and the french surrendering! most of you ( including me) were no way near to be born and we know of the war but the little from what  learn in school but if u want to go deeper you would understand the complexity of this event. it is true that the gouvernment at the time surrender. but you cannot forget "la resistance" and all the intelligence they provide to the allys; some of them made the ultimate sacrifice for this. so at the end you are insulting these ppls as well ( i will stop here cos i could talk about it all day ) so do yourself a favor go deeper in understanding the fact ; but stop insulting a whole nation for something that happend 70 yrs ago due to the mistack of a few old farts that should have never been in power at the time.

Sandmann's picture

The Resistance was largely Communist, it did not start until the Germans started conscripting forced labour to the Reich when the young men fled to the forests - they called themselves Maquis. Without France the Reich could not have fed itself and the trucks used in the Russian Invasion were Renault.

As for the "old farts" Petain was a national hero having led resistance at Verdun in 1916. The "Free French" in London were not trusted, their codes were weak and their security hopeless. The ONLY Resistance Movement that was truly effective and where Collaboration was almost non-existent was Poland and Armiya Krajowa

Narukami's picture

once again an other person that state fact without deeper understanding, let me explain , the fact that the resistance was " largely communist " is irelevant ,in time of war and martial law the party you belong is meaninless...second they "called themselves maquis" ( when i finish laugh i'll reply....) maquis resistance was created in the south of france since by definition the Maquis is a large area covered in think bush, more likely to grow is hot and dry places... and also the Maquis resistance is still actual for corsica where the freedom fighter go and hide, as for the "old farts " yes it is true that they was hero of the WWI but thay had the idea of the ligne maginot which was a great defence if only they did not predicted the the german army would simply go around it which a five yrs old could have done....also the military tactics they was applying was still dated from WWI and in some secret document find after war, one of the french "hero" plan to use horses against tanks ... for the free french in london the message they was giving was of the most importance they use to coordinate most of the resistance activity throughout france but also and for most it was a message of hope for the familly traped in the war , and also england provide shelter for the future french and polish gourvnment once the war was over. now my favorit part poland and the armiya krajowa where to start :D . it was created in ..... yes france ! its was created on the 27 of septembre 1939 with a pact between french and polish that they would unit in case of german agression which they did the best both side could. so please take a book and read dont just say what u saw on t.v.

Treason Season's picture

The knee jerks anti-French tirades spouted by Yankee monkee is a result of British propaganda.

Coldfire's picture

Mario Monti is a serious and talented operator.

Mario Monti is a serious and talented unelected statist commissar.

There, fixed it.

Coldfire's picture

What's the word? Thunderbird! Sarko, complete with mangina.

Nobody For President's picture

Perfect timing, perfect graphic wild Bill. Thanks again


spankfish's picture

Now that is Louvre quality work young man!

working class dog's picture

Thou hippocrits all!  Ye were to not exceed debt to GDP ratios when ye signed on to the Eurozone aggreement. The first to violate was Germany, and all others followed. Now ye all will meet MOBIE DICK, as ye will all go down together.

AnAnonymous's picture

Another US citizen who thinks he deserves every single cent he earns.

Quite a lot of feeble ifs.

Polls are not election votes in US citizenism.

Many others but the biggest is probably the explicit statement that a US citizen president is going to implement the program he ran as a candidate.

That is a big if.

Better to be clear, it is not like it was 1776 anymore, quite a lot of election processes by now in many US citizenism run contries:
no matter who is elected, there wont be that second course the author claims there'll be.

It will be highly similar to what is done now. Biggest change: the mug.

US citizens of A captured that reality with their "say hello to the new boss, same as the old boss"

To be compared by the way to the old saying "new lord, new laws" which existed before the rise of US citizenism.

The reason is simple: US citizenism is hinged around an institutional exercize of power while previously, the power leant toward personal exercize.

Funny that this claim of change comes nearly four years after the US citizen negro in the oval office made change
his gimmick.

Another proof US citizenism is all about submission. Only a consenting person who wants to believe the lie while knowing it is a lie can accept that drivel.

EvlTheCat's picture

Speaking of the Drivel....

n2dark's picture

It's called the cycle of "hope & change". Every 4 years or so you'll get the chance to enjoy some silly optimism and live through the subsequent disappointment.

arcos's picture

This article is not worth reading.

1. What Hollande or any other presidential candidate in the world is promising BEFORE election is just blabla

2. Hollande is a Socialist and 110% PRO EUROPEAN!

3. One year later, the German Socialdemocrats will take over and the French and Germans will continue to work together even better than today.

4. Where is this surge in the US$ by the way? If not now, when then?

A Man without Qualities's picture

I agree with most of what you say, but the Germans are genuinely worried about him.  I was at a dinner with a couple of guys form the CDU who put it like this - the Eurozone governments needs to agree on mulit-year plans and while they need to respect individual nation's electorate, there must be lines of communication.  They have tried talking to the Hollande camp, but are troubled by the lack of clarity of his policies and plans.

They feel sorry for Sarkozy who needs to do unpopular things for the financial security of France and the Eurozone and this is costing him votes, whereas Hollande can make vague promises which may win him the election but he'll either have to break them or risk chaos.

As for the German elections, it's not looking good for the CDU, despite the clear popularity of Merkel.  Funny thing is, from an election perspective, throwing Greece out of the Euro might be the strongest card she has to play...

agent default's picture

Lack of clarity in policies and plans means he is a yesman willing to sell out to the highest bidder.  It's a way of life for politicians.

pine_marten's picture

Vague promises.  That kind of rings a bell.  He will turn out to be a shill for the bankers just like ours.

trebuchet's picture

@arcos: you missed the point

slewie the pi-rat's picture

wake up, people! 

RE:  "ARCO_s"

>>> 1yr43weeks  3 extremely recent posts


spread the word!


Christophe2's picture

@arcos "This article is not worth reading" -> Well said!


People in France use the term UMPS to refer to the UMP (Sarkozy's party) + PS (Parti Socialiste of Hollande), as everyone who is online realizes that left/right divide in France is just as fake as everywhere else.  In Europe like in the US, the illuminati machine of fabricated public opinion and actor-politicians is plain to see, so this 'analysis' that plays along with the patently false assertion that there is a difference in policy between these mainstream politicians is laughable.

=> ZH might as well tell us how the oligarchs are concerned about Mitt Romney taking over from Oblabla...


In France you now need to get 500 signatures from mayors in order to be able to present yourself as president - something so difficult to achieve that even Marine Le Pen (MLP) might not be able to present herself as a presidential candidate...


FWIW, I have my doubts about MLP, who seems like the gatekeeper equivalent to Ron Paul in the US.  Although she at least isn't clearly a freemason, she still has many of the same patterns (eg: a mix of extreme right tendencies, which are enough to make her an impossible candidate for 50% of the population, while being the ONLY mainstream politician to argue for abolishing the Fed / private central banking system).

=> More than anything, one wonders sometimes about the extent of the efforts each (RP + MLP) make in order to actually reach the presidency.  They work hard enough to capture the attention of voters who are against the private central banks, but somehow or other they seem to not be trying hard enough at key points in time...

lolmao500's picture

Fus Roh Dah!

Hollande is a more pro-banks, pro-deficit, pro-big government, pro-big EU than Sarkozy.

The only one who is against the EU is Lepen and she has no chances.

Don Diego's picture

Hollande is faking an anti-establishment approach, but with him it will be business as usual. In the Western world there are no politicians, just actors playing their roles. The only anti-establishment large party is Le Pen's, you just have to watch the aggressivity and the constant interruptions of the journalists that Le Pen has to undergo in the rare occasions she is granted an interview.

Sandmann's picture

"Change" buys votes, look at the US where Obama cruised in on Goldman Cash and Independent Votes. Hollande will be more of the same but he might want to nationalise the Banks as Mitterand did to bring them under control. It is after all French Banks that are a disaster and it is French Government that is sucking the Bundesbank dry to fund them. European Union has an institution called The European Council in which all national political leades are like a College of Cardinals for The Project and their role is to be loyal to The Project above all else. Some people think it is the Central Committee of the European Union with the Commission as the Politburo and the Parliament as the Supreme Soviet of People's Deputies and with martin Schulz there it looks very much like Soviet times