Cinco de Mayo
Cinco de
Derby
Seis de
Europe
Sinko de
Europe
Oh the sun
once shined bright
On my European
homies,
On my European
homies,
Far away…
It’s an amazing
clustering of events. Not only all this but Putin takes his oath of office too.
Does that make it a Red letter day?
While the
voters have spoken one wonders when they will start thinking. Up until this point
of the Zone, the French have done a good job of sticking close to Germany in terms
of keeping inflation in check in the Eurozone. Now with Hollande and his ‘chicken
in every pot’ view of economics we will see where this can all go. The sorts of
ideas he has for even earlier retirement and enormous marginal tax rates do not
seem compatible with the kind of economic performance France will need if it
wants to try to keep pace with Germany. But if France’s true ambition is to
join Spain and Greece and Portugal on the periphery of the e-Zone this as good a
start as any.
If we
simply look at inflation France’s price level has risen by 27.8% since joining
the Euro compared to Germany whose level has risen by 24.8%. On that measure France
has stayed close, But when we take into account productivity and measure unit labor costs, ULCs
in France are up by 20.7% since joining EMU while Germany’s are up by 6.9%. That
puts France at a 20.6% cost disadvantage. Maybe France is just done chasing herr
rabbit?
Now the
plan is to go for earlier retirement and to pay for it by soaking the rich, of
course. And ‘the rich’ will just stand
by and let that happen. Maybe Hollande thinks capital or capitalists are pigs
and pigs can’t fly. But capital can. See capital run,. run capital, run.
Hollande will get a real primer on how Dick and Jane Rich take their capital and
go home- or leave home.
As for
Greece the elections take Greece back to the apocalypse at the Acropolis. With the
new fragmented election results in, putting Humpty Dumpty back together again
will be easier than putting together a coalition to govern from this mess.
Immediately
after the election former Greek finance minister Evangelos Venizelos (a whiz with
numbers) figured that with less than one –third of the total vote a two party
coalition would not be able to rule… another brilliant deduction.
But now,
in the harsh light of day, the fragmented Greek political result makes chaos
look ordered. Some are saying that another election is certain… others are pointing
out that another e\lection is pointless. Well, there you have it. If there were
another election, who would change their mind?
As it stands
Greece has no government. Maybe it’s an improvement? If they do not have politicians
to shaft them, maybe the local businesses can make some progress. After all it
was the Greek’s debt hiding politicians that got them so deep in this mess. It
was a government structure built on bribery, too. How bad could it be to not
rebuild that?
Meanwhile the
world spins…out of control elsewhere
Putin is
ready to instill his fine values in Russia. Italy has regional elections. Syria
is having a set of parliament elections that I’m sure will be on the up and up.
Capitalism
is grand. Democracy is grand. But don’t kid yourself; it’s going to cost you
much more than ‘a grand’.
Greece is
just a mess and I don’t know what model you apply to understand it. It may take
a number of election iterations before the ‘people’ figure out they have a
bitter pill to swallow and pick someone to figure out what it will look like.
In France,
Hollande has the rep of having no backbone like a jelly fish (or flan). We will
see what he really stands for and what he can achieve. Moreover when he tries
to govern we’ll see if this election was more about picking him or dumping
Sarkozy. I suspect it was more the latter and that means that France is not going
to stay on the reform path but it won’t drift very far from it either. But there
will be enough deviation to put Germany on the hot seat. Even the French must
be able to tell that it would be suicide to follow Hollande’s ideas. You can follow
him just as long as you point him in the right direction.
Meanwhile the
euro-voting is all part of a clear message to Germany that this austerity thing
has run its course. But that won’t make
a direction shift any easier to get.
I’d say that
Germany is getting ready to bust out of the Zone except for those target 2 balances;
they mean that Germany has some real skin in the game. If Germany thought it
had an easy exit plan I’m afraid it’s in for a shock.
As for
euro speculation the question on the euro is this: what is it? Are you trading
a euro with membership as is? Without Greece? Without any others? Does Germany stay
in and does the euro become a strong currency bloc? I think that is why it is
hard to puzzle out the euro. I’m surprised it falls on the Greek elections. On the
other hand if it falls on the French elections it is only if you think the new
guy can accomplish anything. I’d think that is jumping to conclusions. He can rattle
his saber but I doubt he can pull it out of its scabbard.