On Friday, SocGen's Albert Edwards was confused: when describing the events of last weekend, when Greece seemed on the verge of being "temporarily" exiled from Europe thus confirming once and for all that the Euro is in fact quite reversible, it was not Germany against France, a France whose total government liabilities assure that its countdown to sovereign insolvency is just a few years behind that of Greece...
... but France alongside Germany, playing the good cop to Schauble's now traditional "Dr Evil" routine. To wit:
[what] surprised me over the weekend was France’s position. I was not in any way surprised that Germany was able to gather a huge number of allies to its camp, with its traditional fiscally conservatively minded allies such as Finland, Holland and Austria, as well as many central European governments. I was not even surprised that other countries previously crushed by austerity, Spain, Ireland etc., were firmly in the Germany camp too. But I was really surprised that French authorities did not stand up to say what was happening was unacceptable, unsustainable, and indeed unfair, and that they would have no part of it.
The reason why I am surprised that France went along with this extreme and humiliating austerity programme – and the effective removal of sovereignty forced on Greece – is simply its own self-interest, for France could itself end up in the firing line. The problem France will surely find further down the road is that its own debt dynamics and sustainability is also highlyquestionable. Estimates we have used before with calculations for the present value of unfunded liabilities (as a % of GDP) show that actually it is not Spain or Italy that have the worst long-term debt sustainability issues; it is the US and France, and then next in line, surprisingly, Germany.
We said that we found France's capitulation "far less surprising: ultimately Hollande's sole focus was to preserve near-term stability (and his job) at any cost, if only until the 2017 French elections, which he is guaranteed to lose. Even if the French fiscal and solvency situation deteriorates dramatically over the next two years (and it will because as we showed in June, France has now had 80 consecutive months of record unemployment as a result of yet another socialist economic failure), by the time the world wakes up it will be someone else's problem, most likely that of Marine Le Pen, at which point the only way to resolve the French "problem" will by through the printing of French Francs."
Today Bloomberg confirmed just that, when it reported that instead of seeking a mathematical resolution to France's unsustainable government liability brick wall, Hollande is now likewise prepared to follow in Tsipras' footsteps and hand over French sovereignty to a German-led European "government" if it means extending the unsustainable French status quo as long as possible. To wit:
French President Francois Hollande said that the 19 countries using the euro need their own government complete with a budget and parliament to cooperate better and overcome the Greek crisis.
“Circumstances are leading us to accelerate,” Hollande said in an opinion piece published by the Journal du Dimanche on Sunday. “What threatens us is not too much Europe, but a lack of it.”
In other words, France just called for the creation of the United States Of Europe, where the dominant power (Germany) is in charge, and where the people of all the smaller, weaker countries, pardon pro forma European states, are merely slaves. See Greece.
And speaking of Greece, somehow we doubt the insolvent nation, which justt last week just handed over its sovereignty to Germany and Brussels, feels there is a "lack of Europe."
While the euro zone has a common currency, fiscal and economic policies remain mostly in the hands of each member state. European Central Bank President Mario Draghi made a plea this week for deeper cooperation between the euro members after political squabbles over Greece almost led to a rupture in the single currency.
Countries in favor of more integration should move ahead, forming an “avant-garde,” Hollande said.
“Europe has let its institutions weaken and the 28 European Union member countries are struggling to agree to move ahead,” Hollande said on Sunday in a text which was also a homage to his mentor Jacques Delors, a former European Commission President who proposed similar ideas. Draghi called for the creation of a shared treasury within 10 years in a joint proposal with politicians.
Well, of course Draghi would call for that: after all, the more "globalized" end markets are, and the greater the stock of monetizable debt collateralized by a supergovernment, the greater the profits for Goldman (followed shortly thereafter by a global government controlled by the Inner Party; call it "Oceania" for lack of a better made up word).
Not to mention that what would happen in Hollande's "avant-garde" world is that Germany will have achieved its World War II goal of taking over Europe without firing a single shot, with every other country, first Greece now France, and everyone inbetween, handing over its sovereignty to the Bundestag (not to mention to German exporters) to run the show.
As for Hollande, and his all time low approval rating, his immediate concern is not how to hand over Paris to Berlin, but how to prevent Marine Le Pen aka "Madame Frexit" from taking his seat in two years because as we wrote before the Greek referendum was even announced, "Forget Grexit, "Madame Frexit" Says France Is Next: French Presidential Frontrunner Wants Out Of "Failed" Euro."
Greece is now a sideshow even as its economy implodes completely and the country ultimately exits the Euro - the real question is can Germany build on the Hollande momentum to finally implement a Berlin-controlled, Frankfurt-funded "government" before Le Pen crushes the European dream, or nightmare as it is better known in Greece and for the half of Europe's peripheral youth who are permanently unemployed, once and for all.