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Why François Hollande’s popularity has plummeted

Category : Business

With only 36% of public support in a poll marking a record low, the president’s policies are seen as gaff-ridden and indecisive

When François Hollande became French president in May, he kept his old mobile phone number so old friends could still reach him to give their frank views. The first Socialist party president in 17 years may be regretting that now: six months after the victory street party at Paris’s Bastille, where he vowed to save Europe from one-size-fits-all austerity, his popularity is plummeting.

He has now broken the record as the most unpopular French president at the six-month mark of a mandate. Only 36% of French people have confidence in Hollande, according to the latest poll by TNS-Sofres for Le Figaro magazine. By comparison, the rightwing Nicolas Sarkozy had 53% approval ratings six months after his election in 2007.

Why has Mr Normal, an ordinary, decent bloke who pledged to rein in France’s huge public deficit while staying fair to the poor and crisis-hit, fallen so far so fast? Hollande’s misfortune in the polls follows an autumn of communications gaffes and perceived inaction by a government that has veered off and on message to the point where the public is no longer certain what the message is.

When Sarkozy fell from grace almost a year after taking office, it was because of his personality – he irked the electorate by flaunting his bling lifestyle, and was perceived as being more concerned about his whirlwind romance with Carla Bruni than the struggling French population. But if in early 2008, the public disliked Sarkozy as a person, they didn’t mind his policies and politics. Proof was the good popularity ratings of his prime minister François Fillon, who was well liked while putting Sarkozy’s plans into practice. Fillon still has high approval ratings as he battles to become the new leader of Sarkozy’s UMP party.

By contrast, Hollande’s opinion poll nose-dive is not about personal animosity – he has kept up his image as a modest president – it’s his politics, specifically his way of doing politics, which is under attack. The Socialist leadership and government is seen as confused, accused by its opponents of amateurism and inaction. Even the leftwing daily Libération recently dubbed Hollande and his prime minister Jean-Marc Ayrault “The Apprentices”.

Ayrault, a former teacher who used to drive a VW campervan, was well liked at the start. Yet he has sunk even further than Hollande, to 34% approval ratings. A series of gaffes haven’t helped – notably when he suggested this week that he was open to debating the future of the Socialists’ cherished 35-hour week before hastily contradicting himself under pressure from the Elysée. Or when the government tweaked a planned increase in capital gains taxes after a revolt from young entrepreneurs calling themselves “The Pigeons” (slang for mug or sucker).

All this created a public perception that the government thought problems needed to be solved, but wasn’t sure which ones, or how to do it.

Hollande and Ayrault are pushing through France’s harshest budget for 30 years – and despite telling voters that nine out of 10 of them wouldn’t feel the pinch of higher taxes aimed mostly at the rich and big business, public opinion clearly does fear it will feel the pain.

Hollande is forced to respect EU demands to cut the French deficit. But he must also persuade voters he has his own ideas. The old cliche of France being a country impossible to reform has given way to a searching quest for real structural solutions to rising unemployment, dying industry, low competitiveness, stuttering growth and the threat of recession.

Hollande favours slow, gradual “negotiation” in contrast to what he calls the “brutality” and headline-grabbing of the Sarkozy era. He has said there will be no “shock treatment” for Paris’s uncompetitive economy, despite an impatient Germany fearing France is the next sick man of Europe, but instead a slow, five-year-long approach. But his consensual approach has been construed in the public eye as inaction. To the point where Le Monde asked in a headline this week: “Has Hollande underestimated the crisis?”

Hollande stood firm in Le Monde, saying he was acutely aware of the trouble facing France and was confident that there would be an economic up-turn. “To exercise power nowadays is very hard. There is no longer any leniency, any respect. But I knew that,” he said.

French brewers hit by 160% rise in beer tax

Category : Business

President Hollande to push through legislation to fund social programmes – but brewers condemn plan as ‘kick in teeth’

The French president, François Hollande, is pushing through legislation to increase taxes on beer by 160% to help fund social programmes, as France struggles to contain a budget deficit hit hard by the economic crisis.

The tax increase will affect local brews and the 30% of imported beer the French drink. The change will push up the price of a beer by about 20% in bars and supermarkets, said Jacqueline Lariven, spokeswoman for the French brewer’s federation, Brasseurs de France.

The Brewers of Europe trade group described the measure as a “kick in the teeth”, as it follows a 6% fall in beer production and an 8% drop in consumption in the EU since the region’s debt crisis began in 2008.

Outside France, Belgium and Germany were likely to be hardest hit by the new legislation, said Pierre-Olivier Bergeron, head of the Brewers of Europe.

“This measure will affect all brewers, including small entrepreneurs,” he said. “This is a very shortsighted approach by penalising one sector.”

President Hollande said he hoped to raise €480m (£300m) from the tax increase on beer to boost medical insurance and elderly care.

Tobin-style tax gets green light from European commission

Category : Business

Biggest eurozone economies to carry out experiment to show whether financial transactions levy can aid responsible trading

It has been a long time coming. Four decades have passed since James Tobin, a Nobel-prizewinning US economist, first proposed “throwing sand in the wheels” of the financial markets by imposing a tax on transactions. Now the idea is within months of becoming a reality.

The European commission has given the green light for a eurozone “coalition of the willing” to go ahead with a financial transaction tax (FTT), likely to be levied at 0.1% on shares and bonds, and at 0.01% on derivatives.

For its supporters, a transaction tax is a classic no-brainer: it will punish those who plunged the world economy into its deepest slump since the 1990s and raise lots of cash from banks, cash that would otherwise have to be extracted from blameless members of the public. Many countries already have taxes on financial transactions (stamp duty, in Britain’s case), so this is hardly a revolutionary proposal.

Opponents say that it will add to the problems of the financial sector when it is already on its knees, raising the costs of funding and so leading to even weaker flows of credit to households and businesses; the fact that the FTT is not being universally levied, even within the eurozone, means it will be simple to avoid the tax; Frankfurt’s loss will be the City of London’s gain, because the UK’s position is that an FTT has to be imposed everywhere if it is to work.

The likelihood is that the FTT, in its current form at least, will neither be the magic bullet claimed by its supporters nor the wrecking ball claimed by its detractors: it is too small to “throw sand in the wheels” (Tobin’s original plan was for a much heftier tax). If it does succeed in reducing churn in financial markets, it won’t raise the sums expected by the 10 countries involved.

On the other hand, the idea that the FTT is going to be the final straw for the financial sector also looks well wide of the mark. In the light of what has happened over the past five years, a transaction tax is going to be well down the list of worries for Europe’s banks. Avoiding paying it could prove to be more trouble than it is worth.

Both sides of the argument should, however, welcome the arrival of the FTT. Why? Because we will soon know who is right and who is wrong. A tax that includes the four leading economies of the eurozone – Germany, France, Italy and Spain – is big enough for the results to carry significance.

We are about to witness a controlled experiment that the rest of the world will be watching with some interest. If the FTT does generate billions of euros in extra revenue for Angela Merkel and François Hollande, other countries will be quick to seek a piece of the action. If it doesn’t, the idea will die a quick death.

France: no leeway for failure

Category : Business

François Hollande’s budget – the toughest in 30 years – is ameliorative but it is hardly a radical departure.

Rigour, austerity and recession are out. Combat, exceptional measures and solidarity are in. With those costume changes, François Hollande has just delivered the toughest budget in 30 years. But he has done what he said he would do. He hit the super-rich with a 75% tax. It will only effect a symbolic number of taxpayers, about 2,000 in all, but in a country which has turned its back on bling-bling presidents, Mr Hollande is sticking to his script. Two thirds of the €30bn the French public purse has to recoup will come from tax rises – a percentage that would have Ed Balls exiting stage right – and one third from a public spending freeze.

The larger question is whether French austerity will prove any less counterproductive than the Greek, Spanish or Portuguese ones have been. The assumptions on which this budget are based are balanced on a hairpin – 0.8% growth? In combative mood, prime minister Jean-Marc Ayrault said this target was both realistic and ambitious, but it appears to be more ambitious than realistic. It is a leap in the dark, but a government has to make a plan, and – in dark times like these – there is no well-lit way to jump. As Labour assembles in Manchester, Mr Balls ought to reflect that uncertainty about the future dogs social democrats when they come to office. In these circumstances of wild flux, the single most important thing to hang on to is flexibility to respond to events. Rushing to repeat the sort of restrictive spending commitments made ahead of the 1997 election at this stage in the game would be a mistake.

Already the French government has been forced to concede that France will not be out of the red by 2017. The remaining hope that the public deficit can be reduced from its current level of 4.5% to 3% of GDP in conditions where the economy is stagnating continues to strain credibility. Even in good times, such a cut would represent a considerable heave. To achieve this, Mr Hollande would have to pull off public-sector reforms that both of his conservative predecessors, Nicolas Sarkozy and Jacques Chirac, ducked.

There remain, too, fundamental concerns about the direction of travel. The central charge against European leaders is they are attempting to counter deflation with deflationary policies. That is not just a point made by the Paul Krugmans of this world. It is now being made by the IMF. By hurting the near-term growth outlook, tighter fiscal policy could be leading to wider rather than narrower spreads over German bonds. Especially so if it involved an outright decline in the overall size of the economy. Killing the economy while raising debt will not work. Seen from this perspective, Hollande’s budget is ameliorative but it is hardly a radical departure.

Borrowing at cheap rates of interest, France is petrified of another Moody’s downgrade. Any jacking up of the rate to Spanish levels would push these finely balanced budget projections over a cliff. Mr Ayrault has argued that if they abandoned the 3% target, France would become Italy and Spain overnight. The black hole in Spain’s banking sector was declared to be €59.3bn, which caused sighs of relief because it could have been worse . But the more essential your economy is to the euro, the better terms you can demand. A Spanish premier is always going to have a louder voice in Brussels than that of a Greek premier. If France ever needed a bailout, it could demand one on better terms.

Mr Hollande is to be applauded for sharing the burden on the people who can most afford to pay it. But he remains a hostage to fortune. With over 3 million unemployed, he has no leeway for failure. It is not his fault, but it is the legacy he has taken on. If small French companies who have been spared the pain in this budget don’t start hiring, and soon, France will have increased debt and declining means to pay it.

France refuses to back Greece’s call for more time to enact reforms

Category : Business

The French president, François Hollande, offers no concessions to Greek PM, Antonis Samaras, during meeting in Paris

The French president, François Hollande, has put more pressure on Greece to push ahead with painful reforms after a meeting with the Greek prime minister, Antonis Samaras.

While Hollande praised Greek citizens for making necessary budget cuts, which EU leaders hope will pull Greece back from crisis and secure the next round of bailout funds, the French leader offered no concessions to Samaras during their meeting in Paris on Saturday.

Samaras has been seeking more time to pass reforms, arguing that an extension of up to two years would allow Greece time to improve growth and therefore its public finances.

But Hollande said no decision could be taken on the issue until European ministers have considered a financial report on Greece, which is due to be published by the International Monetary Fund, the European commission and the European Central Bank in September.

The report will be presented to a Eurogroup summit in October and Hollande said Europe needed to make decisions “the sooner the better”.

“We’ve been facing this question for two-and-a-half years; there’s no time to lose, there are commitments to reaffirm on both sides, decisions to take, and the sooner the better,” Hollande said.

Hollande’s position echoes that of the German chancellor, Angela Merkel, who met Samaras in Berlin on Friday.

However, the French president was keen to promote the idea of solidarity. “For me, the question should no longer be asked: Greece is in the eurozone,” he said.

“In the face of ordeals, we must show more solidarity

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French finance minister says cap on top pay is ‘moral issue’

Category : Business

Pay squeeze delivers on a campaign promise by France’s Socialist president François Hollande

France’s finance minister has declared a crusade against executive pay at state-controlled companies, describing a wage cap of €450,000 (£365,000) a year for bosses as a matter of “justice and morality”.

Pierre Moscovici said the pay squeeze would come into effect over the next two years and deliver on a campaign promise by France’s new Socialist president, François Hollande, who sought to tap into widespread public anger over executive salary packages

“Earning €450,000 a year doesn’t seem to me a deterrent if we want to have quality men and women at the head of our companies,” said Moscovici. He added that the measure was needed to “make state companies more ethical” and respond to “the demands of justice and transparency” at a time of economic crisis.

The government expects to publish a decree on the pay cap next month. Turning the screw on executives, it will then introduce a bill in parliament later in the year to address stock options, so-called “golden parachute” clauses and other components of executive salary packages.

The limit will apply to all companies in which the state holds majority ownership, including the postal service, nuclear power giant Areva, electric utility EDF, railway company SNCF and public transport operator RATP.

Hollande set clear limits on executive pay on the campaign trail, saying no executive at a state company should earn more than 20 times the lowest-paid worker’s salary. Fewer than 20 executives currently have salaries over the limit, the finance ministry said.

“I’m convinced the strict salary framework at public companies will inspire the stabilisation of certain practices in the private sector,” Moscovici said, promising that all salaries for top executives at state firms would now be made public.

The UMP, the party of former president Nicolas Sarkozy, dismissed the cap as political posturing. “It’s a campaign promise. They’re pretending to fix our problems by reducing executives’ salaries. It falls under the category of ‘ostentatious morality’,” said UMP leader Jean-François Copé. “They make the French people believe they are fixing the problems with the budget and the economy by reducing the salaries of our country’s executives. It’s extremely hypocritical. This doesn’t fix anything.”

Europe’s new insurgents: rising rebels spurn the era of bling

Category : Business

From France to Greece and Italy, voters are turning their backs on the old guard and austerity politics in favour of a new generation

They are arguing for a new political settlement across Europe and for the first time their views are getting a hearing. But for the new insurgents challenging a political consensus that has dominated Europe for 30 years, style is as important as substance, and personal demeanour is almost as vital as the fine detail of opposition to the policies of debt reduction. Welcome to Generation Normal.

The leaders of Europe’s new anti-austerity movement are accessible and generally insist – like France’s new president François Hollande – on a certain everyday mundanity.

In Greece, Alexis Tsipras, the 37-year-old leader of the leftwing coalition party Syriza – who rejects the EU austerity programme as “null and void” – rides a motorbike around Athens. In France, Hollande, despite a property portfolio that suggests a certain financial comfort zone, has insisted on how removed he is from the era of President “Bling-Bling” Nicolas Sarkozy. In the era of “we’re all in this together”, Hollande, unlike some, has put his money where his mouth is, ordering all his ministers, himself included, to take a 30% pay cut.

They are not alone in this. Social Democrat Hannelore Kraft, who delivered a stinging defeat to German Chancellor Angela Merkel in state elections in North Rhine-Westphalia last week, is described as volksnah – down to earth. She, too, plays up to her image, as some media commentators have remarked, of “Hannelore from the Ruhr” with her local accent from Mülheim, although it is said that her accent becomes somewhat less pronounced in closed-door meetings.

The reality is that both in policy and style, something is happening in Europe. It is not simply a rejection of the failed narrative that fiscal austerity can lead to growth – the policy pushed by the centre-right governments that dominated Europe at the beginning of the global financial crisis and derided by economist Paul Krugman as the “confidence fairy”. It is the rejection, too, of a wider European political culture – facing a perceived crisis of legitimacy – that has come to be seen as too technocratic and elitist, divorced from the concerns of ordinary voters, where policy is made in the rarefied atmosphere of summits or by the “faceless” bureaucrats in the EU’s institutions.

Whether or not the likes of Tsipras can lead a real revolt in a Greece going back to the polls on 17 June – in a country where 80% of voters do not actually wish to crash out of the euro – the effect of the recent European spring that has brought down governments from Athens to Paris has been to insist that people want politicians to listen to them.

Indeed, the new generation of anti-austerity politicians seem to hark back to an earlier postwar generation of European leaders who seemed both more available and more ordinary, not to be found holidaying on superyachts owned by wealthy friends.

Tsipras is a case in point. As a Greek civil servant told the BBC, Tspiras’s accessibility “reminded voters of the old times when they used to call politicians by their first name, they were approachable and used to answer direct questions”.

The theme has been picked up by France’s new prime minister Jean-Marc Ayrault, a former teacher and mayor of Nantes – whose parents were a textile-factory worker and a dressmaker – who has in the past criticised the “condescension and elitism” of his country’s political class.

Hollande’s new cabinet – dominated by moderate leftwingers split equally between men and women – is also remarkable for its number of new faces, signifying his desire for a clean slate. This new continent-wide mood has thrown up wild cards as well as worrying developments including the rise of far-right parties such as Greece’s Golden Dawn and Marine Le Pen’s National Front.

Among the wild cards is the Five Star Movement in Italy whose figurehead is the acerbic anti-euro and anti-austerity comedian and blogger Beppe Grillo and which came from almost nowhere to rack up double-digit gains in Italy’s local elections in early May.

As in the case of the emergence of the neo-Nazi Golden Dawn, the strong showing by Grillo’s supporters may be far less significant than the increasing prominence of Leoluca Orlando, the leftwing anti-corruption mayor of Palermo whose Italy of Values party refuses to support the austerity regime of prime minister Mario Monti and represents the polar opposite of the debased Berlusconi era.

The elections showed a devastating collapse of public confidence in Italy’s established political parties after the corruption of the Berlusconi years – support for the former prime minister’s party collapsed.

And while the rise of some of the more extreme parties has drawn more attention, it has disguised the real story: the rise of new leaders who insist on their own ordinariness.

If there is a growing tension between electorates and established parties particularly in places like Greece and Italy, it is unlikely to be mitigated by one of the emerging narratives of voters having backed the “wrong” parties.

Labour MP Denis McShane, a former minister for Europe, believes that – excluding the rise of wild cards from the Pirate party to the far right – the new political leaders mark a move away from an era of “Flash Harry politics” to a desire for more competent, “duller” and attentive leaders.

“The generation of politicians who are being pushed from office perhaps over-promised and under-delivered. The new politicians we see emerging are under-promising in the hope of over-delivering. If you look at Hollande, he is a gradualist. It is not like 1981 when François Mitterrand was elected.”

Their message, he believes, is one that even Merkel is now listening to. But the big question remains unanswered: can Generation Normal really deliver the eurozone from the unprecedented and extraordinary predicament in which it finds itself?

Angela Merkel and François Hollande focus on growth in Greece – video

Category : Business

The newly inaugurated French president, François Hollande, and the German chancellor, Angela Merkel, agree to work closely on growth in Europe

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French Socialists celebrate as Greece voters reject austerity – as it happened

Category : Business

• Greek victor announces failure to form coalition
• US markets unmoved by European turmoil
• Obamas extend ‘very best wishes’ to Sarkozy, Bruni

10am ET/3pm BST: This morning we’re tracking the major rearrangements of European politics and how they might register across the globe – welcome to our live blog coverage. Tom McCarthy here in New York, and here’s a summary of the latest developments:

France struck out in a major new direction on Sunday, ejecting Nicolas Sarkozy from the presidency and voting in Socialist party candidate François Hollande. Hollande campaigned on a platform of promoting growth as opposed to the mere elimination of debt. He campaigned against unpopular austerity measures.

In Greek parliamentary elections voters rejected two mainstream parties who had helped negotiate austerity plans meant to pull the country out of its debt crisis in favor of extreme candidates who echoed the popular outcry against austerity. The move cast further doubt on Greece’s long-term ability to stay in the eurozone.

American markets reacted with indifference at the start of trading Monday, with the Dow Jones average down 0.2%. Built-in expectations of a swing away from austerity in Europe coupled with diminishing fears of a sharp new European downturn contributed to market stability.

Hollande’s election was seen as threatening to the Franco-German co-operation on corralling European debt through tighter budgetary discipline. German chancellor Angela Merkel sought to tamp down speculation of a fracturing of European leadership. “I may say from my side that François Hollande will be welcomed with open arms here in Germany by me,” Merkel said Monday. “We will work together well and intensively.”

• The euro was trading at its lowest level in months after the developments of the weekend. Markets in Europe and Asia slumped with the news.

10.45am ET/3.45pm BST: What do the developments in Europe mean for the United States? My colleague Dominic Rushe is watching the first reactions of American markets and provides a little historical context:

The US stock markets are still nonplussed by the European news. Last year the Greek debt crisis helped wipe out a spring rally in the US stock markets and investors here seemed terrified that Europe was made up of country-sized Lehman Brothers all waiting to fall like dominoes.

Now everyone’s favorite fact about Greece is that its economy is the same size as the Dallas-Fort Worth.

Big but not big enough to matter to the US economy.

Jacob Kirkegaard at the Peterson Institute wrote a great piece last week that may explain the as-yet muted reaction to the death of “Merkozy” and the electoral mess in Greece. His basic argument is that very little has really changed after the election of Hollande and that the Greeks face a dilemma that hasn’t changed: agree to reform and stay in Europe or leave. And they don’t want to leave.

We caught up with Kirkegaard this morning. He said that Hollande had little real room for manoeuvre and that Greece still faced the same choice: “Do you want to stay in Europe or join the Levant?”

He’s betting they want to stay.

10.54am ET / 3.54pm BST: Does the potential collapse of the eurozone mean American investments are vulnerable this morning in a new way?

There’s one US investor who doesn’t appear to be worried: Warren Buffett.

Speaking this morning to CNBC, the billionaire head of Berkshire-Hathaway said he expects Europe to steer its way out of its debt crisis, but not without some pain.

The U.S. economy, in any case, is on a “different path” from Europe, with the US having already addressed insolvency in its biggest banks, Buffett told CNBC’s Becky Quick.

Buffett also spoke to the difficulty of acting in 17 countries simultaneously in Europe. The US government can – and did – come to the rescue of the big banks with little discussion outside a tight group of officials acting at the behest of a sole chief executive. Not so in Europe.

11.15am ET/4.15pm BST: Which development will have more long-term consequences for Europe: the election of François Hollande or Greece’s move for the exits of the eurozone?

Matthew Yglesias says despite his campaign rhetoric, Hollande may find that his hands are tied if he seeks a major shift in European fiscal policy:

All that said, when very plausible story of what happens next is simply that the European Central Bank will decide it needs to bring the continent’s newest leader to heel. If the ECB signals that it will only support the French banking system and the French economy if Hollande sticks with the status quo program, then Hollande may well have no choice. Elections in Europe aren’t necessarily what they used to be. Nobody’s crying over Silvio Berlusconi but he was Italy’s elected Prime Minister and he lost power not in an election but it a made-in-Frankfurt call by the central bank.

Paul Krugman sees the Greek elections as a rejection of failed incumbent officeholders, more than as a positive statement of a new political direction:

Backing up a minute: I don’t think you want to read European elections in terms of any particular ideological tide. This is very much a Larry Bartels world in which voters toss out incumbents and reward insurgents if the economy is bad, never mind the specifics of their platforms. Hollande’s victory in France is no more a harbinger of a general leftward shift than Rajoy’s victory in Spain a little while ago heralded a general rightward shift; these are just the “outs” benefiting from the fact that they aren’t in, and the economy stinks.

The Economist sees the Greek election as clearly the more substantive – not to say more ominous – development of the two:

The fragmentation in Greece will inevitably raise the question of whether the country will leave, or be pushed out of, the euro zone. Until now European officials have been adamant that any breach of Greece’s second austerity and reform plan would lead to the halting of its rescue funds.

11.24am ET/4.24pm BST: Euro up, Greece down: it might be a summary of what will happen in the next year. In any case it’s what happened at the close of the trading day in Europe Monday.

Greek stocks were down 6.7 percent, on the sense that a series of carefully crafted austerity plans to deliver the country from its debt crisis were on the verge of being summarily jettisoned.

The euro, meanwhile, reversed its sharp dive to maintain parity with the dollar, the AP reports:

In the currency markets, the euro recovered its poise after falling to a three-month low against the dollar during Asian trading hours. It was up 0.5 percent at $1.3040, having earlier fallen to $1.2972.

Earlier in Asia, Japan’s Nikkei 225 index plunged 2.8 percent to close at 9,119.14 — its lowest finish in three months — with the market’s export sector also sapped by a rising yen. Hong Kong’s Hang Seng slid 2.6 percent to 20,536.59. In other Asia markets, Australia’s S&P/ASX 200 lost 2.2 percent to 4,301.30 and South Korea’s Kospi shed 1.6 percent to 1,956.44.

11.40am ET/4.40pm BST: In the heady early-’90s days of Maastricht and eurozone cheerleading, a vocal minority warned that economies so vastly different could never be made to stick together in the long term.

It is premature to take up the original euro criticism as having been correct. But Derek Thompson of the Atlantic is onto a chart that illustrates, somewhat mirthfully, its truth.

The chart, by JP Morgan analyst Michael Cembalest, measures “dispersion” among economies of the euro-zone and in other monetary unions such as Gulf State GCC countries. The taller the bar, the greater the dissimilarity in member economies.

(Click here for a full-sized chart.)

Among these actual unions the chart mixes hypothetical unions, such as all countries falling inside the former Ottoman empire.

Guess which union is the most disparate of all? Writes Thompson:

“A monetary union might make more sense for every nation starting with the letter “M” than it does for the euro zone.”

11.50am ET/4.50pm BST: Conservative Washington Post columnist Jennifer Rubin says the elections in France and Greece hold three lessons that spell trouble for President Obama:

First, economic non-performance by an incumbent government is not acceptable. Excuses wear thin with anxious voters.

Second, a failure to deal with fiscal problems early on results in economic and political crisis down the road, when the cure becomes much more extreme.

And finally, so long as governments impose anti-growth, high tax policies that impede economic vitality, incumbent governments will fail both to meet their debt obligations and satisfy popular demands for jobs and prosperity.

Not everyone agrees that the lessons of the European elections are so obvious:

Pretending to draw lessons about America from an election in France is political amateur hour

— Doug Mataconis (@dmataconis) May 7, 2012

12.05pm ET/5.05pm BST: How is austerity where you live? Do you need more austerity, or less? Who has the right to impose austerity?

My colleague Katie Rogers has a short history of how a single word came to summarize the debate over Europe’s future.

“Austerity” achieved the questionable honor of being Merriam-Webster’s Top Word of 2010 — runners up included “moratorium” and “socialism.”

“Austerity no longer needs to be our fate,” Hollande said in his victory speech Sunday evening.

The two main political parties in Greece are under fire, but their rejection is as much an attack on externally imposed “austerity” rules as the political status quo.

“We are talking about a complete collapse of the party system as we have known it, which opens up new concerns about Greece’s ability to govern itself,” Dimitris Keridis, professor of political science at Athens’ Panteion University, told The Guardian’s Helena Smith Sunday.

In France, eyes are locked on Germany — specifically, Merkel’s reaction to Hollande’s promise to end “austerity.”

“Perhaps the reality of the euro zone right now is that this isn’t just about what Hollande does now,” writes The Washington Post’s Ezra Klein. “It’s about what Merkel wants to do now, and what the [European Central Bank] wants to do now.”

12.22pm ET/5.22pm BST: President Obama’s former chief of staff, Rahm Emanuel, now mayor of Chicago, doesn’t think François Hollande is presidential material, thank you very much.

“To me, [Hollande] has more of the head of a prime minister than of a president,” Emanuel told a group at the French ambassador’s residence, according to a Libération report (quotation translated back into English from the French). Emanuel added that in his professional opinion Hollande isn’t going to be able to grow into the job, either.

Libération also wades into one of the loonier aspects of the French election as interpreted by Americans. The paper quotes a Washington diplomat as saying that the new French president better get somebody over here pronto to explain to the American market that even though Hollande is a member of the Socialist Party, he’s not actually a socialist, or at least not like that.

“What I’d suggest to Francois Hollande is to send very quickly a representative to New York, to reassure the markets which are very nervous,” the paper quotes an anonymous official as saying. “The word ‘socialist’ still makes investors here afraid.”

We’re certain that President Obama – socialist-in-chief to some of his sharper critics – would love to appear with Hollande on a multi-state barnstorming tour to open a discussion with Americans about what socialism is and how neither man embodies it.

(h/t: BuzzFeed)

12.55pm ET/5.55pm BST: And now, From the Comments, a call for a deeper take on the parliamentary elections in Greece:

So far we’ve had the French elections in great detail – locally, nationally, internationally, as it happens. Whereas the quite extraordinary results from the elections in Greece have mostly been reported from a business and economics perspective. Could we have a bit more of what’s going on there socially and politically please? It seems pretty significant.

First, back to the results in Greece. Greek voters rejected the middle and went to the ends. The voters approved politicians on the far right and left who virulently opposed the deficit-reduction policies demanded by international creditors.

The conservative New Democracy party came in first but with 18.9% of the vote. The far right Chrysi Avgi (Golden Dawn), which campaigned on an anti-immigration ticket, captured 7% of the vote – enough to place 19 deputies in the 300-seat house for the first time since the collapse of military rule in 1974. Syriza, a coalition of radical left and green groups, took 16.6% of the vote – the second largest share.

What are the social and political implications of the vote? It’s tempting to read such a flight to the extremes as a classic rejection of incumbency. Meaning the vote doesn’t affirm anything about the electorate, apart from widespread dissatisfaction.

The Guardian’s Helena Smith is in Athens:

Voters went out of their way to “punish” mainstream parties widely blamed for years of fiscal mismanagement. “How can we vote for parties to be part of the solution when they got us in this mess in the first place?” asked Poppi Stathera, a mother of two, who said she had been out of work for the past year. “We’ve been completely destroyed. Our country is in ruins.”

The Greece election is not to be compared, however, to the usual midterm cleaning of the stables in the US Congress. The fatal riots in Greece of the last two summers raised the specter of societal collapse.

Voters may have been rejecting austerity, but there is also the sense that they were giving voice to a deep sense of insecurity – the kind of feeling that drives support to the political extremes.

Paul Krugman sees parallels with the pre-WWII era

And since all the respectable people are inside the political tent, backing and being identified with failed policies, that means a big vote for extremists right and left.

And yes, the echoes of the 1930s are very strong.

1.08pm ET/6.08pm BST: As an addendum to our last post, we want to direct you to Maria Margaronis’ illuminating column today, “Greece takes a leap into the dark, driven by defiance and despair.” Margaronis traces the old lines of division submerged beneath the weekend tallies:

As elsewhere in Europe, the draining away of the centre has revealed a jagged landscape: the shorthand of “extremes of left and right” doesn’t begin to map it. The most obvious rift in Greece in the last months – a rift that’s been described to me more than once as a “civil war”– has been between those who are for and against the “memorandum”, the EU/IMF schedule of demands. The pro-memorandum forces want to keep Greece in the eurozone at any cost; most of their opponents also want to stay in Europe – but not of “Merkozy”, austerity and the banks.

Across that rift runs an older, deeper one, whose roots go back at least as far as to the actual civil war that followed the Axis occupation, leading to 30 years in which the left was outlawed, and culminating in the neo-fascist junta of 1967 to 1974. The social and political collapse brought by the crisis has revived those memories, too, as well as old family loyalties. In the summer of 2011, when the aganaktismenoi (“outraged”) of Syntagma Square briefly became the darlings of the foreign media, conservative truck drivers could rub shoulders with eco warriors and direct democracy mavens; the Greek flag could stand for self-determination as well as nationalism. But not any more.

1.20pm ET/6.20pm BST: What did François Hollande promise the French to win their votes? The Economist presents a summary under the headline, “Here comes the hard part”:

Most of his campaign pledges—such as a boost in welfare benefits at the start of the school year, an extra 60,000 teaching jobs, and a partial reversal of the retirement age from 62 to 60 years—involve extra spending. Yet in France public spending already accounts for 56% of GDP, and the overall tax take is also high. And the IMF is forecasting a deficit closer to 3.9% for 2013. Mr Hollande will have very little room to manoeuvre. Winning the election was one thing; the hard part is about to begin.

1.35pm ET/6.35pm BST: Turning now to Spain, where a shake-up in the banking industry overlaps with the political shake-ups elsewhere on the continent.

With the election of Hollande, Spain may see some relief in its pursuit of tight budgetary targets imposed by agreement last year. Now the conservative prime minister has indicated that one beneficiary of any new budgetary breathing room would likely be the banking sector.

Here’s the Guardian’s Giles Tremlett in Madrid:

One of Spain’s most high-profile financiers, Rodrigo Rato, resigned Monday as
head of the country’s third-largest bank, Bankia, just hours after prime minister Mariano Rajoy announced a major shake-up of the troubled banking sector.

Rato’s surprise departure was seen as proof that ailing Bankia, which holds 10% of the country’s deposits, was about to be rescued by the Spanish government.

Bankia now looks likely be the centrepiece of a fresh round of financial sector reforms as Rajoy tries to boost confidence in a country that lies at the heart of the eurozone crisis.

Rajoy looked ready to backtrack on pledges not to use more public money on banks. “The last thing I would do would be to inject or lend public money but if it is necessary I would not hesitate to do it, just as other European countries have done,” Rajoy told a radio interviewer yesterday.

He was speaking as the financial markets attempted to digest the implications of the election of the Socialist François Hollande as president in France and the outcome of the Greek elections where the formation of a government looked unlikely.

Rajoy said details of the shake-up in Spain would come after Friday’s cabinet meeting, but there were rumours that a Bankia announcement would come sooner.

“The objective is to send a strong signal to the markets and also to the International Monetary Fund and other international partners that the (Bankia) plan is ambitious and strong and will complete our ongoing banking reform,” an official source told Reuters.

1.43pm ET/6.43pm BST: Which is more significant: the election of Hollande or the political upheaval in Greece?

Britain’s former foreign secretary sounds as if he might be persuaded to entertain the idea that François Hollande is not the best thing that’s ever happened to Europe. But he’s much more concerned about developments further south:

Greek election result far more “dangerous” than Francois Hollande.

— David Miliband (@DMiliband) May 7, 2012

1.46pm ET/6.46pm BST: So it’s plus ça change, plus c’est la même chose as far as the European stock markets are concerned, my colleague Dominic Rushe notes.

In Paris the CAC 40 index ended the day up 1.65%, while in Frankfurt the DAX 30 finished 0.12% up – nothing to shout about but a clear indication that as far as investors are concerned, the political turmoil is a side show.

In London the markets were closed for a public holiday.

1.52pm ET/6.52pm BST: Warren Buffett thinks the euro was a mistake – at least as it was carried out.

That’s what the billionaire investor, who is giving frequent interviews for the annual meeting of his company, Berkshire Hathaway, just told Fox Business.

“The problems facing Europe transcend those in any specific country. They have to work out the rules under which 17 countries can work together,” Buffett told Fox.

“I think maybe it was a mistake; it was a mistake as it was done. Now the question is whether you can modify the original concept in some way to make this more workable than it is proving to be. Getting out of it would be an enormous problem.”

Buffett was asked if the euro was a mistake.

“I think that getting out of it would be an enormous mistake too,” he replied. “I think maybe it was a mistake as it was done. In fact I can say it was a mistake as it was done. Now the question is can you modify the original concept in some way that makes this more workable than it’s proving to be.”

2.02pm ET/7.02pm BST: The top vote-getter in Sunday’s elections in Greece has announced that efforts to form a coalition government have failed.

Antonis Samaras’ conservative New Democracy party garnered 18.9% of the vote. But the party cannot draw together sufficient allies to govern, the Guardian’s Helena Smith reports.

“We did whatever was possible” Samaras told Greeks in a national address Monday night. He said he had reached out to every party with the exception of the extreme right Chrysi Avgi.

“I have informed the president [of the failed effots] and returned the mandate,” Samaras said.

Now the Radical Left Coalition party, which came in second, will get a chance to put together a ruling alliance. RLC head Alexis Tsipras will have three days to seek a coalition.

If his talks fail, according to the Associated Press, the party that came in third in Sunday’s vote will get the mandate. No agreement could force new elections next month.

2.38pm ET/7.38pm BST: How will the German authors of Europe’s austerity program greet the Hollande presidency? Will they be biding their time until they can say “I told you so”? Would London like to see Hollande fail, out of spite?

That’s what Andrew Sullivan expects:

It’s not clear to me that the EU can remain fiscally sound while remaining democratic – unless some glimmer of growth returns to somewhere other than Germany. Cameron and Merkel would provide a natural pro-austerity axis, if Britain had actually signed the fiscal pact. What I expect from London is pure anti-French schadenfreude.

Sullivan finds evidence of skepticism in a Telegraph report:

A senior Conservative source told The Daily Telegraph that fears France was about to reverse course would cause turmoil and uncertainty: “Clearly it’s going to focus a lot of market attention on the French public finances, which are nothing to write home about. I don’t think it is going to make life in the bond markets any easier next week. We haven’t chosen austerity because it’s fun. We have to do austerity, and so does France. He will have to be very careful about his public spending commitments and the lack of welfare reform.”

2.56pm ET/7.56pm BST: A president for all of Europe? The task before François Hollande stretches beyond the borders of France, Matt Browne of the Center for American Progess writes:

Hollande realizes that the policy options open to any one nation in a highly integrated European economic area are marginal. From day one of Hollande’s campaign, he has focused on Europe. Speaking at the Global Progress summit organized by the Center for American Progress in Madrid last October, two days after becoming the party’s nominee, he called for an end to austerity. …

Like President Obama four years ago, the expectations now resting on Hollande’s shoulders are unrealistically high and extend well beyond his national borders. And like in 2008 change today will take time. But by focusing on progressive, pragmatic, pro-growth policies, the new French president has set out a realistic and achievable vision of the Europe we need.

(h/t: Matt Yglesias)

3.46pm ET/8.46pm BST: More in from Athens where Helena Smith says the Left Coalition (Syriza) is vowing to make “good use” of the three days it will have at its disposal to try to form a “durable” government.

Antonis Samaras of the conservative New Democracy party, the first-place election winner, announced earlier this afternoon that it had failed to put together a governing coalition.

“We are the second biggest party. We are very aware of our responsibility towards the Greek people and will make good use of our mandate,” Dimitris Stratoulis, a party official, has just told Mega TV.

At no other time in the nation’s modern history have radical leftists received a mandate to form a government.

“Our aim is form a government of the left that will liberate the country from the shameful loan agreement it has signed up to,” said Stratoulis, rebuffing suggestions that the party was bent on elections being repeated so that it could improve its poll ratings further.

3.58pm ET/8.58pm BST: Keep in touch?

WH: “President Obama said he & Mrs. Obama extend their very best wishes to President Sarkozy & his wife Carla in their future endeavors”

— Ed Henry (@edhenryTV) May 7, 2012

4.07pm ET/9.07pm BST: “Stocks Shrug Off Europe” – that’s the CNBC headline at the close of trading on the East coast. The Dow Jones index closed down 0.2%, Nasdaq closed up 1.42% and the S&P 500 closed up .54%.

Anyone searching for an explanation of why the markets didn’t “react” to the change of government in France and lack of a government in Greece might do well to consider how “easy” it would have been to explain a wild market reaction to the likely crumbling of the eurozone.

The standard explanation is to say that the information was pre-baked in the market cake, and that traders anticipated the results.

We wonder if the traders can tell us what’s going to happen next. Because we sure would like to know.

5.06pm ET/10.06pm BST: Here’s a less prosaic take on the French elections.

The French site Rue89 has created an animation called “Ciao Sarko,” in which Hollande vs. Sarkozy becomes Angry Birds vs. Thieving Pigs.

The Hollande bird slingshots into the Elysée Palace, bringing down the smug Sarkozys within.

Speaking of Angry Birds, Forbes reports that the game’s Finnish developer, Rovio, chalked up $100 million in sales last year and may be prepping for a mammoth IPO.

(h/t: Le Monde)

5.45pm ET/10.45pm BST: We’re going to wrap up our live blog coverage of how the European election results are playing around the world. Here’s a summary of the latest developments:

The top Greek vote-getter, the conservative New Democracy party, announced that it had failed to form a viable governing coalition. The challenge of forming a government now passes to the far-left Syriza party, which won the second most votes Sunday. If they fail, third place gets a crack.

US markets didn’t move much on Monday, despite the excitement overseas. The euro closed slightly up after a steep dropoff in overnight trading.

If François Hollande wants growth for France, he’s going to have to cut a deal that touches all of Europe, analysts agree. Hollande will begin by trying to relax austerity measures written in Germany and applied everywhere from Spain to Greece. He is preparing to take power a week from tomorrow, May 15.

The Obamas wished the Sarkozys well. Former Obama chief of staff Rahm Emanuel pitched in his two cents, too, saying he didn’t think Hollande was presidential material.

Kipper Williams on Hollande and Holland

Category : Business

Contrasting fortunes for François Hollande and the Dutch economy

See the article here: Kipper Williams on Hollande and Holland

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