Super Mario and the European Central Bank

Tuesday, a new player moves into the top rung of European officials dealing with the European financial crisis. 

Mario Draghi is not “new” to the European scene, but on Tuesday he takes over as the president of the European Central Bank replacing Jean-Claude Trichet, and so is “new” in this important position.

A new head of a central bank is generally “known” but, not having ever been in the position before, he (when are we going to get a woman head of a central bank?) is untested and it is uncertain how he will really act under pressure. 

There is an interesting article in the Sunday New York Times about Mr. Draghi titled “Can Super Mario Save the Day for Europe?” that gives us some background on this “new” leader: (http://www.nytimes.com/2011/10/30/business/mario-draghi-into-the-eye-of-europes-financial-storm.html?_r=1&ref=business)

In this article Mr. Draghi is cited as vowing “that there would be no surprises on his watch.”

Vintage Draghi seems to provide a “performance so subtle and politic that it seem(s) to please everyone.  Which, it turns out, is the Draghi way: people often seem to see what they want to see in him.” 

Yet, Mr. Draghi seems to produce.  Although having sterling academic credentials, he in not some academic that gained his laurels by writing about historical events.  He has actually been in “real” administrative positions that have required tough decisions to be made and leadership to be shown.  In these positions he has shown well. 

He has been in the private sector and, although this is the place where people seem to question some of what he has done, he performed well in his role as a vice chairman of Goldman Sachs in Europe.  

He seems to be a person that let’s his actions define his positions and does not get all “hung up” about how best to communicate with investors and markets as does the current Federal Reserve System. 

I particularly like the description of Mr. Draghi given by Francesco Giavazzi, who worked for Mr. Draghi at the Italian treasury.  Mr. Giavazzi, a classmate of his at M. I. T., states that Draghi learned a very important lesson in his efforts to bring Italy’s fiscal problems under control so that Italy could join the new common monetary zone that was being created for Europe.  At that time Italy was dealing with “high levels of debt” and “runaway deficits” which led to Italy being expelled from the European Exchange Rate Mechanism, the European currency system that preceded the formation of the eurozone. 

The efforts of Mr. Draghi and his team brought things under control so that Italy avoided bankruptcy and could become a founding member of the new currency union.

Mr. Giavazzi states that the lesson that Mr. Draghi learned through this experience “is that rather than waiting for help, you need to regain the confidence of the markets through your own actions, and that if you do not do the right thing, no outside help is enough—you will have a solvency problem.” 

Encouraging.

Furthermore, people that have worked with Mr. Draghi claim that even though he is an economist he “put aside models and theories for what actually works.”  Mr. Draghi seems to be a pragmatist. 

So, Mr. Draghi appears to be an experienced, pragmatic leader who is confident enough in his abilities that he can let his actions speak for themselves.

Sounds too good to be true!

Best wishes, Mr. Draghi, we all wish you the greatest success!        

Have Things Changed in the United States Budget Debate?

Last week, April 7, 2011 to be exact, things started to change. Jean-Claude Trichet, President of the European Central Bank, guided the ECB to an increase in its policy interest rate, moving from 1.00 percent to 1.25 percent. (See http://seekingalpha.com/article/262429-trichet-delivers-ecb-hikes-its-interest-rate.)

The night before the announcement, Portugal declared that it would seek a bailout from the European Union.

Last Friday evening, President Obama, the United States Senate and the United States House of Representatives reached an eleventh-hour agreement on the 2011 fiscal budget.

Yesterday, President Obama gave a speech laying out his ideas about improving the fiscal position of the United States government in the upcoming future.

Has Trichet and the ECB provided the turning point?

It is not altogether clear that the financial markets believe that the real attitudes in the United States have changed. Since the Trichet announcement, and through the political maneuvering in the United States over the past week, the Euro rose from about $1.42 per Euro to about $1.46 per Euro. Op-ed pieces in the Financial Times have argued that the Americans are really not serious about getting the budget under control. Seems as if people are not convinced yet that there is anyone in the American government that is intent upon really doing something about the situation. They are just posturing.

And, there is one person I have not mentioned that plays a vital role in this scenario: Ben Bernanke.

Bernanke in now on the opposite side of the picture from Trichet. (http://seekingalpha.com/article/261863-the-euro-trichet-vs-bernanke)

Trichet has turned the corner and raised interest rates.

Bernanke continues to promote QE2.

The Europeans cannot fault the Americans for messy governance. Since the sovereign financial cookie began to crumble in Europe in January 2010, the governments in Europe have fallen all over themselves trying to avoid any real fiscal action that would restore order to the national problems of the continent.

This has allowed countries to delay taking real actions that might resolve the European situation.

Then Trichet stepped up. Because of the pending ECB movement, Portugal had to move, they had to show some activity before the rate increase was announced.

Now, other European nations are on notice. Trichet has indicated that the recent move was not necessarily a part of multiple moves in the interest rate. But, I don’t think that any European nation doubts that Trichet and the ECB will continue to raise rates if the troubled nations don’t seriously attack their problems.

As I said, Bernanke is on the opposite side of the picture.

The Bernanke record? Before the Jackson Hole speech in late August (http://seekingalpha.com/article/222704-bernanke-in-the-hole), a Euro could be purchased for about $1.27. By early November, the price of a Euro had climbed to about $1.42. Into January, as the governments of the European Union messed around, this price dropped to around $1.30. Trichet started making noises that maybe the ECB needed to start raising interest rates and this resulted in value of the Euro rising again to around $1.40. And, Bernanke continued to defend the Fed’s quantitative easing!

What is Bernanke holding out for? What does he know about the economy or the banking system we don’t?

Of course, Bernanke has always been late to the dance. He was still promoting excessively low interest rates in the early 2000s when the housing bubble and the stock market bubble were accelerating. He was still fighting inflation in August 2007 as the regime of the Quants broke. He was still worried about inflation in August of 2008 until he wasn’t worried about inflation in September 2010. (See http://seekingalpha.com/article/106186-the-bailout-plan-did-bernanke-panic)

Any bets that Bernanke will be late to the party once again?

But, when it comes to the lack of confidence in the will of the United States to support the value of the dollar, Bernanke is not alone. With two exceptions, the United States government has followed a policy of credit inflation for the last fifty years that has resulted in a decline in the value of the dollar against major trading partners of around 35 percent. The value of the dollar has declined against other, non-major trading partners, by even more than 35 percent over this time period.

The two exceptions came when the monetary policy of the United States was led by Paul Volcker, 1979-1987, and the fiscal policy was led by Robert Rubin, 1995-1999. During these periods the value of the United States dollar rose strongly. Yet, overall, the value of the dollar still declined by 35 percent.

And, the United States dollar is the reserve currency of the world. We should be really proud of having this responsibility. And, in carrying out this responsibility the economic policy of the United States government has caused other sovereign nations to lose part of their wealth due to the fact that the United States was inflating their currency and causing a decline in the value of the currency reserves these nations were holding.

For the near term, Bernanke is going to “stay with the fight”. That is quantitative easing is going to be continued through June. Between now and then the “debt ceiling” fight is going to heat up along with the competition now being billed as the “budget debate.”

And, the value of the United States dollar will continue to decline (baring other shocks to the world).

The value of the United States dollar will continue to decline over time as long as the rest of the world believes that we will not get our fiscal house in order and also believes that our central bank will continue to inflate the globe!

How will we know if the rest of the world begins to take our fiscal and monetary responsibilities seriously?
We will know that attitudes have shifted once we begin to see the value of the dollar firm up and even begin to rise on information about growing discipline over the budget and monetary policy. (I have written an Instablog on this: see “What is Needed to Reduce the Federal Deficit,” March 3, http://seekingalpha.com/author/john-m-mason/instablog.)

For now, we hear a lot of platitudes in the budget debate but very little noise of rubber hitting the road. We have a right to remain skeptical.

Trichet Delivers: ECB Hikes Its Interest Rate!

The European Central Bank raised its policy interest rate by 25 basis points this morning and, I believe, changed the game.

Mr. Trichet, president of the ECB, delivered on his promise initiatlly given in March.

To me, this is a “tipping point”, even though the Bank of England kept its policy rate constant. Other central banks around the world have been raising their policy rates over the past year but no “Western” central bank had followed.

Now, the “West” has followed and this alters, not the outlook for interest rates, but the timing of future increases.

There are three areas one needs to focus on within the current environment.

First, keep an eye on what goes on in the Eurozone in terms of country “bailouts” and the potential re-structuring of the sovereign debt within the nations of Europe.

It was not a coincidence that Portugal asked for help the day before the meeting of the ECB. Portugal has lots of debt coming due this year; its credit rating has gone through several reductions already this year; and the country is without a government and facing an election. Even Portuguese banks were saying that they would not buy anymore debt issued by the government of Portugal.

Facing a “new” attitude in the capital markets and rising interest rates, what is substituting for a government in Portugal had to act. In essence, the IOUs were coming due.

And this means, I believe, that the IOUs are going to be collected elsewhere within the Eurozone. The day of reckoning has been advanced. People are going to have to do something now.

Second, watch what European banks are doing and are going to do. On Wednesday, two European banks announced their plans to raise new capital. The total to be raised amounts to about $19 billion and brings the total capital raisings announced this year by European banks to almost $36 billion.

Again, I don’t think that the timing of the announcement, the day before the ECB raised its interest rate, was a coincidence.

Furthermore, the Spanish government this week stepped up efforts to get its “healthy” banks to buy up a good portion of its “savings” banks in an effort to shore up Spain’s threatened banking industry. With Portugal now seeking help, a greater focus is going to be placed upon the fiscal health of the Spanish government and its banking system. Spain is going to move because it appears as if it may be “next in line”.

In addition, there still are the results of the recently applied “stress” tests on the commercial banks of Europe. Two things here: there is the question about how valid the tests are; and there is the response of the banks, themselves, to the results of the tests.

The European “stress” tests are already being questioned relative to whether they are strong enough to really be anything but a subject of jokes. If the tests are too weak to prove anything, then the credibility of the European regulators will suffer a serve blow at a very crucial time. This will not raise the financial markets confidence in the European banks and the European banking system.

The European banks may have to “act on their own” to overcome this loss of regulatory credibility. The way to do that? The banks can raise a significant amount of capital on their own and take the whole question of capital adequacy out of the hands of the regulators. This may be a part of the strategy of the European banks that are now raising capital.

Third, continue to observe the behavior of the United States dollar in foreign exchange markets. My guess is that this move by the ECB to raise its interest rate will cause further erosion of the value of the United States dollar in foreign exchange markets. This move may not be immediate, but will persist over time.

By raising its policy rate, the ECB may be forcing Europe to get its act together and resolve some of its solvency and governance issues. The movement by the Portuguese is just a starting point. The movement of the banks adds momentum to the process. If this action truly brings events “to a head” then, I believe, everyone will be better off for it.

But, if Europe begins to move in the right direction, what is in store for the United States dollar?

Europe moving to resolve some of its issues will only result in more pressure for the value of the United States dollar to decline. And, this decline will only provide additional evidence that the international community has little confidence in the current leadership of the United States to really address its fiscal (and monetary) problems.

The question then becomes…will this change the nature of the discussion within the United States?

Will this twenty-five basis point change in the policy interest rate of the European Central Bank serve as anaction that creates the “tipping point” for the direction of economic and fiscal policy in Europe and the United States?

I’m sure that the wiley Mr. Trichet would like to see this happen.

I’m not sure that the former professor of law from the University of Chicago and the former chairman of the Princeton Economics Department would agree.

The Dollar: America versus the World

I look at the following chart and ask whether or not there is some constant factor that stands behind the decline in the value of the dollar over the past fifty years.

Well, you say the chart only covers roughly forty years, why are you talking about fifty years?

You are right that the chart covers only the last forty years or so, but the consistency that runs from the early 1960s to the present began around fifty years ago.

The constant that runs throughout this time period is credit inflation. The foundation for this credit inflation was a “new” philosophy of the government’s program of fiscal policy, one that aimed at achieving high levels of employment. And, this new philosophy was essentially adopted by both the Republicans and Democrats in the United States government.

The consequences of this policy:

• The gross federal debt of the United States increased at a compound growth rate of about 8.0% per year for the last fifty years;

• Up until 2008, the Federal Reserve increased the monetary base at a compound rate of 6.2%;

• Total credit market debt in the United States increased at a compound rate of almost 10.0%.

• A dollar which could purchase $1.00 worth of goods and services in 1960 could only purchase $0.15 in 2011.

The credit inflation was started in the 1960s. It became such a problem that the United States floated its currency on August 15, 1971, and, with two exceptions, declined by about 35% against major currencies from early 1973 through March 2011. The two exceptions were the Volcker-led monetary tightening beginning in 1980 and the Rubin-led efforts to balance the federal budget around 1995.

One could argue that the credibility of the United States government for maintaining a stance of fiscal discipline, with these two exceptions, has been very, very low. And, that is the problem the United States finds itself in at the present: the behavior of the government, especially represented by Chairman Bernanke at the Federal Reserve, is seen as “just more of the same” economic policy that has been followed over the last fifty years. Consequently, the value of the dollar continues to decline.

In terms of the euro, Jean-Claude Trichet, the president of the European Central Bank, seems strong relative to Mr. Bernanke, and the value of the dollar continues to decline against the Euro. (http://seekingalpha.com/article/261863-the-euro-trichet-vs-bernanke)

It has been argued that Mr. Trichet and Mr. Bernanke have been working together during the recent financial crisis. That may be true, but coming out on this side of the crisis it looks to me like Mr. Trichet was the “craftier” of the two. Check out the chart below.

Beginning in September 2008 Mr. Bernanke began to inflate the Fed’s balance sheet. The total assets of the Fed jumped from about $0.9 trillion to $2.2 trillion. Mr. Trichet saw the total assets of the ECB increase, but the increase was far short of what the Federal Reserve did. (http://www.ft.com/cms/s/3/98ad43ec-5fac-11e0-a718-00144feab49a.html#axzz1IeD3XCmo)

Now the ECB may not have had as much to work with as the Fed, but in any case it looks as if Mr. Trichet got Mr. Bernanke to do most of the work for him through the crisis. (Check out the Fed’s recent release of borrower’s during the crisis and all the various comments that reflected on this release. There is some feeling that maybe Mr. Bernanke did not always act in the most disciplined way during this time period: http://seekingalpha.com/article/106186-the-bailout-plan-did-bernanke-panic.)

As a consequence, the current position of the ECB is much more conducive for Trichet to begin raising the Eurozone policy interest rate and, if needed, begin to focus more on the fact that inflation in the Eurozone is starting to become of concern once again.

The United States still faces the reality that, in terms of monetary and fiscal policy, there are no leaders who possess any credibility when it comes to budgetary discipline. This is the underlying constant of the past fifty years (with the two exceptions mentioned) and this is the basis for a continuing downward trend in the value of the United States dollar against other major currencies.

Paul Volcker has argued that the value of a nation’s currency is the most important price in its economy for policy purposes. It seems as if very few people agree with him. So, it seems as if the future will be more of what we got over the past fifty years. This is not what is needed for an economically strong America.

For Mr. Trichet, the New Rules are "Insufficient"

The European sovereign debt unpleasantness continues.

Muddle, muddle, muddle…

The European finance ministers want automatic sanctions against EU countries that violate the debt levels assigned to the countries…

That is, unless a country has enough allies to be able to avoid the sanctions if they break the rules.

Jean-Claude Trichet, president of the European Central Bank, states that the new rules put into place on Tuesday are “insufficient.”

The next step in the application of these rules involves the approval of the European Parliament. The feeling is that this body, given the position taken by Mr. Trichet, will push for tougher rules.

We’ll see.

Meanwhile, back at the ranch, Moody’s Investors Service downgraded Portugal’s long-term government bond rating.

And, the finance minister of Greece, George Papaconstantinou, indicated that Greece might need additional aid beyond what was in its initial bailout which came in 2010.

Interest rate spreads on European government debt over German government debt rose again yesterday after spreads had fallen on Monday after reports from the weekend meeting of the finance ministers was released.

Financial markets just don’t seem to be convinced that the problems that exist within the eurozone are being faced. Government officials seem to want to return to a previous world and will try any band aid they can construct in order to get things “back to the past”.

At least two governments within the European Union are going to have to write down the value of their debt. Maybe there might be two more that will have to do the same thing.

Then, these nations are going to have to severely limit their future budget deficits.

After this, some of the peripheral nations are going to have to bring their economies into the 21st century. This is going to be the hardest part of this exercise.

The point here is that just getting government budgets back into greater balance is not going to do resolve all the issues of the European Union. One of the fault lines that Raghu Rajan writes about in his award winning book “Fault Lines: How Hidden Fractures Still Threaten the World Economy,” is the one that exists between those eurozone countries that are growing rapidly and those whose growth is lagging behind because they are still trapped in the 20th century.

So, in addition to just the fiscal issue, there are structural issues that some nations are going to have to deal with, and, given the protests and riots we have already experienced, it is obvious that such changes are going to be painful. But, the future of the European Union, as it now stands, depends upon this effort.

How can the European Union hold together when these social, as well as economic, issues that are so divisive must be dealt with? If the budget constraints are held to, the governments that face the greatest amount of change are not going to have the “deep pockets” needed to resolve the social unrest that might result. How can the needed change take place without a lot of economic “safety nets” in place, especially in Europe?

In my view, Europe has a long way to go and the sovereign debt problem is just a bump along the road. But, since the “people” issues connected with making these peripheral countries competitive in the 21st century are so important, the debt of these troubled countries should be written down so that the governments of these countries can get their fiscal houses in order.
Then, these governments can deal with the “safety net” issues that they will be facing.

Trichet is correct, what has been done is “insufficient”, but there is much more to the situation than that.

Trichet: It's All About A Strong Euro

Jean-Claude Trichet, the President of the European Central Bank (ECB), made headlines toward the end of last week by suggesting that the ECB might have to raise its major interest rate in April.


This suggestion raised quite a bit of controversy and also helped the Euro to rise, briefly, to more than $1.40 per Euro. It also, some said, set the stage for the weekend in Europe and the upcoming discussions about fiscal affairs in the eurozone countries. (http://seekingalpha.com/article/256255-meanwhile-back-in-europe-a-view-of-the-ecb-inflation-and-other-matters)


Trichet has been as hardnosed as anyone in recent years about keeping inflation in check. And, since 2003 when he became President of the ECB, he has been adamant about maintaining an inflation target as the primary objective of the central bank.


In doing so, he has been relatively successful in allowing eurozone economies to expand while keeping the Euro strong, especially against the United States dollar.







In this chart we see an almost steady climb in the dollar/euro exchange rate from about 2002 until late 2008 when the financial markets began to collapse and there was a “flight to quality” toward the United States dollar.

As market participants moved back into “risk” in 2009 the dollar/euro exchange rate began to rise again, roughly reaching $1.50 per Euro. The sovereign debt crisis in the eurozone resulted in another drop in the exchange rate but the Euro began to rise again once Fed chairman Bernanke started talking up his plans for Quantitative Easing, Part II, for the Federal Reserve in late August 2010.


The strength of the Euro, especially against the United States dollar, should be seen as a source of pride for the President of the ECB. Trichet, a Frenchman, saw how upsetting inflation or the threat of inflation could be in international financial markets when he served in the Treasury Department in France during the time that Francois Mitterrand was the President of the French Republic.

Mitterrand was a socialist and who came to power in 1981. Early in his first term, Mitterrand followed a radical economic program, including nationalization of key firms. The economy developed a serious inflationary problem and money fled France causing a substantial decline in the French Franc. After two years in office, Mitterrand made a substantial u-turn in economic policies. In March 1983 he presented the so-called “Liberal turn”, in which priority was given to the struggle against inflation so that France could remain competitive within the European Monetary System.


The young Treasury Department official took note of this and applied the lessons learned when he became a Governor of the Banque de France, a Governor of the World Bank, an Alternate Governor of the International Monetary Fund and the President of the ECB.

Leading the European Central Bank is one thing, but the ultimate success of Trichet’s efforts to keep European inflation under control is also dependent upon the European Union (EU) getting its fiscal act under control. The sovereign debt issue and its resolution amongst the eurozone countries is crucial to the EU in keeping inflation under control and even whether or not the Euro will continue to exist.


The problem in the eurozone is that the limits or restrictions on independent sovereign nations to conduct their own fiscal policies have not been very effective. The leaders of the EU are going to have to reach some satisfactory solution to this problem or there will be continued attacks on the sovereign debt of the less disciplined countries and this will tend to bring with it attacks on the Euro.

In my view, the EU has two choices. It either moves toward the German model of conservative fiscal control of governmental budgets or it fails to bring sufficient controls on less-disciplined governments which, to me, is basically saying that the EU will err on the side of not offending anybody.


To err on this latter side is to seal the fate of the Euro. If one takes the “weaker” side, if one allows the less-disciplined to get-away with their lack-of-will, then the financial problems of the eurozone will continue and there will be a movement away from the Euro. Over time, the value of the Euro will slowly deteriorate. The Germans will not remain in such a union and the Euro will become “legacy.”

Trichet hopes, I believe, that the Germans will prevail in determining the fiscal parameters of the European Union now being discussed. This, to me, is the only hope for the Euro surviving in the longer run. In this, the Germans win…which a lot of people in Europe…and elsewhere…don’t really want to see.

Ultimately, however, the more fiscally prudent nation will prevail whether or not the Euro does. I believe the Germans don’t want the Euro to become history, but they are not willing to sacrifice their economic strength and benefits to live with the excesses of other governments. It is good to be economically strong!


Thus, to Trichet, it’s all about a strong Euro. He has done his job in setting the stage for the continuing discussions within the EU over the future of eurozone cooperation, fiscal policies, and debt restructuring. For the eurozone to be a strong player in the global economy in the future, the EU must have a strong currency. Trichet has done his job in an effort to achieve this goal.

The European Union: It's a Question of Leadership

The dust is clearing around the recent negotiations in Europe concerning the “bailout” bill and what we are seeing, at least to me, is unnerving.

“France has won!” (“Paris seen as trumping Berlin at EU table” at http://www.ft.com/cms/s/0/4fbef0b4-5d5e-11df-8373-00144feab49a.html)

“The French government yesterday vowed to ‘reinvent the European model.” (“Sarkozy triumphs in his bid to rewrite the rules” at http://www.ft.com/cms/s/0/f2666c76-5d5d-11df-8373-00144feab49a.html)

The press has predominantly been following German Chancellor Angela Merkel over the past month or so as she struggled to achieve a “German” twist to the negotiations concerning the fate of Greece and the bailout package that was needed to keep the EU together.

Many in Germany did not like what her leadership has achieved as people voted against her party last Sunday making it ever so much more difficult for her to lead her nation.

Sarkozy, the president of France, kept a very low profile…for him.

And, who seems to have come out on top? France!

France’s intent? To build a new structure with greater budgetary policy co-ordination and more effective fiscal rules. In essence, to follow the French model, allowing the spenders to spend and the savers to pay for what the spenders are spending on.

The start is a vast loan facility to distribute cash quickly to “a stricken member” without prior approval from other national governments…especially Berlin! (However, the current effort is to last only three years, but once begun…)

Also, Sarkozy is said to be very happy with the decision of the European Central Bank to start buying euro-zone government debt. This is a massive step toward “Quantitative Easing” something the ECB had been constantly resisting.

The ECB has been “Bernankied”!

This shift in policy direction is seen by Sarkozy as “irreversible” and puts France in the driver’s seat.

In my mind, this “victory” just exacerbates the “race to the bottom” (See “How the euro-zone set off a race to the bottom” at http://www.ft.com/cms/s/0/5d666d5a-5c69-11df-93f6-00144feab49a.html.)

The feeling in Germany? The newspaper Bild Zeitung puts is very simply: "The 'safety parachute' for the euro is the ultimate crime for Europe. We Germans have made sacrifices for a stable euro for the last 10 years, with wage restraint and sacrificing pension rises. We have paid the price while others have been partying at our expense . . . Europe's path to a transfer union is simply a road to its ruin."

And, what direction are you betting the euro will go?

This whole muddle returns to the question of leadership and in Europe.

Unfortunately, I don’t see anyone there that I would call a real leader.

In terms of the leadership at central banks, the head of a central bank can only go so far in achieving a monetary policy independent of the party that rules a nation.

NOTE: Check out what recently happened to the head of the central bank in Argentina!

Ben Bernanke and the Federal Reserve System have never acted independently of the presidential administration in Washington, D. C. whether it was the Bush 43 administration or the Obama administration.

The only show of independence that Bernanke and the Fed has made is to keep the Congress from conducting an audit of them.

Alan Greenspan was the lackey of whoever was in the White House.

This is why the financial markets expect that sooner or later massive governmental deficits will be monetized. Central banks cannot forever “hold out” against a government that wants to continue to live way beyond its means.

And, because of this Jean-Claude Trichet should not be judged too harshly. The “profligates” are in charge and a central banker can only fight back so hard. At least if they want to keep their high profile position.

So, we go back to the victory that France has achieved. If people were uncertain over the future of the European Union and the future of the euro, in my mind a lot of that uncertainty has been removed.

The major uncertainties now relate to when the periodic financial upheavals are going to take place, how severe they will be, and how long it will take for a European leadership to arise that will have had enough of the “race to the bottom”?

Weak leadership always caves in to the popular short run viewpoint!