By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from MacroBusiness.
Back in December last year while discussing the ongoing woes of Europe, I suggested tha the fiscal compact may never actually be enacted because attempts to do so would have such a disastrous outcome that European nations will inevitably give up. I also mentioned in February that one of the things that could potentially effect any implementation was the European people themselves when they got to have a say about what was going on.
Over the weekend round one of the French presidential elections took place, and the results certainly aren’t pro-compact. In fact, I am not even sure they are pro-Europe:
Far-rightist Marine Le Pen threw France’s presidential race wide open on Sunday by scoring nearly 20 percent in the first round – votes that may determine the runoff between Socialist favorite Francois Hollande and conservative President Nicolas Sarkozy.
Hollande led Sarkozy by about 29 to 26 percent in reliable computer projections broadcast after polling stations closed, and the two will meet in a head-to-head decider on May 6.
But Le Pen’s record score of 18-20 percent was the sensation of the night, beating her father’s 2002 result and outpolling hard leftist Jean-Luc Melenchon, in fourth place on 11 percent. Centrist Francois Bayrou finished fifth on less than 10 percent.
Le Pen, who took over the anti-immigration National Front in early 2011, wants jobs reserved for French nationals at a time when jobless claims are at a 12-year high. She also advocates abandoning the euro currency and restoring monetary policy to Paris.
Le Pen’s policies are as you would expect from a far-Right candidate. Patriotism, protectionism, state control all being high on the list. Le Pen has stated she is determined to re-industrialisation of France, reduce immigration to just 10,000 a year, scrap the European common Agricultural Policy and pull France out of the passport-free Schengen zone amongst many other policies.
Latest results are Hollande 28.8%, Sarkozy: 26.1; Le Pen 18.5%. The big question now is how the votes of failed far-left candidate Jean-Luc Mélenchon and Le Pen will fall. A first round poll suggested that 48% of Le Pen supporters will transfer their vote to Sarkozy, while 24% will opt for Hollande. However, 83% of Mélenchon voters prefer Hollande. At this stage Hollande and Sarkozy are very close going into the final round, but it is the far-Right’s Le Pen that holds the key.
France, however, is not the only nation in Europe where the Right is resurgent. Although the latest polls in Greece show that Antonis Samaras’s New Democracy is likely to win over all, it will be unable to get anywhere near the required 151 seats to form government. In fact, the latest polls show that even if New Democracy and PASOK, the current ruling party, joined forces they may not get there.
That being the case, a larger coalition will need to be formed, and the latest polls are predicting that will mean eight parties in the parliament many of them towards the extremes of the political spectrum:
Shockingly, all recent surveys agree that one of these will be Golden Dawn (Chrysi Augi), a violently xenophobic and pro-Nazi organization which has exploited public anger over the uncontrolled influx of illegal immigrants into the country.
The far left, meaning the unrepentantly Stalinist Communist Party and the fissiparous Marxists of SYRIZA, are also expecting their fiery anti-austerity rhetoric to pay electoral dividends—they are both vying for a third place finish.
A more longshot but not entirely hopeless contender for third place are the newly minted Independent Greeks, a right-wing party that flirts with sectarian Greek-Orthodox rhetoric, which was founded just last February by Panos Kammenos, a disaffected demagogue who quit Nea Dimokratia because of its support for the tough measures accompanying Greece’s second bailout. Kammenos rails against the “foreign occupation” of Greece by its official lenders and calls for Greece’s debt to be erased.
The Greek election will be held on May 6. As I stated above, I mentioned both of these elections back in February calling them “black cygnets”, meaning that they were events that people knew about but may have not have fully appreciated the potential consequences of them.
Black Swan events are those that come completely out of the blue, and in those terms what occurred over the weekend in The Netherlands probably fits the bill:
The ruling Dutch minority government was on the brink of collapse Saturday after anti-EU lawmaker Geert Wilders torpedoed seven weeks of austerity talks, saying he would not cave in to budget demands from “dictators in Brussels
New national elections that will be a referendum on the Netherlands relationship with Europe and its ailing single currency are now all-but-certain.
But before Prime Minister can tender his resignation — possibly as early as Monday — he must consult with allies and opposition parties on how to run a caretaker government that will have to make important economic decisions in the coming weeks and months.
“Elections are the logical next step,” Rutte said.
Opposition leader Diederik Sansom of the Labor Party joined others across the political spectrum in calling for new elections as soon as possible.
This Dutch government has been relatively unstable since the last election when a majority coalition was formed including the Freedom Party, which runs far-Right immigration policy but is Left-leaning on state policy. The government was attempting to push through €14.2 billion in cost cuts in order to speed up the country’s transition to a 3% deficit in 2013 instead of the forecast for 2015-16 under existing projections.
After week long negotiations the cuts were sent to the government’s economic agency for analysis (report available here if you can read Dutch ) and it was determined that they would result in a loss of economic growth which would mean that the overall effect of the cuts would only be about €6 billion as the rest would be lost in falling government income due to the negative effects of the cuts.
Upon seeing this analysis, the Freedom party pulled the pin on the coalition and the country must now hold new elections in September. It is widely expected that the country will be downgraded from AAA to AA by the ratings agencies given the on-going political instability.
The other thing of note is that the Dutch housing market appears to be popping. In February prices were 3.4% lower y-o-y, in March this rose to 4.7% y-o-y and prices are now down 11.8% from the peak. The Netherlands currently allows mortgage interest as a tax deduction, however , under a new government this deduction maybe reduced or removed altogether.
Geert Wilders’s new book “Marked for Death. Islam’s war against the West and Me” will be launched shortly in the US.
As I have stated previously in reference to austerity.
Obviously this is an economic disaster and I have been at the front of the queue screaming about misguided economic ideologies in Europe that have led, and continue to lead, to this situation. However, it doesn’t take much of an imagination to realise that this has the potential to become something much more sinister than just ugly looking charts and that is my real concern.
Obviously, I’m still concerned.