European Polls Head for Heaven and Hell

By David Llewellyn-Smith, founding publisher and former editor-in-chief of The Diplomat magazine, now the Asia Pacific’s leading geo-politics website. Originally published at MacroBusiness

Slowish action overnight with the US closed but one measure hit new wides. European bond spreads continue to blow out:

French yields are now at their widest to German since 2012, the FT explains:

The premium for 10-year French debt climbed to a fresh post-eurozone crisis high over equivalent German Bunds on Monday, reflecting investor jitters about France’s upcoming presidential election. The yield gap exceeded 0.81 percentage points for the first time since August 2012 as France’s 10-year bond yield — which reflects the government’s borrowing costs — leapt 7 basis points today to 1.1 per cent. Renewed selling pressure was sparked by a latest poll showing Marine Le Pen is on course to emerge as a clear winner in the first round vote to be held in late April. Ms Le Pen, who has promised to hold a referendum on France’s eurozone membership, is polling at 27 per cent in the first round vote, with her two main rivals, François Fillon and Emmanuel Macron tied at 20 per cent, according to latest collated polls from OpinionLab.

More alarmingly, Le Pen also surged in the second round poll to her highest in recent times:

Though the gap remains wide. As we know, Le Pen would unleash Hell as she engineered a French exit from the euro, effectively ending the single currency and triggering a major global shakeout.

Meanwhile, in Germany, there is hope that that nation may go the other way, via Reuters:

Germany’s center-left Social Democrats (SPD) have moved ahead of Chancellor Angela Merkel’s conservative Christian Democrats (CDU/CSU) in an opinion poll by the Emnid institute for the first time since 2006, Bild am Sonntag newspaper said.

The SPD’s unexpected surge of some 12 points in the last month has caught Merkel and her conservatives off guard, analysts said, just seven months before the Sept. 24 election, where she had expected to win a fourth term easily.

The Emnid poll of 1,885 voters gave the SPD 33 percent of the vote, up 1 point in the last week, while the Christian Democrats (CDU) and their Bavarian sister party the Christian Social Union (CSU) would win 32 percent, down 1 point.

The SPD has now gained a record-breaking 12 points in the last four weeks, according to Bild am Sonntag newspaper, since former European Parliament president Martin Schulz was named as its candidate to run against Merkel in the Sept. 24 election.

“The increase is unmatched in the history of the Bild am Sonntag polls,” the newspaper wrote.

It has been quite a surge:

Perhaps most significantly, the SDP is a fan of closer European integration including eurobonds, also from Reuters:

Chancellor Angela Merkel’s conservatives on Monday rebuked Martin Schulz, the new Social Democratic leader who will run against her in September’s elections, for calling for “euro bonds” in the single currency bloc to relieve its debt crisis.

Peter Tauber, the Christian Democratic (CDU) general secretary and campaign manager, said the party intended to remind voters ahead of the Sept. 24 vote that Schulz, a former European Parliament president, had long advocated the introduction of EU-wide debt – anathema to many in Germany.

“He is the man who was for a mutualisation of debt,” Tauber told reporters in Berlin. He also said Schulz was “the man who wanted to allow Turkey to join the European Union” – another hot button issue that alarms many conservatives.

Germans fear that eurobonds would lead to higher interest rates in Germany, Europe’s biggest and most prosperous economy, and relax pressure on Greece, Italy and Spain to stick with their austerity programmes.

In her 2013 election campaign, Merkel spoke out clearly and often against eurobonds and debt mutualisation. Tauber presented a nine-page dossier on criticisms of Schulz that the CDU plans to use during the coming election campaign.

Maybe so, but this is now a political question as well. The failure to fiscally integrate Europe is a primary driver of the rise of populist de-globalising parties in the periphery (and even France). An SPD that reignites integration reform could unleash fiscal stimulus across the Continent and help fight the rise of extremism via more widespread growth. Sure debt and interest rates would rise but Germans may at last realise that that’s a worthwhile trade off.

This bears very close watching for current MB allocations. A revitalised European project would lift the euro dramatically and implicitly hit the US dollar as markets accelerated the timing for ECB tightening. It would thus also add a double tail wind to commodities as Europe released the spigot on fiscal spending, likely to be infrastructure, and a monetary tailwind as the US dollar bull market was held back. The Aussie dollar could fly in this scenario though it may also coincide with the slowdown in Chinese housing.

That said, if the pressure comes off the US dollar then that economy too will grow more strongly, adding weight to the S&P500. Gold is unlikely to benefit overly despite the easing US dollar owing to a clear easing in the existential European threat.

Interesting times.

Print Friendly, PDF & Email


  1. UserFriendly

    Wow, a ray of hope from Germany…. How ironic would it be if both the FN and SPD pulled out wins? Would that just devistate france and allow the rest of the EU to coalesce around a less austere Germany? Or would a Frexit still be too big a blow? Or might La Pen back down some with some fiscal space?

    1. visitor

      Wow, a ray of hope from Germany

      Well, the SPD is the party that organized the current German austerity policies — Hartz laws, Agenda 2010, official wage “moderation” policy, etc — and then was a staunch supporter of further austerity policies such as the “debt brake” in the coalition with the CDU and CSU.

      A ray of hope it is not — not at all.

        1. Praedor

          Can but doesn’t. Look at the Democraps. They COULD change but there’s a major neoliberal push to make sure it doesn’t.

          And it wont. So it will continue to lose. The SPD will NOT change and will continue raping the poor/downtrodden in non-German countries, via “austerity”, so their investor class can continue to ride the bull.

      1. Foppe

        I mean that it shouldn’t be sorted below the opioid epidemic story in the recent list. (The publication date is feb 20 at 1:41am, rather than feb 21 at 1:41am.)

      2. Yves Smith Post author

        Yes, I now see and this was a real screw up. I must have had an “Add Post” window I has opened up from the day before, so it had that date. Aargh.

  2. Bugs Bunny

    If Le Pen does win (and I don’t think polling captures her true numbers, which are surely higher), she can’t possibly have a compliant government since there’s no way that the FN can win legislative elections for at least two cycles.

    That said, she could unleash chaos and I can realistically imagine an explosive atmosphere in the usual Paris suburbs.

      1. Bugs Bunny

        Hamon (PS) has committed to legalization of cannabis. The current penalty is a ridiculous max 7 years in prison and €7000.00 fine.

  3. The Trumpening

    I was watching BFM last night and they reported that the latest poll had MLP trailing Fillon 45-55 and Macron 42-58. Just after Fillon won his primary it was 33-67 in his favor. BFM also had a heated debate between the Socialists and the Front de Gauche who are attempting to combine their forces to make it to the second round. Policy on Europe seems to be the sticking point.

  4. european

    The idea of a joint candidate of the Left seems to be dead. That’s too bad, as both Macron and Fillon are polling at around 20% right now, which should be beatable for a joint left candidate.

  5. disc_writes

    People in Germany actually trust Schulz? I thought his nomination was irresponsible and was going to cost the SPD votes.

    Another fake Nobel price in power. Great. Obama was not enough.

  6. Some French Dude

    It is very unlikely that Marine Lepen win this year.

    Most voters of the traditional right, who back Fillon or Macron, would still not cross the red line and vote for her. Plus, their candidates are ahead in the polls and will probably make it to the secund turn.

    Among working classes, most people have quit voting for years, 40% are already voting for Marine Lepen. The remaining ones still voting to the left, could cross line.

    All in all, the right middle and upper class will probably have its candidate. The left middle and upper classes would never vote Lepen.
    The questions are :

    – To what extent will usually non voting working class people move to vote for Lepen ? Abstention was 20% at the previous presidential elections, we can assume that the reserve is not that big.
    She got 6 million votes in 2012 with 80% of participation. 6 millions in 2015 in the regional elections with around 50% participation, and polls showing that the abstentionnists would have voted more or less the same way as voters.

    – Will the lefty oppose Lepen ? The risk of course is that many left wing voters would refuse to cast a ballot for Macron or Fillon, considering they already have been fooled too many times as in 2002 or in the regional elections in 2015.

    Even with an unprecedently huge secund turn abstention, you still need at least 15 millions votes to become president. Marine Lepen is not yet there.

    People are aware of the Marine Lepen risk, especially left people who are told by polls that they will have to chose between Juppé then Fillon and Marine Lepen for 2 years. They have been thinking about this responsability and most say they will move.

    This scenario might sound very Trump like but what one has to keep in mind is that Marine Lepen is not being endorsed by the conservative party of a bipartisan system.

    But after 5 years of Macron or Fillon in 2022, I would not be so comfortable.

    1. vlade

      I’m not sure whether the marginal Trump voter gave a toss about the very reluctant endorsement of the Repub party.

      1. Name

        I’m sure there are a significant number of people who voted for trump because they have always voted republican, and they didn’t really know/care about the specifics as long as he was in their party.

  7. Gman

    Le Pen stands next to no chance in the second round vote as the split vote in first round inevitably, but reluctantly comes together to defeat her – this is not a Trump or Brexit 2.0 scenario.

    What’s most interesting here is the SPD’s apparent (new?) fondness for Euro bonds and the implication in the article from their poll surge that the German people would accept them and fully understand their implications for Germany.

    The fundamentally flawed, one size clearly doesn’t fit all EURO and all it entails is the EU’s most vulnerable point at the moment and this might well be the only way to save it from going the way of the dodo.

    Interesting times indeed.

    1. Antoine LeBear

      I would not say that she stands no chance at all. First, her polling numbers are surely under-evaluated, as were all the right-wing/populist/brexit in the past few years. Or at least let’s say it’s volatile.
      Then you have the question of whom is she against. Fillon is very much hated by the left, he’s uber-neoliberal and hardline catholic (and has a nice scandal on his lap). I’m old enough to have voted for Chirac (right) in 2002 when he was opposed to Le Pen’s father in the second round of the presidential election. I hated doing that with all my guts. I’m not sure I would vote to choose between Fillon and Le Pen. I’m sure a lot of my cohort will find the choice difficult and may get drunk on Saturday and forget to vote on Sunday.

  8. David

    I dunno. The conventional wisdom is certainly that Le Pen stands no chance in the second round, but the conventional wisdom is having a bad year. It though that Fillon stood no chance in the primaries (he won massively) that Juppé would win (he lost badly) and that Sarkozy might make a comeback (he was annihilated). It thought that Valls would easily win the other primary (he lost badly), and that Montebourg would do quite well (he lost even worse). Nobody even knew who Hamon was. But remember, a Le Pen victory means the death of the current political system, and it’s hard for any organism to imagine its own death. Partly, this is because, as Bugs Bunny says, there’s no chance of Le Pen winning a parliamentary majority, so there will be a major political crisis anyway. But this is probably true whoever wins – we may be back to the Fourth Republic of constantly changing governments assembled from bits and pieces.
    In the end, I think it depends what the second round is seen to be about. Assuming, for the sake of argument, that it’s Le Pen vs Macron, then Macron stands for all those things – pro-EU, pro-Euro, more deregulation, more privatization, further European integration, no border controls etc, with a sauce of identity politics – which are being increasingly repudiated by French voters, of the Left as well as the Right. From a purely technical point of view its hard to see how you can actually run a campaign which offers the electorate an exciting alternative to Le Pen, based largely on a continuation of the status quo but even more so. In fact, whilst Macron claims to be all about change, it’s Le Pen who is, as everyone recognises, actually proposing something different, whether or not you like it. The only feasible strategy, it seems to me, is simply to chant endlessly “Le Pen is a monster, so vote for me”; The problem then is that Macron would be trying to federate an immense range of opinion, telling them that Le Pen is terribly dangerous because she will persecute transexuals but also restrict immigration, drive the stock market down, leave the integrated military structure of NATO (again), keep jobs in France, undermine the profits of banks, reinstate a national currency …. all of which, of course, are going to be attractive to different parts of the very coalition Macron would be trying to assemble against her. And even if he won, it’s not clear where he would get a government majority from.
    In the end, it would probably come down to a sustained hate campaign, the like of which has not been seen before in modern French politics, joined by every interest group from the extreme Right to the extreme Left. That may work, but the French being the awkward sods that they are, it might also not work.
    Otherwise, there are two other possible scenarios (1) Le Pen makes a total mess of the campaign (quite possible) (2) There are so many abstentions that the result bears no relationship to any of the polls.
    Watch this space, but don’t believe everything you read.

    1. european

      I agree that France (and Europe) will see a massive campaign against Le Pen after the first round. Could be similar to the Anti-Trump hysterics. Still, i do think that Le Pen has a good chance of winning. Why should workers vote for a neoliberal like Macron or Fillon? Are rural voters really going to vote for an urban yuppie like Macron? I have my doubts.

      Pollsters and the media thought that Juppe or Sarkozy would be the Conservative candidate. They were wrong. They thought Valls would be the Socialdemocratic candidate. They were wrong again. In my opinion there is no reason at all to believe these “Macron beats Le Pen by 20 points” polls.

      1. fajensen

        The problem with polls is: Who do they actually poll these days?

        Here, telemarketing is so bad that one never answers the phone with an unknown number unless one has a doctors appointment or some tests which forces one to (the health-care fuckers are in league with the telemarketing scum, I believe, because always they use “Hidden Number”).

        So, who answers the pollsters phone calls?

        Pensioners, children, people with more free time than common sense, and so on … are those representative, probably not. Do the pollsters care about that? Probably not that much really!

        It is after all their business to deliver the numbers that clients want, not to question and fret over details. When serious economists can be 50% wrong 100% of the time for decades, opinion pollsters are bound to figure out that polls can take a little crapification too, for extra fun & profit.

        I would not trust opinion polls much more that I trust the stock tips and tax scams peddled in investment magazines.

        Anyway, In politics these days, any surprise is a happy surprise.

        Fun Fact: Many of the polls will be run from the same call centers that the telemarketing scammers use, with the underperforming-in-the-ripoff-scams people doing the poll calls as punishment. My sister used to do this in her poorer days of misspent youth.

        1. UserFriendly

          I wouldn’t trust any second round polls yet, especially if they are conducted simultaneously with a first round poll. There is no way to come up with a decent voter turnout model for the second round.

      2. Praedor

        Agree. I WANT Le Pen to win for the very same reason I have not been OVERLY upset by Trump winning (he promised to totally overturn the neoliberal apple cart…though he seems to be running back on a lot of that now). ANYTHING that guts the neoliberal heart of the EU is a good thing. Sorry, but worries about bonds (ie, investors and money) is BULLCRAP neoliberal nonsense. It is the concern for “markets” and stocks and bonds (ie, money/investment) that is the big problem with neoliberalism. It needs to be Roto-Rootered out of political control by any means necessary and if that means Le Pen in France, then that’s what I hope to see. Anyone else Vichy.

    2. Allegorio

      “The only feasible strategy, it seems to me, is simply to chant endlessly “Le Pen is a monster, so vote for me”” @ David.

      That worked really well for Clinton n’est ce pas? Trump was a protest vote: “we would rather elect an ignorant clown then a pack of neo-liberal sociopaths. ” Given a lack of alternatives in France, might not the French voter do the same and vote for LePen. Whatever happened to the doctrine of creative destruction?

  9. David

    Yes, it’s much better informed and more balanced than the average Anglo-Saxon piece, and the characterization of Macron is spot-on. Unfortunately, though, it overrates the chances of a socialist candidate surviving the first round.
    But it’s a bit too conspiracy-minded. There are conspiracies in French politics, of course, and lots of them, but Le Canard is an equal-opportunity Exocet, and would not be party to any deliberate manipulation. The timing of the leak about Fillon is interesting, and it would also be very interesting to know where it came from, but it probably has more to do with the fratricidal nature of right-wing French politics than any grander strategic design. Likewise you don’t have to invoke a “Deep State” – what’s at stake here is the entire neoliberal-identity politics model of French political life which has become dominant over the last twenty years, and for which Macron represents the best hope of continuity. Accusations about Russia haven’t made much of an impact at all, and few voters will be swayed by them in a country where the Communist party vote was around 20% at one point. The “Deep State” in the end is nothing more than what used to be called the “wall of money”, the massive power of individuals owning banks, media and (what remains of) industry. It will be interesting to see how far they can go.

    1. Allegorio

      “But will the SPD still push/tolerate the raping/pillaging of Greece?” @ Praedor

      Why not? What good is wealth and power if you can’t lord it over someone, especially those degenerate Mediterraneans! Founders of European civilization indeed. It’s no longer about ideology and isms & shisms these days, it’s all about ethnic privilege, our team vs their team. Welcome to our atavistic age. Post Modern indeed.

Comments are closed.