Germany-IMF Staredown on Greece: The Election Calculus

The next big round of extend and pretend for Greece isn’t set to take place until July, yet serious jockeying between the key actors, the IMF versus the European countries acting as lenders, is underway now. Why? The politicians and Eurocrats are keen to get a deal, at least in general terms, agreed now so as to keep Greece out of the headlines as much as possible for an upcoming series of European elections.

Of course, the European view of “getting to a deal” means knuckling the IMF into joining a new round of financing. As we’ve discussed since 2015, the Fund’s staff has been in open revolt, and has leaked important internal documents to the press more than once, making clear the agency’s view that Greek debts are not sustainable (note that these leaks may have been sanctioned at a more senior level). By the Fund’s own rules, that means it cannot provide additional loans. The latest Financial Sustainability Report reached the same conclusion, although it did uncharacteristically say that some fund directors (as in board members) did not agree with that view.

If the IMF does not provide more dough, the consequences are serious, as we’ve stressed and Wolfgang Munchau underscores in a comment at the Financial Times:

A much overlooked part of the Greek bailout programme is that Germany made its participation conditional on IMF involvement. That gave the fund leverage. If the IMF now pulls out of Greece, one of two things will happen. Athens will either default on its debt this summer and be forced to quit the eurozone, or Berlin will accept debt relief just a few months before the elections. Either way, this is a fight in which someone ends up on the floor.

Mind you, under either scenario, German voters will be outraged. If Greece defaults, Germany and all the other countries that loaned to Greece will have to recognize a loss under their budget rules, which means they will have to “pay” for it out of the current budget by increasing taxes and/or cutting spending. Given how creative the Eurocrats have been, they will presumably find a way to spread out the loss recognition, probably via financial engineering. Nevertheless, a Greek default would be front page news and debated heavily, so there would be no way to pretend that voters hadn’t been lied to for many years.

Germany is unlikely to regard “debt relief” as palatable, since that means knuckling under to the IMF and writing down the principal value of loans. The IMF has deemed that further extension of loan maturities and interest rate reduction won’t make enough of a difference. But writing down debt also hits national budgets on a current basis, again forcing tax increasing and spending reductions.

The normal assumption would be a rerun of what we’ve seen since 2010: lots of headlines, grand-standing, and drama, with an 11th hour deal that provides at most 2 years of kinda-sorta breathing room. However, things are different this time.

As we wrote last week

Normally, IMF participation would be a given because, if all else failed, pressure would be brought to bear at the board level. European countries have about 1/3 of the votes, and the US, 1/6, which together gives them a majority.

But will the US break with its past pattern? Trump is hostile to Germany as a trade competitor. His advisers have also been trying to pursue bi-lateral trade deals with EU members even though that is against EU rules. Trump is seen as so hostile to the EU that Theresa May’s first meeting included a pitch for a strong NATO and Europe.

Thus it isn’t hard to imagine that the Trump Administration won’t pressure the IMF to continue to participate in the upcoming rescue. Admittedly, Steve Mnuchin is likely to take the point of view that market disruption is too high a price and will persuade his boss.

Munchau agrees:

Once the Trump administration sends its representatives to the IMF board, expect the climate to become even more hostile. My expectation is that the IMF will ultimately pull out of the Greek programme, leaving the Europeans free to mismanage the ongoing Greek crisis on their own.

Munchau also points out that Germany’s current coalition could be arm-twisted to vote through debt relief, but that will be pretty much impossible after the fall elections. However, this will all come to a head before then.

The one offsetting consideration is that Christine Lagarde would not want to be charged with breaking up the Eurozone by refusing to participate in the next Greek bailout. However, the most likely course of action is for the European leaders to stump up enough to fill the hole that would be left by the IMF exodus. There is a separate problem that the German parliament believes that IMF participation is necessary, not just for financial reasons, but for its expertise in acting as gaoler running these programs. Finance minister Wolfgang Schauble will have to figure out how to talk his way out of this little problem.

The other factor in Lagarde’s calculus is that there are enough Eurozone-disrputing events already scheduled before the July funding date that if the IMF simply keeps the negotiations in play, the rising tide of pressure is likely to make history regard an IMF refusal as at most a contributing event to a Eurozone crack-up rather than the trigger. And let us not forget that the original sin was refusing to impose losses on banks and their investors and instead shifting them onto citizens via austerity.

The key election dates are:

The Dutch Parliamentary election, Wednesday March 15. The right wing nationalist, anti-Muslim Party for Freedom has a strong lead in polling. Its head, Geert Wilders, has said he would leave the Eurozone and EU. However, even if his party performs as well as expected, Wilders is unlikely to become Prime Minister because Party for Freedom will not get a majority and other parties will not join it in a coalition. The likely results are a weak “most everybody but the Party for Freedom” group or a failed coalition, which would trigger new elections.

Serbian Presidential election, expected for April 30, possible second round on May 14. This post has little real power but will get more play that it would otherwise warrant as yet another reading of populist/nationalist versus EU sentiment.

French Presidential election, April 23 and May 7; parliamentary elections June 11 and 18. Marine Le Pen, who has said she would exit the Eurozone and EU, is expected to win the first round of polling on April 23. The assumption of the punditocracy and Mr. Market is that she will lose the second round by virtue of everyone else ganging up on her, in particular the French left, which has no horse in this race and is presumed to regard her racism and anti-Europe positions as unacceptable. However, Mark Blyth, who was one of the few who called a Trump victory, thinks Le Pen will win. He pointed out that (starting at 26:45):

…if you actually go to their website and look at their economic policies, I find it much more progressive than anything else that’s on offer and the mainstream French left have completely collapsed…What’s meant to happen is that the entirety of the French left voting public is meant to get behind their equivalent of Mrs. Thatcher who thinks that what France needs is a healthy dose of more markets and austerity to get things going again. And to vote for that person to stop the Front. Now on every issue apart from immigration, you actually agree with the Front’s policies. And you disagree with everything this guy’s got except immigration. That has, “I’m not going to show up” written all over it. And that’s how the National Front gets in.

German Parliamentary elections: before October 23. Conventional thinking is that despite having taken a big hit in popularity due to backing a generous refugee policy, that Merkel’s party is still stronger than that of her main coalition partner, the Social Democrats, and even a very strong showing by the hard core right Alternative for Germany does not pose an existential threat. But October is a long way away.

And even with Merkel still in charge, parliamentary support for the Eurozone and EU projects is sure to erode. As Munchau points out:

The “grand coalition” led by Chancellor Angela Merkel commands about 80 per cent of the seats in the Bundestag. But with the September elections, I would expect the Free Democrats, the liberal party, to re-enter the parliament after they failed to clear the hurdle last time. Their leader, Christian Lindner, said last week that the best way forward is for Greece to leave the eurozone, and for Greek debt to be forgiven afterwards.

Alternative for Germany, the rightwing anti-European party, not only wants Greece out of the eurozone, but Germany as well. Together those two parties will probably account for some 20 to 25 per cent of MPs. If you add the large group of Eurosceptics from Ms Merkel’s Christian Democratic Union and its Bavarian sister party, the Christian Social Union, it is not hard to see why the window for debt relief will close permanently this autumn.

Stay tuned.

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  1. vlade

    Dutch elections are a non-event, from the perspective that nothing immediate can come out of them. They are more important in anticipation than actuality, because in anticipating them can make the current Dutch government do a lot of weird things to try to stem Wilders win.

    French elections are the key – if Le Pen wins, EUR is most likely dead, and EU quite possibly – although it still depends on the parliamentary elections, and I don’t see into those at all (anyone?). On the other hand, if LePen is soundly trounced in the second round (for example, if she wouldn’t get much more than in the first one), it also sends a strong EU message to the rest, and would likely help Merkel.

    German elections will be the last one, but by then a lot would have happened as you say, so best leave speculations about those till summer.

    1. Synoia

      Futures in writing banking software, in French, quickly?

      As discussed here, Banking system are an intricate network of linked software, most of it quite old.

      Whatever the slow moving political results, changing software is even more slow moving.

      Has anyone got a task list, let alone a starting point, for separating banking back into national entities?

      The Banks have spent the last 20 years, spending about 4 to 8% of expenses on the software they have. That amounts to 40% plus of a single year’s expenses in one shot for Euro End. A 20x increase.

      Even if there are enough programmers with the required skills, modifying code painstakingly, system by system to accommodate dual currencies, or even changing the interconnected systems to provide exchange rate adjustment to transactions will be very slow. That is: modifying code is 3 to 5 times as slow and expensive as writing new code.

      Let’s assume:

      1. 2% of the EU GDP is spent on programming.
      2. There are 250 million workers in the EU
      3. 5 million programmers
      4. Now let’s boost the 2% programmers by Euro End.
      5. Assume 25% of programmers work in Banks and Finance
      6. 1.25 million programmers in Banking
      7. France is about 10% of Europe’s GDP, thus 125,000 French Fluent programmers in France’s Banking sector.
      8. Suddenly France needs 20 x the 125,000 fluent french speaking, banking experienced programmers.
      9. That’s twice the number of programmers with Banking experience in Europe – The majority of which are not fluent french speakers.

      That’s before the considering miserable success rate of large IT projects.

      The UK does not have this problem, because it never adopted the Euro.

      Not. Going. To. Happen.

      1. Colonel Smithers

        Can’t France import some programmers on some local HB1B (sic) visas, may be from Pondichery? Oh, wait!

      2. vlade

        a) if LePen would win, France would not get out of EUR overnight. If nothing else, it would require parliamentary approval, which may take a time.
        b) I work in banking, and before doing what I do now I spent quite a lot of time building backoffice systems (which is what would have to be rebuilt. A lot of banking sw doesn’t care how you settle your transactions in detail, indeed, it doesn’t even know abou it – credit scoring system doesn’t give a toss about Target2).
        I disagree with Yves on how hard it would be, for a plethora of reasons, but two main are: no-one really knows (and I’d argue that for Greek banks, which are smaller, it would be actually easier), but the second crucial point is that for any single bank, the introduction of a new currency is not code change, it’s a configuration change. EUR required code change, but that was because EUR was in effect a fixed-currency system for a set of currencies. New currencies come and go all the time (even in Europe – say Romania adapted “new romanian Leu” in 2005, which has a different ISO currency code from the old romanian leu, so banks had to adapt *gasp*).

        There are massive operational issues – like recoding ATMs, getting new currency printed (as India shows, although they make their case much harder by refusing having the money printed out of India, which slows the process down quite a lot), and, most importantly having an internal clearing system (equivalend of FedWire/BACS/CHAPS).

        People get tied in knots about target2, but there’s no such thing as target2. Technically, there’s a plethora of national clearing systems that work together. In France this is Target2-Banque de France,

        How hard/easy the french one would be to take away from the rest of T2 and use for new new franc is debatable, and neither you nor I can say it, as neither of us know its internal workings.

        France also has its own retail payments system (CORE), which I suspect may be reasonably easy to switch to a new franc, as these tend to operate in “single currency” mode (i.e. can use only one currency, in which case it doesn’t matter what the currency is). At the moment it’s not used to settle large transactions, but to my knowledge there’s nothing technical that would stop it. The major issue that CORE would need reworked is final net settlements, which at the moment settle into T2 accounts, but would have to settle directly into BdF accounts. Given that the T2 accounts it settles to now are part of the T2-BdF system, that would not be a massive problem.

        I’d point out that Slovakia, Slovenia, and Baltics switched from their local currency to EUR, which didn’t take decades and hordes of programmers to do.

        It doesn’t happen overnight, but it’s not going to take 3-5 years either.

        1. ChrisPacific

          This is why it’s important to get into the detail on IT projects like this. Until then nobody actually knows, so estimates tend to be either wildly optimistic (people with no IT background or specific knowledge) or wildly pessimistic (people with an IT background and no specific knowledge).

          I’m inclined to think that code changes would be required in this case as well, on the grounds that there are likely to be some unique factors involved in coming off the Euro (for the same reason that there were unique factors involved in moving onto it). But if adding or removing currency types has indeed been designed as a BAU activity, then it should be simpler than some of the discussions to date have suggested. If there are systems that don’t treat it as a BAU activity, then this would be a good excuse to upgrade them (whether the time and budget is available to do so is another question, as these projects can be massive). Transition planning would be another complex area and there would also be a ton of third party dependencies which would need to be managed (if it was going to go off the rails anywhere, I expect this would be it).

          In any case, the possibility of a Eurozone exit or breakup must rank pretty high on the risk register for any large financial institution that does business in Europe, as well as the ECB itself. If they don’t already have a risk management plan in place and contingency options ready to go, then they are massively deficient on the governance front. (Note I’m not saying this isn’t the case – these are banks we are talking about, after all).

        2. Clive

          The Romanian denomination did require at least three years. The legislation was given parliamentary ascent in July 2014 after starting as a draft statutory instrument in December 2003 (there was industry consultation from June 2003 too). The two currencies ran in parallel until December 2006. And that was just a re denomination, not a brand new currency. So with a re denomination you have the luxury of a period of parallel running which de-risks the implementation — a currency conversion means a hard stop and no roll back. And there were problems with the new currency on introducing it too. How does that worked example prove your assertion? Rather, it proves the opposite.

          As for CORE, remediation of that to cope with a reintroduced franc would be no help at all with the major card schemes (VISA, MasterCard and Meastro in France) so would therefore be just an added complication. Adding complexity does not reduce costs, timescales or risks.

          1. LT

            Oh, no…financial institutions taking risks. Can’t have that. Poor babies.

            Coddling them is why it’s a mess.

            1. Clive

              Banks socialise losses in the general population. They are called Too Big to Fail for a reason. Exhibit A — just off the top of my head — The Royal Bank of Scotland where we lovely and long suffering UK citizens are still, yes, still sitting on a £23.8bn loss. And next year it will be a decade (you’d call it a Lost Decade if it’d just been that, but it isn’t that we’ve gone nowhere but instead we’ve still incurred the financial hit) since the bail out.

              And you are proposing — if I understand your pithy but somewhat vague diatribe correctly — that we should not only allow but actually encourage bank risk taking some more at the behest of a public policy objective? Why not take €100 out of the ATM now from your own account and hand it to the French banks’ c-suite members and save yourself from using a governmental middle man. Please someone, shoot me now if this is the voice of the proletariat. At least the peasants besieging the gates of Versailles demanded bread — if it’d been up to you, you’d have been lobbing muffins at the nobility

    2. Colonel Smithers

      Thank you, Vlade.

      Just one thing to add. The timeline implied by your comment should have influenced the triggering of Article 50, but, as friends who are working on such matters tell me, her ladyship really does want a hard Brexit and won’t be reasoned with, so she ignored “expert” advice to delay until Q1 2018, by which time the new German government would have settled down.

      You said as much yesterday on the thread about how the UK could, but did not bother to, control migration, especially when May was at the Home Office. A friend who works at the UK mission to the EU and shares origins with me reckons that May can’t handle complexity. She came from the Home Office, ideal for her her, as both share a similar and basic outlook, crime is bad and foreigners / immigrants are bad. The UK has a longer coast line than Italy, but has a handful of patrol boats. May talks a good game and is indulged by a media eager to have a go at Trump (nowt to do with the UK), Corbyn and Putin, three white cartoon villains, a perhaps welcome change from dark(er) ones like Mugabe, Saddam et al.

    3. visitor

      Dutch elections are a non-event

      Do not discount their impact.

      The euro-skeptical under-current in the Netherlands has been simmering and growing for a long time. Dutch voters rejected both the European “constitution” in 2005 and the EU-Ukraine association treaty in 2015.

      If Wilders’ party makes a really strong showing, whatever resulting coalition government excluding it will be cowed, and wary to put itself in the limelight with strong pro-European-integration or euro-federalist initiatives, or as the over-active enforcer of German policies in the EU that Mr. Jeroen Dijsselbloem has been so far.

      1. Colonel Smithers

        Thank you. Good point.

        Few people realise that Diesel Babe is from the Labour Party (PvdA).

        Many years ago, he was on a panel, discussing the economy. His comments puzzled many attendees, as if his qualifications in economics are not what they seem.

      2. Foppe

        I wouldn’t assume that he’s kept out. If you look at his voting record on socio-economic issues, Wilders is pretty much wholly indistinguishable from the VVD/Liberal Party from which he came, just more willing to engage in blaming ethnic minorities for their exclusion and ‘failed integration’. And things seem to have changed wrt the view the Mainstream has of “populism” — just look at Theresa May’s behavior/posturing since “brexit”: she’s basically become a honorary UKIPer/out&out nationalist. But a VVD/PVV coalition could easily happen, unless the former are worried over the stability of such a coalition.

        1. Foppe

          Let me rephrase that, as this is inaccurate due to my not caring about the distinction between him being part of the cabinet, and him not being part of it.
          Wilders won’t be part of the coalition because there is nothing to gain for him, since most of his “campaign promises” are BS/impossible/fake, and the downside would be increased attention being paid to him not delivering on his “pro-elderly” / anticorruption/antinepotism policy positions. So we’ll most likely get another liberal (minority) cabinet with strong “stabilizing” support from the PVV.

    4. Ignacio

      Outstanding article and outstanding comments here!

      Timing is crucial. French Presidential election is well before the deadline for agreement about Greece, so I expect that negotiations will not break their way to the media until after these elections. The risk of such negotiations strengthening, for instance, Le Pen possibilities is too high. If we assume that pro-EU presidents are elected or assigned by coalition in the Netherlands and France how will negotiations resolve? Then, the role of Trump and the IMF comes up as crucial and Merkel will feel the pressure.

      In this conditions, the german government migth the forced to accept debt relief as palatable…

  2. Anonymous2

    I agree the French elections are key. For my money Macron looks the best bet against Le Pen so it could be crucial who comes second in the first round. A white- knuckle ride is ahead for the EU, I reckon.

  3. Frenchguy

    Very good piece but a couple of quick points if I may:

    which means they will have to “pay” for it out of the current budget by increasing taxes and/or cutting spending” I think this is wrong. They will have to recognise the loss and it will impact the deficit but since it is a “one-off” the deficit rules allow it to be ignored. Also, it won’t affect gross debt levels which already include the aid to Greece.

    the French left, which has no horse in this race” Actually, given the recent scandal around the right-wing candidate Fillon, the French left has two horses in this race (Macron and Hamon). Anyway, I am still very doubtful that Le Pen can win. For once, the FT had a very good take on why she cannot:

    Populists cannot win on their own

    (in short, Brexit won because part of the Tories were in favour and Trump won because he was the Republican candidate, populists cannot win without an alliance, forced or not, with mainstream forces)

    1. Colonel Smithers

      Thank you, French Guy.

      I agree except on your take that Macron is from or on the left. He strikes me as being an opportunist like the Clintons, Blair and Obama. He will throw a bone or two to the left, much as Blair distracted the left with the ban on foxhunting, but do the bidding of his neo-liberal and neo-conservative friends and associates, e.g. his former employer(‘s clients). I have seen Macron at the races in France with the brothers who co-managed his then employer. Macron did not seem interested in the proceedings, unlike his bosses, but probably thought it was wise to show an interest and use the occasion to talk shop where no one is likely to notice on a week-end.

      I am francophone and watch the news on TV5 most days. I am puzzled why Macron’s role in (les dessous de) l’affaire Alsthom is not discussed.

      1. Foppe

        Probably for the same reason the CGI’s role was not discussed: because the french MSM are owned by parties that want to make Macron seem respectable. More broadly, there is the question why and how Macron went from a nobody ~2ya to a “serious” contender now, what role the media played in his creation (and why). And then there are minor-ish questions such as why ‘his’ neoliberal employment law is not named after him, but after someone else. Murky, to say the least.
        See the Vineyard of the Saker for a long-form discussion about Macron/Fillon — including the question why the hell this open secret broke now, when Fillon’s has been doing this for a decade. The tone of the piece is a bit odd (and there are a few confused commenters around), but the questions and tentative answers seem to me relevant.

        1. Colonel Smithers

          Thank you. That is a good point about the reform of employment. It’s common to get an outsider who wants to be an insider to do the dirty work, in this case the child of immigrants, Miriam El Khomry. It happens in the UK and elsewhere often. For example, have a look at who SA cricket captain Hansie Cronje got to help with the match fixing.

    2. visitor

      Fillon, the French left has two horses in this race (Macron and Hamon).

      Macron can in no way be categorized as “left”. His programme is a right-wing one, and he has no endorsement from any left-wing party. His passage at the French socialist party was pure opportunism. In fact, Macron is just a shameless opportunist — even more than, say, Tony Blair was during the “third-way” days of the British Labour party.

      1. Frenchguy

        On substance you are right but on appearance Macron describes himself as from the left and the media generally agree. For a whole bunch of people, it will be more than enough and there is a good chance that numerous members of the Socialist Party will join him…

      2. fosforos

        “the French left, has no horse in this race???” The French Left has (at the moment) two horses in the race, and neither one is named Macron. The anglophone punditocracy (present company not excepted) still scarcely recognizes the existence of Benoit Hamon and is totally blind to the existence of Jean-Luc Mélenchon. Yet those two “hard” leftists, together, are already polling ahead of everyone but Marine. Only a bout of extreme sectarianism (hardly unknown on the left!) can create enough disunity to prevent Hamon from beating Macron (and whoever can be cobbled up to replace Fillon) in the first round and then prevailing against Marine in the second.

  4. generic

    I certainly wouldn’t totally discount the Left in the French election. Hamon quit the cabinet over austerity so there is still the possibility of a deal between him and Melenchon. As things stand even if they lose a few percent their combined numbers lead them into the second round.

  5. Eustache de Saint Pierre

    For what it is worth, this is the reply I received from A Parisienne friend of mine, to my request for a summing up of the situation. He has proven over the years to be always pretty spot on when in comes to French politics.

    ” For me Macron is not a socialist but a conservative (under the “fresh young outside of the parties” thin varnish he is the real dusty candidate of the establishment : pro Europe, pro Globalization, pro Status quo etc etc. He is actually Hollande’s candidate).

    In my opinion Hamon just cannot win because the people who really want a Left candidate will rather vote Mélenchon, not Hamon. And the people who want a Center Left candidate Hollande-like, will vote Macron so I think he will and up with 10-15% max (and even if Hamon did win, I indeed think it will be mostly business as usual).

    The only real Left candidate is Mélenchon. If he wins it would be a big change, but I doubt he can reach the second round (and I doubt there will be an alliance between him and Hamon. Mélenchon will not step back and Hamon can argue that he has won the primary).

    If we are talking about real changes, for me there only 2 candidates : Marine Le Pen and Mélenchon “.

    1. PKMKII

      I doubt there will be an alliance between him and Hamon. Mélenchon will not step back and Hamon can argue that he has won the primary

      Even though if one threw their lot behind the other, the collective polling would put them ahead of Le Pen and Macron. Once again, the left snatches defeat from the jaws of victory with infighting.

  6. Stephen Douglas

    This might be petty, but why are you using gaoler instead of jailer? Had to look it up and it says it’s just the British English version of jailer. You live in New York City, right? Why use a 50 dollar word when a 50 cent one would be more clear. Am I missing something? Does gaoler have another meaning not apparent to Webster’s?

    1. Andrew

      To my ear (raised West Coast US, living East Coast for 20 years) jailer is a modern law enforcement official, while gaoler is the medieval guy with a hood, a collection of bloody instruments, and license by law to use them. You’re right that it’s a 50 cent word, but the difference in implication is meaningful.

  7. fosforos

    But were talking Europe–and, n’en déplaise aux Tories, Britain is part of Europe and always will be. English, not Yankee, is the European language to use for European matters.

  8. susan the other

    Blyth’s comment on LePen was interesting, and matter of fact. I hope he is right. I’m wondering about why Schaeuble is so consistently stubborn about Greece leaving the EU – there must be some benefit to the taxpayers after they write off Greece if it goes along with leaving the EU. But the money has still gone up in smoke. Can Deutschebank and the other Lone Rangers take this loss now? Call it a business expense? If Greece still wants to stay in the EU it’s a rock and a hard place. No more IMF loans until Greek debt is reduced, no write off of Greek debt until they leave the EU. It almost looks like the banksters’ chickens coming home to roost and some of the loss and anger could be lost in the dissolution of the entire EU.

  9. jakob berardi

    I wonder why there is no mentioning of Martin Schulz and the SPD pulling ahead in some german polls. Since he announced his run for Chancellor, SPD has gained 9% points up from 20% to 29% while the CDU and Merkel lost around 3-4 putting them at 32%. He draws this support mainly from former non voters. The change is drastic and the biggest swing in post-war Germany. People are apparently desperate for change. Now Martin Schulz runs on a pro Europe platform. If this trend holds he will likely try a coalition with the left and green party. Which could spell the end of austerity.
    Geert Wilders in the Netherlands may gain 25% compared to 2012 but the at the same time the green left party will gain 12%. Even if he wins the elections, PVV will not be able to find a coalition partner. And if he finds one still could not win a referendum on leaving the EU.
    And this is the exact same scenario in France, a majority of voters even if it is small, will vote against Le Pen supporting no matter what candidate comes up in the second round and for staying in the EU.
    The more realistic question is what will happen after all these elections are over.
    With having come so close to total disintegration, those new Présidents and Bundeskanzlers (or old ones) will likely look for a change in the structure of European policy making and integration. Having lost the UK it is now obvious that Europe needs to change course or it will ground itself.
    Even the bureaucrats in Brussels know that. Angel Merkel was talking just recently about a Europe of different speeds and integration. Varoufakis was right when he said that Germany wants a North EUR, but since that is to big of a gamble and destructive approach there will likely be a push for a core EU around Benelux and Germany with or without France.

  10. Oregoncharles

    “…if you actually go to their website and look at their economic policies, I find it much more progressive than anything else that’s on offer and the mainstream French left have completely collapsed”
    That’s helpful – I’d seen hints, but I’d consider Blyth authoritative. Sounds an awfully lot like the recent US election, doesn’t it, only with the economic issue even further left? I’ll have to actually watch that video – I resist doing that; transcripts are so much quicker to absorb. And maybe go to LePen’s platform and try Google translate on it. There was a time I could read French, but it was 50 years ago.

    Is anyone booking odds on the Euro collapsing by next year? That might provide a soft landing – if it’s everybody, they can take the years they need for the transition. A remodel would be better, but the real problem is that the currency is way ahead of the political union, and that isn’t going to speed up – au contraire.

    Personally, I don’t think that the EU was a good idea. I think they had it right at the Common Market stage: the advantages of small countries that can be administered well, plus a large open trading area. I have priors on that: made a personal list of countries that had a reputation for being well run. They’re ALL small. Given my background, they were all also more or less European, but you can compare Singapore (mostly Chinese) with China itself. Singapore even has an ethnic minority, the Malays. Yes, I’d favor devolution for the US, if it could be done peacefully. We don’t need another Civil War. Being an empire is greatly overrated.

    Anyway, looks like an exciting summer in Europe.

    1. Outis Philalithopoulos

      I tried to check this out for myself – do you know (or does anyone else know) if this, Marine’s “144 engagements” (in English, “commitments”), is the most definitive statement of their current platform?

      1. Foppe

        Would assume so — uploaded in feb 2017, and the vertical text refers to the dates for the 2 rounds. Would be pretty strange if it wasn’t.

        1. Anonymous2

          Fwiw, talking to my Parisian contacts, they think too many distrust that Le Pen’s switch to more moderate positions than her fathers is genuine. The apparent FN move to the centre is probably lipstick on what is still really a fascist pig.

      2. The Trumpening

        Yes it is. But what Mark Blyth was probably refering to was her economic program as outlined on her Wiki page — while the English page seems quite complete, not everything from her Wiki page made it into this most recent program. My favorite paragraph from the Wiki page is:

        She favours the repeal of the 1973 Pompidou-Giscard Law, which makes it illegal for France to borrow at zero or a low rate of interest from the Banque de France and forces the country to borrow at higher rate on the international financial markets. In her view, the national debt has grown steeply because of this law. She claimed that in 2010 France had already refunded 1.355 trillion euros of accrued interest on loans at a time when the national debt represented around 1.650 trillion euros

        I could never imagine Trump coming up with a 144 point program! Marine Le Pen is special in that she is both strategist and politician; both Bannon and Trump, in the same person.

        1. Yves Smith Post author

          I fail to see why you don’t take Blyth at his word. He said he went to the website for Le Front National. Most reasonably educated Brits and Europeans are multilingual. French is so close to English as to be easy to learn, and it takes a lower skill level to have a passive command of a language (read it and listen to it) than active (speak it and write it).

          Plus there is always Google Translate.

          1. The Trumpening

            Mark Blyth’s talk was sometime in January and the 144 pledges just went up so what I meant to say is that Blyth could not have been referring to these 144 points since they didn’t exist at the point of his talk.

            From time to time I look at the FN website and I have never seen a coherent economic program presented there because that is what I am looking for when I go there. Mostly it is links to videos. Of course maybe Blyth found one that I hadn’t seen.

            I mentioned the English Wiki page because someone upthread had discussed translating the French page. Often for a French topic the English page is not as complete but in this case it is.

            I live in a world of people speaking multiple languages so I would never just assume someone couldn’t read French, certainly not an academic.

            1. Yves Smith Post author

              Please tell me where Blyth makes any reference to “144 pledges” or a specific policy list. I listened to the 27 minute segment and what he said was “if you go to their website and just look at their economic policies” at 25:50. Can you tell me where he said what you state that he said?

              1. The Trumpening

                First of all I have never said that Mark Blyth was referring to the 144 pledges. How could he have? They didn’t exist at the time! My point was exactly that he was NOT referring to these points.

                Look at the threading. Oregoncharles mentioned Blyth mentioning the FN website. Outis Philalithopoulos then pointed out the 144 pledges and asked for confirmation these were the latest FN positions. I confirmed they were indeed the latest but pointed out, just to avoid confusion, that Mark Blyth was not referring to these since they are new and didn’t exist when Blyth gave his talk. This was in case anyone was disappointed in these 144 points.

                BTW, I am not in the least hostile to Mark Blyth; in fact I think the guy is great!

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