Wednesday, November 16, 2011

Krugman: Eurogeddon

From Paul Krugman: a picture is worth a thousand words:

While Fillon obsesses about le triple-A, the better to excoriate Hollande, the market has decided not to wait for the ratings agencies and has repriced French debt as if the downgrade had already occurred, just as Hollande claims.

And just for good measure, read this:

And if you are an investor, this is the moment of truth. Everything – every asset class – depends on how the euro zone performs in the Italian Job. There are only two outcomes, here. If Italy blows up, a Depression is upon us; banks would be insolvent, CDS triggers would implode the system, bank runs would begin, stock markets would crash, and you will would see sovereign debt yields go to unbelievable lows for nations with a lender of last resort. If Italy survives, I would expect a monster rally in periphery debt, stock markets, and bank shares and a selloff in CDS at the minimum. However, the euro zone is already in recession so that rally will not be sustained.

Attacking Welfare Fraud--Again

Sarkozy and his minions are highlighting the issue of welfare and health care fraud and publicizing the cost to the state. They will do something about it, they promise, if re-elected in 2012. The only problem is that they harped on the same string in 2007, made the same promises, and accomplished nothing in the four years since then. As policy, therefore, their promises ring hollow, but of course the purpose of such campaign rhetoric is not to outline policy but to stigmatize groups associated with the other side.

Social Portrait of France

INSEE, the French statistical agency, has released its annual "social portrait" of France. Laurent Mauduit details the primary findings here. Sarkozy's labor market reforms coupled with the economic crisis have changed the structure of employment significantly:

« Le taux d'emploi en CDI a ainsi atteint un point haut au 4etrimestre 2008,où il s'établissait à 50,5% de la population, puis il a diminué en 2009. La reprise de l'activité n'enraye pas tout de suite cette diminution: le taux d'emploi en CDI continue de baisser tout au long de 2010 et début 2011 (48,7% au 1er trimestre 2011) pour ne repartir à la hausse qu'au 2e trimestre 2011. »
Inequality has increased, although average purchasing power has held steady.

A lot of moxie

So, all is not well in the PS-Green accord. It seems that the Greens wanted an end to MOX processing (MOX is a type of recycled nuclear fuel, a mixture of uranium and plutonium oxides) and thought the PS had agreed to this, but the clause disappeared somewhere between the draft and final agreements. Le Monde insinuates, and Mediapart flatly asserts, that the clause was dropped at the behest of Henry Proglio, head of Areva, a Sarkozy appointee who replaced the Socialist Anne Lauvergeon. (Proglio is not only a Sarko appointee but also a loyalist and the former companion of Rachida Dati). Areva specializes in the production of MOX, and French nuclear installations depend on it.

The Greens will no doubt take this badly, especially since they have already had to eat Eva Joly's promise that there would never be an electoral accord with the PS without a capitulation on the EPR at Flamanville and a promise to wean France off nuclear power. Will the agreement break down? It's not out of the question, given the fissiparous tendencies of EELV and a sense among the rank-and-file of having been sold out.

The Hollande Machine

François Hollande has announced his new campaign organization, and it looks remarkably like his old campaign organization. Moscovici and Le Foll are at the top, and Manuel Valls has been added to take charge of communications. Overtures have been made to all the éléphants, losing candidates, and their entourages, but the core remains the group that saw Hollande through the primaries. This is a victory for the right wing of the PS: the elevation of Valls, the party's rightmost leading figure, to the position that in the party belongs to Benoît Hamon, one of its leftmost leading figures, underscores the point. Cambadélis, the Strauss-Kahnian who bolted to the Aubriac left, is nowhere in sight, whereas Moscovici, the Strauss-Kahnian who opted for Hollande, is at the top of the organization chart. Foreign policy has been entrusted to Bartolone. On s'engage, puis on voit.