Friday, June 4, 2010

"The Big News is France" and It's Not Good

Peter Boone and Simon Johnson:

The big news is France.  With sentiment worsening across Europe, France has lost its relative safe haven status – credit default swap spreads on French government debt were up sharply today.

The trigger – oddly enough – was Hungary’s announcement that its budget is worse than expected (blaming the previous government; this is starting to become the European pattern) and in the current fragile environment discussed yesterday, this relatively small piece of news spooked investors.  But these developments only reinforced a trend that was already in place.

Incidentally, Boone and Johnson are wrong about the statement by Fillon. They translate:

Earlier today the French Prime Minister came out with a quote for the ages:
“I only see good news in parity between euro and dollar”.
But then they say:

Update: the exact quote from the French PM is “”Je n’ai pas d’inquiétude quant à l’actuelle parité entre l’euro et le dollar”.  He may be referring to the current euro-dollar rate but there is some potential ambiguity here.

"l'actuelle parité" makes it perfectly clear that he is referring to the current "parity," that is, the current exchange rate, and not to some future hypothetical "parity" of $1 = 1 euro. Nevertheless, such parity is where some observers expect that the current decline of the euro is headed.

1 comment:

Unknown said...

For a correction to this post, see above.