Tuesday, May 31, 2005

"Not decline but destiny"

The Financial Times reports that the Euro falls further as Villepin named PM. Villepin, a chief architect of the coalition against the US operation against Saddam, had predicted a new French Golden Age as he surveyed the world he was about to bestride. "Pas le déclin, le destin". That was two years ago but it will have to be postponed for the present.

President Jacques Chirac’s decision to name Dominique de Villepin as prime minister, following the resignation of Jean-Pierre Raffarin, also appeared to go down badly with the market, sending the euro lower still when the announcement was made.

“Dominique de Villepin, has a social democratic stance on economic policy, which might help to persuade the anti-reform minded French electorate, but would cost France precious time to reform its outdated economic model. In the case of Villepin being appointed the euro would slide further,” Hans Redeker, global head of forex strategy at BNP Paribas, had said prior to Mr Chirac’s decision.

A similar observation was reached by Forbes:

Markets also appeared unimpressed by the appointment of Dominique de Villepin as France's new Prime Minister. De Villepin replaces Jean-Pierre Raffarin, who resigned earlier today after France's massive rejection of the proposed EU constitution. De Villepin, a close ally of Chirac for several years, was previously interior minister. Markets had been holding out hope that Raffarin would be replaced by the more reform friendly Nicolas Sarkozy, currently the president of Jacques Chirac's ruling UMP party.

The market reaction underlined the curiously dual nature of the European project,  a statist political pill sugar-coated with market candy. The European project dangles the prospect of economic integration, and the implied dismantling of protectionist barriers, in exchange for the installation of a vast, powerful and largely unelected bureaucracy in Brussels. The European Economic Community was the first half of a Faustian bargain; whose second part no one wanted to think about until recently. This duality made the "Polish plumber", a key symbol of the European charter debate, simultaneously a figure of menace and hope. Those who wanted his money didn't necessarily didn't want the rest of him and voted accordingly. The currency markets are now recoiling from the economic consequences the 'Non' vote just as the electorate had earlier fled from its political implications.

There is of course, no reason why the economic benefits of freer markets must necessarily be purchased at the price of a supranational dirigiste state. Brussels' masterstroke was to repeatedly suggest one was inseparable from the other, even as Lenin once said that 'Communism was justice plus electricity". They may in fact be unrelated concepts. But sometimes it takes a long time to figure out.


Blogger jake-the-peg said...

But the Euro needs to decline relative to the dollar in order to compete. A fall in the currency is a good thing for its members.

5/31/2005 09:50:00 AM  
Blogger Doug said...

David Horowitz is Hosting the Dennis Prager Show.
Currently discussing Hollywood Commies and the contemporary coverup artists.

. _____KRLA_____ .

. _____Discover The Network_____

5/31/2005 10:29:00 AM  
Blogger Doug said...

Red Star Over Hollywood
Ron Radosh

5/31/2005 10:30:00 AM  
Blogger desert rat said...

In a macro world it is agood thing for all members, but in the real world it is a better thing for the new Eastern members than for the moribid French or German economies.

5/31/2005 10:48:00 AM  
Blogger Doug said...

____Our Hairo_____

5/31/2005 11:02:00 AM  
Blogger Doug said...

New York Times Exposes CIA, covers up background of reporter.
Hat Tip, Dave Horowitz
. _____C.I.A. Expanding Terror Battle Under Guise of Charter Flights_____

5/31/2005 11:13:00 AM  
Blogger Doug said...

"There is of course, no reason why the economic benefits of freer markets must necessarily be purchased at the price of a supranational dirigiste state. "
And in the USA, one could say:
"There is no reason our heritage, national unity and national security must be sold out to obtain the illusory benefits of illegal labor and uncontrolled borders."
...But Washington D.C. is not concerned.

5/31/2005 12:25:00 PM  
Blogger Ray said...

De Villepin is already making a contribution to French economic recovery by lowering the price of Bordeaux and Brie in Boston.

I did think that Chirac might play a sly trick by appointing Sarkozy in the hope that by becoming a part of this widely discredited government, he might become tarnished himself. But I guess that fear Sarkozy might actually do something substantive/successful and loathing for his prodigal protege kept him from doing it.

By the way, in reference to the last paragraph of Wretchard's excellent post, I think that Lenin's slogan was "Communism is Socialism plus Electricity" and we wouldn't want to make the mistake of equating "socialism" with "justice", would we?

5/31/2005 12:50:00 PM  
Blogger Ari Tai said...

re: Euro in retreat / socialism.

I think there's a large slice of mercantilism in the mix. They (the continent) are roughly where the U.S. was back in the 20s when it was hard to separate business from government either through bribes and/or direct ownership. Rather than clean this up, they made a peace with Labor, and now they are paying the price.

Consider EDF. They have more than 100,000 employees to run less than 100 nuclear power plants and dams (shades of a non-competitive AT&T). Their plants (derived from a proven U.S. design) should have cost less than 100M$ a copy (given manufacturer, regulator, and employer are the same.. note that they created their own semi-military operator corps, and pay them about that well). So they have a cost per KWH of considerably less than a penny. And charge more than 10 cents (selling electricity to other parts of Europe contributes a large fraction to the foreign income of France). Call it 8-10B$ a year of unaccountable benefit (or moral hazard) to the "government."

And now EDF is reported to be in financial trouble. Given the lack of transparency and accountability in all these governments and their businesses (EU-wide), no one should be surprised. Hard to place they beyond 1920s wrt governance, and they've yet to experience the social upheaval (and lessons with regard to how you should treat all your citizens) of the U.S. in the 60s and 70s, nor the (moral) decay in self-worth that followed from welfare as we knew it (i.e. charity without obligation.)

Recent reports show that the difference in productivity between the two systems suggest a general finding that the lowest 1/4th in the U.S. live as well or better than the middle class in Europe (in terms of consumption, recreation, access (granted, not guaranteed) to the latest drugs and medical care, and crisis health-care outcomes). The difference in systems has also made the U.S. the world's market. Everything here is half-as-costly in Purchasing-Power-Parity (PPP) than anywhere else in the world (excluding subsidies).

5/31/2005 01:45:00 PM  
Blogger fred said...

This whole superstate project has been France's since it was envisioned by Charles "le Petit" (my nickname for him) de Gaulle. Gaullists have been trying to gain traction for this project for years and they have been trying to leverage an anti-American alliance with European (not just French) socialists, communists, trotskyists, and Greens in order to gain this prize. However, the bribes weren't sweet enough for the players on the Left. The Right simply does not trust an alliance with Leftists and they are not at all happy with Brussells' cozy relationship with the folks from Allahland. Everyone is paranoid of their turf being taken by immigrant workers from Eastern Europe, who are hard-working, educated, and industrious. This vision of a European superstate fails because its vision is not based upon anything positive, because of the Gaullists' distinctly virulent anti-Americanism.

This is one American who cannot for the life of me understand why a free trade zone, reduced taxation, and pared down regulations cannot be grasped as a better solution. It can be done while still keeping some version of their cherished social safety net. The U.K. has a more generous safety net than ours, yet the U.K. prospers - even Ulster province is making strides. For a LOT LESS headache they can have some lesser version of socialism and a much more prosperous economy than the current version.

de Villepin hardly seems to be a pragmatic answer to the deeper problems. Will anyone second my opinion that a man who yearns for the glory days of Bonaparte is simply delusional and out of touch with reality?

5/31/2005 06:45:00 PM  
Blogger Peter UK said...

As soon as everyone realises that the EU is The Blob in a different guise the better.

5/31/2005 06:58:00 PM  
Blogger Peter UK said...

The EU was never envisaged as an ecconomic entity purely for prosperity,the ecconomic aspects were intended to bind Europe together.If you Google Jean Monnet you will get a better feel of the whole ambitious project,which began in the ashes of WWI and was intended to prevent another war like the Great War.
In the wake of WWII the ruling no longer trusted the people to vote the right government in, "Europe" was not to be democratic,it was not to be put to the people,it was insidiuosly put in place step by step and is properly called a benign oligarchy.Ruled by an unaccountable bureaucratic elite decisions were to be handed down as a fait accompli.
It was essentially a nineteenth century solution to an early twentieth century problem trying to cram itself into twenty first century problem of a totally kind. Add a bloodless coup a grab for power by the nomeklatura and you get the me we have now.

5/31/2005 07:19:00 PM  
Blogger madawaskan said...

I read an article in the print-out version of Le Monde page 2 of 29 May edition-the title of which was Nicolas Sarkozy avoue ses "difficultes" avec Cecilia

English version of the story-http://news.yahoo.com/news?tmpl=story&u=/afp/20050524/en_afp/francepoliticssarkozy_050524120839

-Sarkozy having marital troubles-should be no big deal in France- but interesting the timing of it.

5/31/2005 07:40:00 PM  
Blogger fred said...

Thank you, peter uk, for bringing me up to speed about this. Then this vision is even more totalitarian in nature than I had first grasped. The premise is even more disturbing, inasmuch as the elites think it is the "unwashed masses" who hanker for war or some other disaster. If my history serves me correctly (please feel free to disturb my false impressions, as applicable), it was not necessarily "the masses" who prepped Europe for WWI. Once again, you have the high and mighty blaming the unwashed for every problem and disaster, while they bask in edifying moral superiority! There seems to be this enduring temptation in Europe for "top down" solutions to problems real and imagined.

5/31/2005 07:46:00 PM  
Blogger Rick Ballard said...


If you want to understand the "roots" of the EU from the end of WWII this article lays out the underlying political philosophy.

5/31/2005 08:37:00 PM  
Blogger Robert Schwartz said...

The French nomenklatura, who dreamed up the EU and who have pushed it along, hoped that they would be able to create an entity that would be able to defeat the US, one with a larger territory and population.

During the first phase of the EU, the nomenklatura milked the rest of the union to pacify the French public with subsidies and socialism. The second phase required a bit of slight of hand. The reflected glorie of the French nomenklatura running the new super-power, would have to take the place of subsidies.

If Chirac had put the question to the French legislature, they would have bleated oui. But he wanted something more, a show of the commitment of the French people that would intimidate or inspire the Dutch, the Brits and other euroskeptics.

Clearly, Chirac's decision to put the question to a referendum was a blunder. However, arrogance is the besetting sin of the nomenklatura. If Chirac had a shred of nobility, this would be a tragedy, but he is a crook and a jerk, and all it is, is comeupance.

It turns out that the French public was unmoved by the prospect of glorie. They had become inured to their soft lives. They saw the Constitution as creating a new coutry where they would no longer be privledged, and they voted non.

Many people, including non-French euroskeptics have bashed the French public as idiots for voting no for the wrong reasons. But I think it is easier to understand what they did and why if you assume the knew what they were doing and why. I think the French public understood precisely the issue before them and voted in what the believed is their interest.

If there is to be a single state of Europe, with a single constitution, then 1). each country will eventually give up its national identity and 2). there will be no limit on companies, jobs and people moving around and diluting the economic and cultural relationships that each heretofore soverign state has had.

The French nomenklatura's belief in the superiority and rationality of French culture is unshakeable. They thought nothing of these issues. They assumed that they would be on the horse of the new Europe riding it.

The lower orders are terrified, they have seen the muslim invasion and the crime and social chaos that it has spawned, they know how vulnerable their 35 hour/wk 46 wk/yr sinecures are. They wanted to stand athwart history and yell stop. And they did.

Those of us who are anglo-saxon, understand that the EU's real problem is its insufficent liberalism, but even the tiny amount implied by the EU is too much for the French lower orders. They are as hysterically afraid of liberalism and what it would do them and their culture, as the most millitant islamist. And they are not wrong, although on a human level they want for courage and faith.

This may very well have been the high tide of the movement for a united Europe. The nomenklatura will not be able to sell it to any of the euroskeptics. The Dutch will vote no. If the EU pushes the UK to vote, Blair's optimal strategy would be to not campaign for it and let it go down without impairing his political capital.

I would be short the Euro. It was a solution to a problem that did not exist because computers and electronic transactions had solved the currency conversion problem, and all it did was transfer the real cost of currency hedging onto the books of the central bank.

When the big countries decided the rules were for the little guys and a number of little countries, such as Greece, turned out to be complying by cooking their books, the whole enterprise was doomed.

The Euro's recent rise against the dollar was an illusion. As much as the Democrats want to paint it as a sign of American profligacy and Republican mismanagement, it was not about US. It was about the stringencies that the European Central Bank had to impose to keep their bicycle upright.

I do not think it will long survive

5/31/2005 09:19:00 PM  
Blogger exhelodrvr said...

Peter UK,
Your post re the ruling class not trusting the people especially makes sense in light of an article I read yesterday about Holland's vote. Their government (I forget which minister) stated that a No vote will only be considered binding if at least 30% of the voters vote, and at least 55% of them vote no.

6/01/2005 05:37:00 AM  
Blogger Moral Hazard to Navigation said...

Despite Europe's elite having delsions of grandeur, the more basic problem of an aging population coupled with the Islamic invasion is what's on the forfront of the average Frenchman's mind.

I lived in Holland for a time and my guess is they will vote no too.

6/01/2005 07:04:00 AM  
Blogger Doug said...

Peter UK said...
"As soon as everyone realises that the EU is The Blob in a different guise the better. "
We'll just mix up this economic wonderworks in Brussels, and submit it to the people for ratification later.

6/01/2005 11:10:00 AM  
Blogger ledger said...

It looks like some in Euro want out. I am talking about the countries in the Euro currency. As most of you know the countries that joined the Euro currency basically gave up monetary control of their nation's central bank to the EU central bank. Now some in Italy want out of the Euro and a return to the Italian lira. If this were to happen the whole EU concept would be badly damaged. Barron's notes:

"Italian Welfare Minister Roberto Maroni, a member of the Northern League party, suggested Friday reintroducing the lira. Italy is in recession, hurt by the strong euro and competing textile and machinery products from China..."

See: European Trader, By Vito Racanelli, Barron's, 06/06/05, page M6 (print edition).

[note: Barron's can be purchase on Saturday but is dated for Monday]

6/05/2005 01:06:00 AM  

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