"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might help to persuade the anti-reform minded French electorate, but would cost France precious time to reform its outdated economic model.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.