Left-Wing Hollande Would Trigger €urogeddon

MONDAY, APRIL 23, 2012

Left-Wing Hollande Would Trigger €urogeddon

Guido shorted €uros last night as soon as the Kiwi’s got to their desks and the currency markets opened. French Socialist Francois Hollande looks set to become President of France and the Dutch government has fallen apart. International investors are not going to look at that kindly, Guido also has a sense that the election of a left-wing president in France who actually implements a left-wing agenda would frighten the bond markets. Hollande will probably tack to the centre once in office, he is after all only a politician making election promises. If however he sticks to the left-wing agenda that his rhetoric promises, the big macro-hedge funds will take the view that French bonds can join the PIIGS (Portugese, Irish, Italian and Spanish bonds) on the sell list. In government Hollande has to choose between his rhetoric and the reality of the bond markets.
The ECB has already dangerously leveraged up support for the PIIGs via Long Term Refinancing Operations (LTRO). Leveraging up the ECB’s capital base has allowed it to put nearly €1 trillion of PIIG sovereign debt on its books, at a massive leverage ratio of nearly 40 to 1. If the ECB were a marked-to-market hedge fund instead of a Central Bank we would say it was investing recklessly, a mere 2.5% market move against it would wipe out all of its capital. The market doesn’t move it against it because it massively intervenes to support its own position.
If however the German Bundesbank decides that the ECB can’t go on literally doubling the chips on the table – up 106% since last year – the €uro as is could be too big to save. That is why all Osborne’s Treasury’s protestations about the IMF always getting its money back count for little. The US and China want to see Germany bet everything on the €uro before they join the rescue party. German politicians – including those of the left-of-centre SPD – expect Hollande to govern from the centre whatever he says on the hustings. British left-wingers hoping for a left-wing surge on the continent sparked by Hollande should be careful what they wish for, it would trigger the end of the €uro. If Hollande abandoned Sarkozy’s deficit reduction programme Germany would probably seek alternative arrangements – a hard-€uro Fiscal Union made up of Northern Europeans who run their affairs like the Germans and a looser soft-€uro of Southern Europeans who overspend. The dream of a united continent of Europe with one currency would be over…

SUNDAY, APRIL 22, 2012

Buy the Daily Star Sunday

Not too late to whip down to the newsagents to pick up a copy of the Daily Star Sunday, still only 50p.
Don’t miss it…

In your 50p #DailyStarSunday Cor! @MASieghart is the Star page 9 girl, some Brum dirty tricks and analysis of international monetary policy.—
Guido Fawkes (@GuidoFawkes) April 22, 2012

24% of Tory Voters Prefer Farage to Cameron
Carswell Ahead of Cameron on Preferred Policies

Dave beats Ed 37% to 30% when it comes to the question of which party leader best defends Britain’s interests. No great surprise there.

To those who claim UKIP is not going to cut through what is interesting is that the pollstersSurvation found that 24% of those that voted Conservative in 2010 –  almost a quarter - choose UKIP’s Nigel Farage as the party leader that best defends Britain’s interests. The crowding at the centre of politics is opening up space for UKIP on the right…
Tory MP Douglas Carswell might also have the last laugh after being slapped down by Cameron at PMQs for a lack of a sense of humour. The Mail on Sunday found that voters preferred Carswell’s policies over Cameron’s:

To be fair Dave too used to be in favour of an EU referendum, open primaries, MP right to recall laws and the rest. Before he was elected…