Left-Wing Hollande Would Trigger €urogeddon

Guido shorted €uros last night as soon as the Kiwis 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…



Tip offs: 0709 284 0531
team@Order-order.com

GuidoFawkes Quote of the Day

David Cameron tells MPs after voting:

“Wouldn’t miss this for the world. Secret ballots very important. Remember the Chartists.”

Top Posts This Week

Guidogram: Sign up

Subscribe to the most succinct 7 days a week daily email read by thousands of Westminster insiders.

Facebook

WALTER MITTY CV OF ANTI-FRACKING CANDIDATE WALTER MITTY CV OF ANTI-FRACKING CANDIDATE
Cassetteboy v Cameron and Farage Cassetteboy v Cameron and Farage
MICROSOFT SHAKES DOWN PUBLIC SECTOR FOR DOSH MICROSOFT SHAKES DOWN PUBLIC SECTOR FOR DOSH
WATCH: Toby Young Skewers Labour Zero Hours Contract Attack Line WATCH: Toby Young Skewers Labour Zero Hours Contract Attack Line
MAIL TRICKED INTO QUOTING BATMAN FILM IN PLANE CRASH COVERAGE MAIL TRICKED INTO QUOTING BATMAN FILM IN PLANE CRASH COVERAGE
ANTI-FRACKING PARLIAMENTARY CANDIDATE WANTED TO WORK FOR FRACKERS ANTI-FRACKING PARLIAMENTARY CANDIDATE WANTED TO WORK FOR FRACKERS

Crick Gets Paxo’d Crick Gets Paxo’d
Cameron’s Secret A-List Cameron’s Secret A-List
Corrections and Clarifications: Brooks Newmark Corrections and Clarifications: Brooks Newmark
What is Wrong With the Lobby? What is Wrong With the Lobby?
Arrogant Bercow: “I’m Not Going Anywhere” Arrogant Bercow: “I’m Not Going Anywhere”
GOVERNMENT SHELLS OUT FOR PHOTO OF DEAD ZEBRA GOVERNMENT SHELLS OUT FOR PHOTO OF DEAD ZEBRA
DWP Press Office Wins the Internet DWP Press Office Wins the Internet
Two-Faced Chuka Ruins Labour Attack Ad Two-Faced Chuka Ruins Labour Attack Ad
Cameron Mauls Miliband at PMQs Cameron Mauls Miliband at PMQs
Actual Pub Landlord Likes Farage Actual Pub Landlord Likes Farage
Dave’s SNP Poodle Zinger Dave’s SNP Poodle Zinger
GREEDY SOLAR INDUSTRY WANTS MORE PUBLIC CASH GREEDY SOLAR INDUSTRY WANTS MORE PUBLIC CASH
This is the worst thing the LibDems  have ever done This is the worst thing the LibDems have ever done
CLIMATE CHANGE FUELLED MOSQUITOES ARE NOT COMING TO GET YOU CLIMATE CHANGE FUELLED MOSQUITOES ARE NOT COMING TO GET YOU
ORDNANCE SURVEY OPENS UP DATA MAPPING TREASURE CHEST ORDNANCE SURVEY OPENS UP DATA MAPPING TREASURE CHEST
“I’d S**k Off David Cameron” “I’d S**k Off David Cameron”
WATCH: Cameron Heckled By Pensioners WATCH: Cameron Heckled By Pensioners
WATCH: Gove v Campbell WATCH: Gove v Campbell
Politician dumps his wife over sexy selfies Politician dumps his wife over sexy selfies
UKIP PROTESTERS ORGANISED BY GREEN LOBBYIST UKIP PROTESTERS ORGANISED BY GREEN LOBBYIST
You’ve Been Cricked! You’ve Been Cricked!
He’s Not Dancing Anymore He’s Not Dancing Anymore
Miliband’s Hedge Funder Hypocrisy Miliband’s Hedge Funder Hypocrisy
NATIONAL TRUST CLAIMS CLIMATE CHANGE IS “BIGGEST THREAT” NATIONAL TRUST CLAIMS CLIMATE CHANGE IS “BIGGEST THREAT”