It’s sad when one is held up as a persistent moaning Minnie but I continue to struggle to interpret a ray of sunshine breaking through the clouds as the makings of a fine day.
On the other hand, I have to concede that for all the warnings of dire outcomes, Greece, Spain, Portugal and Italy are all still standing, the eurozone hasn’t disintegrated and the single currency at €1.33/US$ is not a million miles off its lifetime average of €1.19.
In the same vein, ever since I joined the ignoble guild of bankers at the back end of the 1970s, I have heard pronouncements that France has had it, that it is just about to hit the buffers and that “la grande nation” can no longer continue to live in its socio-economic and fiscal dreamland.
And yet, time after time, it has defied its detractors and has battled on to remain, by means foul and fair, an economic and industrial powerhouse. In the same way in which the United Kingdom has not declined quite as far as domestic public opinion would have it, so France has not been quite so great. But, in an Orwellian sense, if nobody offers up the concept, then nobody else can formulate the thought.
French exception
Then, through the good offices of Brussels based Martin Tixier of the Macronomics BlogSpot and the most francosceptic of Frenchmen, I received this week a copy of a research paper from Oddo Securitas in Paris titled “France – la dérive lente” which translates as “the slow drift”. In it the author, Bruno Cavalier, not only tracks and comments on the inexorable decline in France’s competitive position but wonders why it is that investors appear to remain either oblivious of or disinterested in this phenomenon.
He observes the declining competitiveness of French industry, quoting recent league tables which have seen its current global ranking decline from 11th in 2005 to 23rd position. Meanwhile over the same period the benchmark by which France measures itself, Germany, has improved its relative position from 6th to 4th. This makes the decline even more painful. For once, Cavalier observes, the methodology can’t be blamed as the same metrics are applied to all comers.
He also pulls out the debt/GDP charts which show both Germany and France at around 65% at the beginning of the crisis in 2008, both at around 82% in mid-2010 but then the French figure exploding into the mid 90s as at now and on a rising trajectory while German debt/GDP has fallen back to 80% and still pointing south.
Not all is negative. Business climate indices and PMIs are beginning to look better again after the misery of the early Hollande era but they are coming from a pitifully low base
On the flip-side, unemployment continues its steep rise – just under 2 million when the crisis began to bite to the current figure of just under 3.3 million at the end of July. I must add that Prime Minister Ayrault was on the tapes yesterday declaring that he is confident that the trend will be reversed by the end of the year but as Mandy Rice-Davies so famously put it in 1963, “Well, he would, wouldn’t he…”
Dancing on the ceiling
Meanwhile, on the other side of the pond, the director of the Congressional Budget Office, Douglas Elmendorf, has reported that the Treasury will run out of money sometime between the End of October and the middle of November unless the debt ceiling is raised. He has also predicted that the budget deficit will be marginally higher than the May forecast had suggested but the wording would let us assume that it more of a rounding error than a big miss.
President O’Bama has made it clear that he is not going to battle Congress over this one and is expecting the joint houses to find a way of squeezing the quart back into the pint pot. That might look fine on paper but I suspect that as the deadline approaches markets will get the woollies. Add to that the first rumblings that the recent rocket-ship recovery might conceivably be showing signs of stalling - both the Empire State Manufacturing Survey for September and US Industrial Production release for August disappointed, albeit not by a lot - and we find some nice volatility programmed for the coming months. Directional plays to the fore; trick or treat in September? What will they think of next?
Brit persecution
On a personal note, I was privileged to attend a showing of Rush, the new film about the battle for the 1976 Formula One world championship between James Hunt and Niki Lauda which was followed by a dinner at the Royal Automobile Club.
However, the highlight was the presence at dinner of Hunt’s contemporary team manager, Alastair Cordwell, who spoke of the events which gave rise to the film. He garnered plenty of laughter and applause when he spoke of how rules were made up by the FIA as they went along and how often the British McLaren team found itself disqualified post factum, apparently in order to keep the perfidious Brits out of the championship running.
Isn’t it strange how the British feel this ongoing sense of persecution by the mainland cousins… some things never change, do they?