Reflections on 9/11; Spain, the Dutch vote and China
As I do every year on this date, I dedicate today’s comment to the memory of Mike Taddonio, Cantor Fitzgerald broker and brother of my friend RT, who perished with his many colleagues and thousands of others in the 9/11 attacks on New York.
The world will never be quite the same again; our belief that a new world order had been created in which peace brought prosperity and prosperity brought peace was shattered and the default option of “shop ’til you drop” didn’t do it either.
A few moments of reflection on what we are doing and why might not go amiss today.
Alas, the world will not stop and neither will the eurozone Muppet Show. Spanish Prime Minister Rajoy persists in playing the role of the Great Gonzo as he seemingly refuses to be told by outsiders where and how he has to cut expenditure. If that is his attitude, which might play well to the domestic gallery, how about someone in Brussels reminding him of his obligations under the Maastricht Treaty to contain debt and deficit to the 3% and 60% limits and threatening to fine his country for breaching these. “Ah!” he would cry “these are extraordinary circumstances….”. Precisely, sir, that is what they are. So would you please now shut up and get on with it.
All of this has an added bit of spice as the Dutch go to the polls tomorrow to elect a new parliament following the resignation of the Mark Rutte administration after Geert Wilders’ fervently eurosceptic PVV had withdrawn it support. There is probably no country in Europe in which the debate about the pros and cons of eurozone membership are so openly discussed and where it is not an offence verging on high treason to suggest that enough is enough.
The murders of the activist Theo van Gogh and Pim Fortuyn probably did more to generate support for the PVV that to stop its momentum and in doing so dragged it closer to the mainstream of the political process if not to its way of thinking. Nevertheless, the PVV’s success might also lead to its downfall as the traditional parties take the message on board.
To what extent the Netherlands might become the recalcitrant member of the donor nation side of the eurozone is not clear. Many of the political uncertainties were brought about by the outgoing government’s insistence that it will do all that is necessary to meet Maastricht. If the PVV loses seats as the polls suggest, then the new coalition government will most probably be formed by four parties which all unconditionally support the Fiscal Compact leaving the PVV and the socialists isolated.
Investors can go to bed tonight soundly assuming that neither The Hague nor Karlsruhe will put a spoke in the wheel of prevailing optimism. However, if the Spanish begin to play hard and fast as the Greeks did under Papandreou with their attitude that it is in their hands to break the eurozone if they didn’t get their own way, then I’d expect the Dutch vox pop to act as something of the litmus paper of northern European thinking.
Meanwhile, elsewhere, China continues to confuse with the notable absence of Xi Jinping from public view. He is supposed to be top candidate to replace Hu Jintao as President but he has not been seen in over a week. Following the defrocking of Bo Xilai, the worst could be thought. Yet I understand that the rumour mill in Peking has him absent with nothing worse than an injury picked up while playing football.
Prime Minister Wen Jinbao’s speech at the Tianjin Economic Forum – the Asian Davos – is due today. He is expected to reiterate the government’s commitment to keeping the economy up and running and to stimulate as needed. Forget the economics for a moment and bear in mind the risk of social unrest if growth were to fall below 7% or so. The Party needs that like it needs a hole in the head and will make sure it doesn’t happen, especially as the once a decade change of control is imminent.
China is intent on demonstrating how a command economy can be steered from the bottom as well as it can from the top. However, to what extent revived Chinese growth will fuel recovery anywhere else in the world – other than in commodity suppliers such as Australia – is questionable.
Bet against Oz at you own peril.