Saint Mario's diplomatic tour de force
Watching Saint Mario’s charm offensive in Germany – after his stunning performance in front of the Bundestag, he now follows up with an interview with Der Spiegel in which he supports the concept of central oversight over national budgets – leaves me uncertain. Is this the smart diplomatic tactician at work or are these the heartfelt opinions of the ECB President?
Far more to the point though, where does it leave France and the champion of the impoverished, President Hollande? Draghi is no fool and in an act of simple “Realpolitik” he is playing to the solvent side of the gallery while at the same time leaving us to wonder whether France is still a principal dancer or whether it has been relegated to the corps de ballet?
I read much about the plight of French government finance and how the country will be at the epicentre of the sovereign debt crisis in 2013. My gut feeling is that La Grande Nation is about to hit the buffers but I must add that I have lived through too many dire warnings that it is about to fall over, fiscally and economically, only for it to prove us all wrong.
Whether Draghi believes what he is saying or whether he is just attempting to keep the German political class at bay while the difficult non-negotiations surrounding Greece and Spain are spooking around is a matter of opinion.
Since the great devaluation of the French franc – I think it must have been in summer 1982 when working for Barclays in Zurich that I wrote overnight depots in francs at 1,200% – there have been attacks on the unsustainable French system but time and again the Paris authorities have wiped the floor with the market shorts.
Jean-Claude Trichet, known by the younger amongst us only as Draghi’s predecessor at the ECB, forged his reputation as President of the Banque de France by successfully defending the mid 80s “Franc Fort” policy against all comers. He would and could have become the first President of the European bank had Paris not so aggressively forced its candidates into as many senior roles in international organisations as possible, leaving the rest of the world suspicious and causing the late “Dim Wim” Duisenberg to be chosen as the diplomatically correct solution.
Whether Draghi believes what he is saying or whether he is just attempting to keep the German political class at bay while the difficult non-negotiations surrounding Greece and Spain are spooking around is a matter of opinion. By saying all the right things within earshot of Hans and Helga SixPack and by reassuring them that he’s “on their side”, he enables Brussels to do exactly what it wants to in order to keep the floundering peripherals afloat.
All the while, and this should not be forgotten, he placates the Portuguese and the Irish who must feel that what had originally looked like a first mover advantage when they put their hands up is rapidly turning into the nightmare of having been the first guinea pigs in the laboratory. Sure, at the time, the bail-out structure which is now in place had not been thought of yet and even as it has the adequacy of the financial firepower of the ESM, if faced with a Spanish cry for help, is questioned by many.
A good try is not enough
The latest news from Greece has us appreciating that the can-kicking contest is back on the agenda as an Olympic sport. I do take my hat off to the way it is trying but I did not get my degree or keep my job for putting up a valiant effort but for succeeding. Draghi is trying to find a way to have Germany believe that a fine but failed attempt and a residual mess are very nearly as good as a success.
Meanwhile, New York is awaiting Sandy. Exchanges are closed, public transport is suspended and Mayor Bloomberg has ordered the evacuation of 375,000 people in “low-lying” areas. I am not a meteorologist but I understand that there are two weather fronts about to collide, thus possibly creating the perfect storm.
O’Bama is flying back to Washington in order to make sure that he doesn’t screw up the way Dubbya did over Katrina. Romney will have to grudgingly congratulate the President on his efforts, irrespective of the outcome and all will be praying that the devastation, whatever it is, does not cause too many problems come next Tuesday.
We, in the meanwhile, will be facing a quiet start to the week as we have to accept that the New York market will be as good as absent today. The closure of the exchange floors is the minor issue – it will be the people who will be missing. I have one friend from Boston and one from New York who are over here in London this week, both of whom I suspect would rather be over there with their families. Fingers crossed for all.