Posts Tagged ‘Nicolas Sarkozy’

Emerging Stocks Extend Worst Slump Since 2008 on French Election

Emerging-market stocks extended the longest string of weekly declines since 2008 after French Socialist Francois Hollande was elected President, U.S. employers added fewer jobs and Taiwan’s inflation accelerated.

PetroChina Co. (857) retreated the most in five weeks in Hong Kong trading after the Shanghai Securities News said gasoline prices may be cut. China Vanke Co. (000002) and Poly Real Estate Group Co. led declines for property developers in Shanghai after the Xinhua News Agency reported Industrial & Commercial Bank of China Ltd. suspended a discount on mortgages for first-time home buyers nationwide. Cathay Financial Holding Co., Taiwan’s largest financial services company, retreated 2.8 percent.

The MSCI Emerging Markets Index (MXEF) lost 1.5 percent to 998.21 as of 10:49 a.m. in Singapore, heading for its biggest slump since April 4. The index dropped for a seventh week last week after U.S. Labor Department data on May 4 showed U.S. payrolls climbed by 115,000 in April, below economists’ estimates for a 160,000 advance. The Hang Seng China Enterprises Index (HSCEI) of Chinese companies listed in Hong Kong lost 2.4 percent. Taiwan’s Taiex Index dropped 2.3 percent, while South Korea’s Kospi Index (KOSPI) fell 1.7 percent.

The U.S. data and the French presidential election are sending “jitters through the Asian markets today,” Vasu Menon, vice president for wealth management at Oversea-Chinese Banking Corp. in Singapore, said in a Bloomberg television interview. “If the market pulls back another 5 percent, 8 percent, you will see bargain hunters coming back to bargain hunt for stocks because the fundamentals for Asia are still fairly strong.”

European Debt

The MSCI’s developing nations index, which has gained 9 percent this year, is valued at 10.4 times estimated profit, a 15 percent discount to the MSCI World Index’s multiple of 12.4, according to data compiled by Bloomberg.

Hollande, the first Socialist in 17 years to control Europe’s second-biggest economy, pledged to push for less austerity. Hollande got about 52 percent against about 48 percent for Nicolas Sarkozy, according to estimates by four pollsters. His platform calls for policies German Chancellor Angela Merkel opposes, including increased spending and a delayed deficit-reduction effort.

Taiwan’s consumer-price index climbed 1.44 percent in April from a year earlier, compared with a revised 1.25 percent increase in March, the statistics bureau said in Taipei today. The median of 12 estimates in a Bloomberg News survey was for a 1.41 percent gain.

Taiwan Semiconductor Manufacturing Co., the company with the biggest weighting on the Taiex, slid 2.9 percent. Cathay Financial Holding retreated 2.8 percent.

Developers Slump

PetroChina decreased 2.8 percent. The Shanghai Securities News reported gasoline and diesel prices may drop by 300 yuan per ton, or 0.22-0.26 yuan a liter, citing Hu Huichun, an analyst at researcher

Vanke, the nation’s largest listed property developer, fell 2 percent. Poly Real Estate, the second biggest, dropped 0.5 percent. ICBC, the largest lender, notified its borrowers of scrapping the mortgage rate discount by phone last week, Xinhua reported. The suspension was made amid tighter liquidity and “deposit instability,” according to Sophie Jiang, banking analyst at Religare Capital Markets.

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Economic crisis, a failing political class and the spectre of 1930s-style extremism across Europe

History suggests that in dire economic times which offer  no hope of improvement, extreme parties of the Left and Right will spring up and  attract widespread popular support. That was what  happened in much of continental Europe in the Twenties and early Thirties, most notably in Germany.

This time, it is not in Germany that political extremism is gathering force, no doubt because that country is at least, for the moment, largely insulated from the cold economic winds blasting much of Europe. No, the first disturbing signs of parties of the  far-Right and Left entering the political mainstream are to be found in France and Greece.

To be sure, France already had an established record of extremism in the shape of the semi-fascist Front National, whose leader, Jean-Marie Le Pen, was actually runner-up (admittedly a distant one) in the 2002 presidential elections. The party’s current and only marginally more moderate leader, his daughter, Marine Le Pen, commands around 14 per cent in the opinion polls ahead of the first round of this year’s presidential election on April 22.

Phenomenal success: Jean-Luc Melenchon appeals particularly to the young, desperate and unemployed with his rousing rhetoric and extreme Left policies Phenomenal success: Jean-Luc Melenchon appeals particularly to the young, desperate and unemployed with his rousing rhetoric and extreme Left policies

More surprising, and in a way more shocking, is the phenomenal success of a far-Left candidate called Jean-Luc Melenchon, who is slightly in front of Marine Le Pen in most polls. Think of a Gallic, more intelligent Arthur Scargill and you would not be very far off beam. He advocates confiscating the incomes above a certain level of the rich, raising the minimum wage immediately by 20 per cent, and  banning profitable companies from laying off workers.

M Melenchon’s rhetoric is even more alarming than his policies. He speaks approvingly of ‘civil insurrection’ and  tells delirious crowds, largely made up  of desperate, unemployed young  people, that they ‘will have to be the crater from which the new flame of revolution erupts’.

This kind of far-Left incendiary language has not been listened to in Europe for more than 30 years. The fall of the Berlin Wall was thought to have put an end to it. The far-Left is back in France as a formidable force, and M Melenchon’s wild policies and wilder words — which only ten years ago would have seemed hopelessly anachronistic — are being taken seriously in a country where youth unemployment is at least 25 per cent.

As is invariably the case with extreme Left-wing and extreme Right-wing politicians, Jean-Luc Melenchon and Marine Le Pen have much in common, railing against globalisation  and the European Union. Mme Le Pen has her own anti-immigration rhetoric, which speaks to the fears of many French people over the ‘Islamisation’  of France.

Neither of them will win this year’s presidential election, and both will almost certainly be knocked out in the first round. The ultimate victor will either be the present incumbent, the centre-Right Nicolas Sarkozy, or the Socialist Party candidate Francois Hollande, something of a Left-wing firebrand himself, whose policies put him to the Left of the British Labour Party.

But although neither of the extremist candidates will be president, they will together probably account for around 30 per cent of the vote on April  22. Moreover, their policies will influence the eventual winner. This is particularly likely if the socialist M Hollande emerges triumphant in the second round two weeks later, and there is talk of M Melenchon securing Cabinet seats or influencing policy if that happens.

In other words, extremism is becoming part of the mainstream. Who can say what will happen if the French economy continues to deteriorate? It is still a long way from the predicament of Greece, where draconian austerity measures demanded by the German government in the name of eurozone solidarity are provoking a deeply worrying political backlash.

According to opinion polls, the two established Greek parties may win less than 50 per cent of the vote in elections early next month. A majority  of voters seems likely to back  one of the small parties  which oppose the austerity measures, in particular the Greek Communist Party or  the far-Right Chrysi Avgi  (Golden Dawn).

Jean-Marie Le Pen and his daughter Marine Le Pen: Mme Le Pen has her own anti-immigration rhetoric, which speaks to the fears of many French people over the 'Islamisation' of FranceJean-Marie Le Pen and his daughter Marine Le Pen: Mme Le Pen has her own anti-immigration rhetoric, which speaks to the fears of many French people over the ‘Islamisation’ of France

As in France, though even more strikingly, many people are rejecting the failed orthodoxies of the mainstream in favour of the superficially alluring — though almost certainly impractical — quack remedies peddled by politicians who until recently would have been almost universally regarded as being beyond  the pale.

Of course, in Europe as a whole it would be silly to exaggerate a development that is still in its infancy, and is not bound to follow the pattern  of the Twenties and Thirties.  We are obviously still very far from the financial meltdown of the Weimar Republic which led to Hitler coming to power, trading as he did on the communist threat which terrified many middle-class Germans.

But it would be equally foolish to deny that recession and unemployment on a scale unknown since the end of World War II are helping to create the  conditions in which extremist parties can flourish. Nor should we be surprised that the movement is gaining traction  in France, cradle of revolutionary fervour.

Extremism reaches Britain? It is tempting to see the recent triumph of the populist Leftist George Galloway in the Bradford West by-election as a protest vote against mainstream orthodoxyExtremism reaches Britain? It is tempting to see the recent triumph of the populist Leftist George Galloway in the Bradford West by-election as a protest vote against mainstream orthodoxy

It is also tempting to see the recent triumph of the populist Leftist demagogue George Galloway in the Bradford West by-election as a similar protest vote against mainstream orthodoxy, though we can perhaps hope that this was a one-off victory that will not be repeated elsewhere. The British are not supposed to be drawn to political extremists.

If, like me, you think that the euro is the main — though not the only — cause of Europe’s woes, then there is at least a theoretical solution. The financial difficulties of  France, Spain, Italy, Portugal,  Ireland and Greece would be greatly ameliorated if they could be freed from the  uncompetitive exchange rate which membership of the euro imposes on them.

That, though, is not going to happen any time soon. Angela Merkel, Chancellor of Germany, is wedded to the notion that the future of a federal Europe and the survival of the euro are indivisible. The fear is that she could turn out to be entirely wrong, and the medicine being forced on Europe’s weaker economies could end up destroying the patient and tearing Europe apart.

What is certain is that while many young people in some European countries have no realistic hope of having a job, and they and their parents are subjected to never-ending austerity measures imposed by Berlin, there will be more politicians such as Marine Le Pen spouting their inflammatory nonsense, and others still like Jean-Luc Melenchon proposing lunatic economic measures that would only make things far worse.

When mainstream leaders are incapable of offering solutions to apparently intractable economic problems, extremists will step in. That is what happened in Europe in the Twenties and Thirties. Looking ahead to years of sclerosis which none of our leaders shows the slightest sign of knowing how to prevent, it would be a brave man who said the same thing could not happen again.

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