French primaries

marianne

Francois Fillon will run for the center right party at the next French presidential elections. His political program was less moderate than the one offered by his main opponent, more closely inspired to the free markets of the Reagan years.

This result seems to confirm the electors’ preference to a more explicit political program.

French political scene starts today to be more transparent. In looking at the names that will emerge for the final vote we now understand that Marine Le Pen will represent the extreme right, Francois Fillon the moderate right and we still need to wait for the nomination of the left party. We already know that the approval rating for Hollande are at the lowest level in French history, a negative impact on the French left should be expected.

The selection of Francois Fillon lowered the probability of Mrs Le Pen to be the next French president to 20% from about 30%. If we consider that the electoral preferences are moving to the extremes, that France has always been a strong and centralized state, and that the composition of the electorate is socially and demographically changing, in France too, we should say that 20% probability of being elected for Marine Le Pen could be too low (she represents the strength and centralization of the State better than the French version of a neo-liberal). In any case 20% is high enough to negatively impact the financial markets.

Sticking to today’s reality, we know that two of the three future possibilities are more or less strongly euro-skeptics, that both are not ashamed in siding with Putin, to the point of accepting an European step back in Ukraine (damaging the reliability of our continent on the world political scene). The victory of Mrs Le Pen could add one more name to the protectionist styles that seems to have started with Trump (on this the new USA president is at least ambiguous). Protectionism should not be underrated, due to the importance it had in worsening the 1929 crisis (the 2008 crisis is not yet over in Europe).

The European political scene is already showing some clouds in 2017, suggesting a diversification in US dollars for a Euro based Investment portfolio. On some metrics the European equity market looks undervalued, the continent’s macro economic conditions are improving, our political choices (or their perception by the financial market actors) support the prudent evaluations we observe.

All of the above might be the best contemporary representation of the meaning of Franklin Delano Roosevelt’s inaugural speech on March 4th 1933: “the only thing we need to fear is fear itself”.

The strong concentration on pessimism we observe in Europe is a non irrelevant part of the European problem.

 

 

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