Thursday, 16 March 2017

The economic lunacy of Marine le Pen

Many Europeans are breathing more easily this morning as we consider the encouraging results of the Dutch elections. With a slackening wind from the North Sea holding up, one hopes for good, the progression of the populist ship, it seems a good opportunity to look more closely at Marine Le Pen’s economic programme and hope that its lunacy will become increasingly apparent to electors in France.

The most complete exposition of this programme I have read so far can be found in an interview published in “Investir, Le Journal des Finances” on February 18 of this year. While M.L-P’s positions on the single currency and the EU itself have been well rehearsed, what caught my eye in particular was a comment tucked away in the middle of the piece where she says: “  … the whole logic our of policy is to no longer depend on foreign creditors.” [1]

A statement that is eerily familiar to those who remember François Hollande’s Le Bourget speech in the run up to the presidential election in 2011: “My enemy is finance.”

It is worthwhile repeating the facts about France’s indebtedness, as reported by Le Monde a few days ago, although M.L-P clearly prefers facts of the alternative variety. Current debt runs to 97.5% of GDP, 60% of which is held by foreigners, or, as the statisticians would describe them, “non-resident investors”. Annual interest payments, amount to €40billion (yes billion!!).

The only way of  “no longer depending on foreign creditors” would be to default on most of that debt, which M.L-P says she would stop short of. But investors worried about the prospect of France ditching the euro and having their debt repaid in a devalued currency are hedging their bets, which goes some way to explaining the rise of French 10 year rates over the last few months and the increasing spread with comparable German rates.

Whatever the bluster from M.L-P, it is very clear that any programme to reduce dependence on foreign creditors will require the implementation of a patient, credible and single-minded policy over many years. To claim anything else is pure fantasy.

Unless of course the Euro is abandoned and the EU falls apart. What would happen then is anybody’s guess.

François Fillon, for all his faults, is the only candidate who seems to have a proper understanding of this challenge. Whether he will be elected President and in a position do something about it is very much a matter of conjecture at the moment. But one hopes that he will at least, in the upcoming televised debates, explode the myths surrounding the lunatic policies of one of his main rivals.

[1] Unless otherwise stated, all translations from French and German in this blog are my own

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