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France's Tangled Web - BBH

FXStreet (Barcelona) - Marc Chandler, Global Head of Currency Strategy at BBH Global sees France is in a difficult position as it has not had a sufficient spur to reform, despite the platitudes by both Sarkozy and Hollande.

Key Quotes

“Neither international capital, represented by asset managers, nor the EC is going to force France to enact structural reforms. And there is even less of a chance that Hollande makes a clean break and announces an aggressively pro-growth fiscal initiative. This means the continuation of the charade, yet the status quo is toxic. The political elite are committing a French version of hari-kiri.”

“Large pools of capital, including central banks and sovereign wealth funds, continue to buy French bonds, keeping yields near German levels. The logic is not so much about fair value based on economic fundamentals.”

“Instead, it is a political judgment. Despite the divergence between German and French economic prowess, the two remain the twin pillars of Europe. As long as one is confident that EMU remains intact, then France’s credit is as good as Germany’s credit.”

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