Euronext president Stéphane Buzna put the problem in its proper dimension: Investors, he argued, should not worry about who will win the elections in France, because neither the far right nor the left alliance will be able to implement the policies that they defend. The reason is the suffocating pressure from unions, Brussels and above all from rating agencies, which closely monitor countries’ fiscal discrepancies. And France is one of them, having been under its microscope for a long time.
Regardless of the electoral result, all parties will “cut” their pre-election promises and “soften” the sharp corners of their plans, which presuppose aggressive fiscal relaxation policies. In this sense, political extortions, statements about the risk of civil war, warnings of a new financial crisis or Macron’s “mea culpa” are not so important, as all of these are mainly aimed at the temperament of the electorate.
The harsh reality is that the fiscal derailment is already underway and will continue whether Macron’s party wins or one of the other two political formations. And even more sinister is the fact that there are no solutions in sight to deal with this issue, other than containment due to new tax rules. Governments, not only in Europe, but also in America, have entered an endless debt spiral, from which it is now impossible to get out, as they take out loans to cover their deficits, constantly adding new debts.
The size of global debt is unfathomable, it constitutes a huge bubble, which will grow constantly. Considering low productivity, especially in Europe, but also the demographic problem, the space for growth is limited. However, something will have to happen to settle or eliminate the debts. And since this cannot be done with adequate policies, it will be done with something much more violent and uncontrolled…