The French Presidential Election – After the first round

Emmanuel Macron and Marine Le Pen will be the two runners up of the French Presidential Election. This result is consistent with polls as it is shown below.
Presidential election-first round
Some remarks
1 – The conservative party, Les Républicains, and le Parti Socialiste dropped dramatically in  this election. Their number of voters is just 26% this year while it was 63% in 1995, 36% in 2002, 57% in 2007 and 56% in 2012. There is, as in many European countries, a deep political recomposition which is done out of the traditional parties.
2 – The abstention rate is 21.5% while it was 20.52% in 2012.
3 – Following polls, Emmanuel Macron is expected to be the next French President (May the 7th) Continue reading

David Ricardo and the Comparative Advantage – Happy anniversary

On April the 19th, 1817 David Ricardo published his famous book “On the Principles of Political Economy and Taxation” in which he developed his theory of the comparative advantage. This theory has creates the foundation of the theory of the international trade.
Douglas Irwin, Professor at Dartmouth College, has written a short note on this 200th anniversary.
You can read the note here

British Risk

The United Kingdom GDP growth will slowdown dramatically during the first quarter of 2017. Retail sales were down -6.1% during the first three months of the year, in contrast with what was seen recently. This reflects the acceleration of the inflation rate and specifically the higher food prices that have reduced HH purchasing power.
As the consumption profile is consistent with retail sales we can expect a drop in HH consumption that will pull down the GDP figure.
This is the first real impact of the Brexit through lower purchasing power. But that’s just a first step
uk-2017-q1-retailsales&consimption

New currency in France – Uncertainties and Instability

Here is my weekly column for Forbes in France. My column is available here in French

Europe is a key factor in the presidential campaign, even though this theme gained minimal coverage during the two televised debates. Europe is a key differentiating factor for the four candidates who are leading in the polls, and so it must be the main decisive factor in the elector’s choice between the candidates. 

The aim for two of them, Emmanuel Macron and François Fillon, is to intensify existing institutions although the exact ways to achieve this are not the same for them both. But neither wants to leave the Eurozone.
However, for the two other candidates in the top 4, Marine Le Pen and Jean-Luc Mélenchon, Europe marks a clear area of watershed as regards’ France’s position on the European institutions. They both intend to start negotiations with Europe to change the relationship and give France back its decision-making power. In the event of the likely breakdown of these talks (the remaining European Member States would not necessarily want to change the existing framework), both intend to take France out of Europe, backed by a referendum.

In both cases, currency would be at the very crux of the new framework that France would need to set up.
In Le Pen’s opinion, a national French currency is the key to ensuring independence for the country. Meanwhile, under Mélenchon, the euro would become a common currency and no longer a single currency, which would imply the creation of a new currency for France. As the other members of the Eurozone would probably not be favorable to this new framework for the euro, this would be tantamount to France leaving the Eurozone and creating a French currency.

Looking beyond these factors, neither program explicitly outlines the currency framework the candidates would set up. What we do know is that in both scenarios, the central bank would lose its independence and would be used as an instrument to finance state spending. In other words, the state would have the wherewithal to create its own currency to finance its own spending: economic history tells us that this type of situation triggers inflation and fuels macroeconomic, financial and monetary instability. French savers would be directly hit. Continue reading