Francois Hollande Looks Set for French Election Victory but Will Markets Vanquish Him?
Assuming Francois Hollande triumphs over Nicolas Sarkozy in today‚Äôs second round of the French presidential election - the odds against a late Sarkozy comeback being very long indeed - then the Socialist victor faces another contest in the very near future. Next he has to take on the opponent that he himself called in campaign speeches ‚Äúmy real adversary, the world of finance‚ÄĚ.
That could be a bitter encounter - though you might not think so from early indications. Markets have been in wait-and-see mode in the run-up to today‚Äôs poll, as well as the less talked-about general election in Greece.
Investors began to shun French government bonds in early April as Hollande drew ahead, but a ‚ā¨7 billion issue last week met a warmer reception: France is still able to borrow 10-year money at below 3 per cent, compared to a new low of 1.6 per cent for safe-haven Germany, around 2 per cent for the UK and 4.7 per cent for deeply troubled Spain. Greek bond yields are, unsurprisingly, off the chart.
Those comparisons suggest that the international bond market has decided, for now, to give Hollande the benefit of the doubt. That‚Äôs not a compliment to his statesmanship or to his sparkle - in terms of government experience, he‚Äôs the equivalent of a county council leader who happens to have clout at party HQ, and on the charisma scale he makes Ed Miliband look exciting.
Rather, the market has persuaded itself that Hollande is more moderate than he tried to sound on the stump, and that his ‚Äúgrowth agenda‚ÄĚ of tax grabs and public-sector job schemes will rapidly be neutralised by force of fiscal circumstance.