Vive La France? On se croise les doigts.

As the French head to the polls for round 2, the consensus expectation is that it’ll be a Macron win and everything will be fine.

For the moment, perhaps. 

The financial press has been somewhat ambivalent about their forecasts about how the story pans out from here, although with a bit of basic Game Theory the outcomes are pretty grim.

Then came the epiphany: the fate of France was sealed the moment it came to a Macron vs. Le Pen showdown. Sealed like that of Marie Antoinette heading to the guillotine.

Allow me to explain, for this will truly infuriate the europhiles and general optimists: Bloomberg Businessweek put it best when they called to “Give this man a party“, ostensibly because despite being the front runner in the presidential race, his party can scarcely fill up the seats required to govern.

So we get to two possible outcomes by the end of today:

1. A Le Pen win – unlikely, but not impossible with abstentions, which will sound the death knoll for the European project, with the silver lining being a quick and relatively less painful implosion. Also makes the Brexiteers look like geniuses.

2. A Macron win – more probable, not a given, but seen as hope for a rejuvenated Europe.


Heading into government with not just one party filibustering every policy change, but TWO? There’s little reason for either the PS or the UMP to support Macron policies, even under the political guise of “stopping the far right.” If they help Macron and make a success of it, it ensures voters vote “En Marche!” the next time round, basically losing incumbent UMP/PS deputies their jobs, short of a party defection. If they help him and things flop, the blame of supporting a neophyte politician, lacking in experience, falls in them – political suicide.

The optimal strategy here: do nothing; The natural outcome: Stagnation.

And hidden in Macron’s manifesto is the trigger: the EU must reform or die.

At this point, the outlook seems much more likely to lead to the latter rather than the former on the Macron ultimatum.

I spoke with a retired professor this morning who just spent a couple of days in Northwest France where he has a holiday home, and he came back with one glaring observation: France is bankrupt.

His neighbour who runs a B&B with about 20 rooms, who moved there 17 years ago from London, is convinced they won’t be in business next year. Not because of demand – it’s a small establishment after all; but because the tax regime was recently changed in 2015-16, moving from a fixed tariff for small businesses (aka Micro-entreprises) with turnover below €80k/yr to an effective 24% tax on sales. SALES.

For the more francophone among us, details of the rules for les micro-entrepreneurs are here. All in French, for better or for worse. After all, European Commission President Mr. Juncker did assert that English was losing its importance in the Europe.

The aim? To catch out the zero-expense small businesses like online traders or landlords with long-depreciated property that are escaping taxes. Bah oui, of course they’re fiddling with the books! What kind of small business can be THAT unprofitable as to pay that little tax??

Which just makes all this talk of making France competitive, snatching finance business from London, quite a joke.

The Eurostoxx has been on a tear in hopes of European reflation – I think it’s just that: hope. Wouldn’t touch it with a barge pole.

France basically faces either 1. Death by decapitation; or 2. Death by starvation. Not sure which is worse, but in a way, perhaps the former will be, with hindsight, a coup de grace.

And we haven’t even looked at Italy.

La prochaine fois, peut-être.

Bon courage, La France.