Eurozone Problems

For John, BLUF:  It is Sunday and time to think big thoughts.  Nothing to see here; just move along.

---

From The Telegraph, out of London, where national elections in early May make Europe a hot topic, we have "Eurozone can't survive in current form, says PIMCO".  (PIMCO is Pacific Investment Management Company)  The reporter is Szu Ping Chan.  The subheadline is:

Single currency area must become a "United States of Europe" in order to secure its future, says manager of world's largest bond fund

Here is the front end of the article.

The eurozone is "untenable" in its current form and cannot survive unless countries are prepared to cede sovereignty and become a "United States of Europe", the manager of the world's biggest bond fund has warned.

The Pacific Investment Management Company (PIMCO) said that while the bloc was likely to stay together in the medium term, with Greece remaining in the eurozone, the single currency could not survive if countries did not move closer together.

Persistently weak growth in the eurozone had led to voter unrest and the rise of populist parties such as Podemos in Spain, Syriza in Greece, and Front National in France, said PIMCO managing directors Andrew Bosomworth and Mike Amey.

"The lesson from history is that the status quo we have now is not a tenable structure," said Mr Bosomworth. "There's no historical precedent that this sort of structure, which is centralised monetary policy, decentralised fiscal policy, can last over multiple decades."

Mr Bosomworth notes that when the Scandinavian nations tried this in the 19th Century it only made it for 50 years.

Mario Monti, the former prime minister of Italy, said last week that France was Europe's "big problem" because anti-EU sentiment there threatened to destroy the bloc's Franco-German axis.

PIMCO said France's inflexible labour market meant it was "lagging behind" other countries such as Spain and Ireland, which had implemented structural reforms.

Mr Bosomworth, who is head of portfolio management in Germany, said there was too much at stake for the eurozone to force Greece out. "It's a bit like nuclear warfare. Actually doing it is so disastrous that you don't," he said.

And, there were local elections last weekend in France and the Party of Ms Marine le Pen did well, as explained by Ms Stephanie Pezard (Rand Corp) in this War on the Rocks article—The Front National and the Future of French Foreign Policy.  To capture the Flavor of the French Front National, think of the Republican Party, as described by the Progressive wing of the US Democrat Party.  Or the Southern Wing of the Democrat Party up through 1972.

Sunday’s elections gave the French extreme-right party Front National the highest percentage of votes it ever achieved in a local election.  With 26 percent of the votes, the Front National confirms that it is in the ascendant and its leader, Marine le Pen, stands well-positioned as a strong contender in France’s presidential elections in 2017.  Should this be of concern mostly to the French, or do the Front National’s current and, possibly, future successes have implications for France’s partners and allies in Europe and beyond?

Less than two weeks after the deadly attacks in Paris against the satirical magazine Charlie Hebdo and a kosher supermarket, Marine le Pen, the leader of the Front National, enumerated in an op-ed in The New York Times a few of her party’s pet peeves:  the Schengen Agreement♠ that opened up borders within the European Union, French immigration policies, and her country’s “serious geopolitical incoherence” due to misguided foreign interventions and the influence of foreign countries such as Qatar and Saudi Arabia on French policy.

It is no coincidence that her condemnation of French foreign policy comes last, and focuses on a hotchpotch of elements almost as incoherent as the French policy it denounces.  The Front National has built its constituency around domestic issues – security and immigration policy – first and foremost . Le Pen’s platform for the 2012 presidential election barely touches upon foreign policy issues, except in relation to the EU and to advocate for France pulling out of NATO’s integrated command. Front National voters were unlikely to be bothered by this oversight.  A March 2014 poll showed that, compared with others, respondents who voted for Le Pen in 2012 were less prone to having conversations with relatives or colleagues on the foreign policy issues of the moment than domestic ones.

So a rabid French Nationalist comes to The New York Times to publish her issue positions.  That might mean that she needs to assault the French media from the outside in order to penetrate the more establishment outlook within the French media.  Clever idea.

Regards  —  Cliff

♠  The Schengen Agreement is about border controls, which, within the area, are relaxed to a considerable extent, thus creating in essence a single nation for travel and transportation of goods.  It is all of the European Union, less the UK and Ireland, plus a number of other Western European nations.  So, a refugee from North Africa, having landed in Italy, can travel freely almost anywhere in Continental Western Europe.