Outlook: Markets Oblivious to French 'Non' Vote
Warner, Jeremy, The Independent (London, England)
There's only one election that really matters in Europe right now, and it's not the one that happens next week in Britain. Rather, it is the French referendum on the EU constitution on 29 May. That, at least, is the fashionable thing to say at lunch tables up and down the City.
The general election seems to be a closer contest than anyone thought likely, yet there is still not much doubt about the outcome, and I suspect that when push comes to shove, it'll prove more of a walkover for Labour than the pundits are saying, not with standing the shenanigans over the legal advice for going to war.
The prospect of a 'non' vote in France, on the other hand, is being widely billed as the greatest upset for Europe's political elites since the Second World War, with potentially catastrophic or hugely beneficial consequences, depending on who you happen to be listening to at the time. This is, of course, a gross exaggeration. Indeed, I doubt a no vote in France is of any long-term significance at all, though plainly it would be the death of the present constitutional proposal. I take comfort in this view from the financial markets, whose reaction thus far to the growing likelihood of a French 'non' has been precisely zero.
The calm with which financial markets view this potential 'catastrophe' for Europe is in marked contrast to the hysterical predictions of the politicians, which range from the comparatively modest forecast of a sharp rise in interest rates to the end of the single currency or even the European project as we know it. If any of these outcomes were even remotely likely, there would already be mayhem in the markets.
Spreads have widened marginally in recent months, but this is down more to the loosening of the Stability and Growth Pact rules and some specific national concerns than referendum prompted doubts about the future of the single currency. …