Emmanuel Macron must hurry to find a new prime minister and Olaf Scholz he’s about to lose his job. The Franco-German axis falters like a beaten boxer and Italy is no longer the Cinderella of Europe, on the contrary. At the moment the Meloni government is the only one able to show off stability and just yesterday the spread between BTPs and Bunds fell below 110 points, falling close to the minimums of the last three years.
With this underlying scenario, and above all in the face of the financial difficulties that French politicians have to manage today, how can the balance change in terms of influence on some of the economic issues that are important to us?
Let’s start from the most urgent, i.e. the automotive crisis and the necessary U-turn that the EU Commission should have the courage to take on the ecological transition and in particular on two deadlines: the 2035 one on the stop to internal combustion engines (at least anticipating the check on the “ecological” rules expected in 2026), but above all that of 2025 for compliance with the limits on CO2 emissions. A rapid review of this is urgently needed to avoid dealing the final blow to the sector which risks over 15 billion in fines. Without forgetting the need to enhance the role of alternative fuels, such as e-fuels, biofuels and renewable or synthetic fuels, and to focus decisively on plug-in hybrid vehicles (Phev), which today seem to have more of a market.
On the Italian plan, taken up by the EPP, which wants to reduce emissions constraints and fines in 2025, there is broad consensus with a bloc of 15 countries. Berlin does not sign, but the next government that will be born after the early elections in February could change its attitude on green policies also to respond to the strong protests of the workers of Volkswagen and other German companies. Paris is already tempted by the accession and successor of Barnier it could follow the path of pragmatism traced by Rome and the popular movement.
Furthermore, let’s not forget that among the main shareholders of Stellantis, in addition to Exor degli Elkann (14% and 23% of voting rights) and the family Peugeot (7% and 11% of voting rights), there is the French State through Bpi (6.1% and 9.6% of voting rights). At the Elysée they find themselves with a weakened negotiating force just as the controlling shareholder – Italian – must reverse course to mend the relationships torn apart by Carlo Tavares with unions, dealers, suppliers and even governments.
From cars to counters. Investment bankers, managers and analysts will surely have read the editorial board of Wall Street Journal from a few days ago, with a very eloquent title: «Is France now Greece on the Seine?». Investors, it is underlined, fear that France could be on the verge of triggering a new eurozone crisis, and the surprising thing is that it took so long for everyone to realize that the country’s public finances and its economy are a disaster. All this is happening just as the risk spotlight – not only banking, but also that of managed savings – has turned on Italy. With the double move of the CEO of Unicredit, Andrea Orcel: first the offensive launched on the German Commerzbank and then the Ops on the Bpm Bank. Perhaps even before Christmas the Roman banker will fly to Paris to meet the top management of Crédit Agricole, the main shareholder of Piazza Meda with 9.2% of the capital in hand, as well as the controlling shareholder of the managed savings giant Amundi, which with Unicredit has a commercial distribution agreement expiring in 2017. The success of the operation on the Bank, however Orcelwill also pass through the decisions of the French of the Banque Verte, who are however sensitive to the political and financial difficulties of the government at home.
Analysts fear France will enter a slow-burn crisis that could lead to a deterioration in sovereign creditworthiness and lower economic growth. Uncertainty is the market’s number one enemy, it unnerves investors who are also looking at the risk of a further widening of the spreads between the French Oat and the German Bund. This means that the French government will have to pay investors more to buy the debt securities it issues to finance itself. An increase in the risk premium would have several consequences such as, for example, new volatility for French stocks, in particular for banks and insurance companies, which are the main buyers of French debt. It is therefore likely that, rather than selling French debt, international investors will not buy any. And they will move to other markets that are currently more stable, more attractive and safer.
In the background, the French crisis may also have an effect on the realization of the banking union. At the end of last February, the French Economy Minister, Bruno Le Mairehad presented himself at the informal Ecofin meeting launching an appeal: «If it is impossible to start at Twenty-seven, let’s start immediately with voluntary European supervision, voluntary savings products, and voluntary securities for the States and banks that want it», he had said. From his pocket he then took out some proposals to put France’s hat on the monetary union, seeking the “breakaway” of a group of states that can break away from the rest and integrate their financial markets more. Moreover, Paris had long been in the running to attract the financial giants who left London after Brexit, with the ambition of becoming the new financial epicenter in competition with Frankfurt. And in this challenge he sought the support of “les amis italiens”. So much so that the banking union dossier ended up in the Quirinale Treaty signed with our country. The forward flight of Le Maire had received the first reactions, to be honest, rather cold. Even in Berlin they were taken aback by the fact that the Frenchman had anticipated the move and the then German Finance Minister, Christian Lindnerhad replied that he did not want a multi-speed Capital Markets Union, but “a Union at maximum speed in which we proceed together”. Then Lindner was fired from Scholz in November paving the way for early elections.
Which banking union model will be pursued? We will see. Certainly, the European banking risk will also have effects on geofinancial balances.
