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Tuesday, 30 June 2015

French Economy In "Dire Straits", "Worse Than Anyone Can Imagine", Leaked NSA Cable Reveals 

Earlier today Wikileaks released a new batch of NSA intercepts among which one in particular stands out: an intercepted communication which reveals that then French Finance Minister Pierre Moscovici believes the French economic situation was far worse, as of mid-2012, than perceived.

Specifically, Moscovici who served as French finance minister until 2014 and then became European commissioner for Economic and Financial Affairs, Taxation and Customs, used some very colorful language, i.e., the French economic situation was "worse than anyone [could] imagine and drastic measures [would] have to be taken in the next two years”.

Needless to say, no drastic measures were taken. In fact, no measures at all were taken because thanks to the ECB's "whatever it takes" 2012 intervention and subsequent QE, pushed French yields to record low levels making the need for any reform moot (a la Greece, until the whole circus exploded).

He remarks about that the situation with the automotive industry was more critical than a pre-retirement unemployment supplement known as AER, which he also thought wouldn't have had a severe impact on elections (while senator Bourquin thought would have driven voters to right-wing National Front).

Moscovici's conclusion was that "the situation is dire" although the finance minister ignored warnings that without a "pre-retirement unemployment supplement known as the AER... the ruling Socialist Party will have a rough time in the industrial basin of the country, with voters turning to the rightwing National Front."

Moscovici disagreed. Fast forward 3 years, and not only did French unemployment just hit an all time high confirming that the economic situation has indeed never been more dire...

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