Sarkozy Threat to Leave Euro Was a Bluff

Drudge is blasting with this headline:

PAPER: SARKOZY THREAT TO PULL FRANCE OUT OF EURO

Here's what really went down:

Spanish Prime Minister Jose Luis Rodriguez Zapatero told his party members that France, Italy and Spain had formed a united front against Germany at the Brussels meetings and that Sarkozy had threatened to break up a traditional France-Germany "hold" on the rest of Europe, according to El Pais...Another source present at the meeting between Zapatero and his party members and cited by the paper said: "Sarkozy ended up banging his fist on the table and threatening to leave the euro...This forced Angela Merkel to give in and reach an agreement.

If anybody ditches the euro, it's going to be Germany moving first, not France.

Huge Bets on Euro Core Zone Meltdown

There was a stunning $630 million, $558 million and $370 million in net notional derisking last week. Huge negative bets were made on France, UK and Germany, not just in sovereigns but in all names, reports ZH.

The greatest non-sovereign derisker in the last week? Goldman Sachs, with $175 million.

This is extreme panic, worse than September 2008, when the money market Reserve Fund broke the buck.

It is quite possible the PIIGS don't survive without default, but the UK isn't going that route. The UK is in a completely different situation. It controls its own money so it can print its own way out of their debt hole. This is very inflationary, but it is likely what they will do, rather than default.

Further,  there is also no reason to bet against private triple A German debt. The German economy will survive.

Crisis breeds opportunity. Stay alert.

France Rejects Obama Style Stimulus

Who would have expected French leaders to understand even a tiny bit of laissez faire?

Bloomberg reports:

Prime Minister François Fillon on Monday rejected demands that the French government seek to stimulate consumer spending, rather than follow his plan to stimulate corporate and infrastructure investment, to lift France out of its economic slump.

"It would be irresponsible to chose another policy, which would increase our country's indebtedness without having more infrastructure and increased competitiveness in the end," Fillon said in a speech in Lyon.

And he said this despite heavy protests from union groups:

More than 1.1 million people took to the streets across France last Thursday, according to the Interior Ministry, with unions putting the number of protesters at 2.5 million, to call on President Nicolas Sarkozy to stop cutting government jobs, increase the minimum wage and spend more on households as the economy enters its first recession since 1993.

France Said to Seek Emergency G8 Meeting

France is proposing through diplomatic channels that the Group of Eight industrialized nations hold an emergency summit to contain the U.S.-triggered financial crisis, according to a published report in the Japanese business daily Nikkei.

Since the solution to the crisis is to allow the markets to work things out, there is nothing positive to expect from a G8 meeting, only the possibility of international market manipulation and rigging.

Naturally, the Oligarchy will be well represented at such a gathering. For starters, Carlyle managing director Oliver Sarkozy is the half brother of France's President Ncholas Sarkozy.

Europe of the Future: Germany Shrinks, France Grows, but UK Population Booms

Britain will overtake Germany and France to become the biggest country in the EU in 50 years' time, according to population projections unveiled yesterday. A survey of demographic trends by the EU finds Britain's positive birth rate contrasting strongly with most other large countries in Europe.

The survey predicts that Britain's population by 2060 will increase by 25% from the current figure of just over 61 million to almost 77 million.

Germany is the biggest country in the EU, with more than 82 million people, but it is likely to shed almost 12 million by 2060, says the report.

The French population will rise to almost 72 million by 2060.

Of the biggest six EU countries (Germany, France, Britain, Italy, Spain and Poland) Britain has by far the greatest birth rates. Only Luxembourg, Cyprus, and Ireland are growing faster than the UK.

The average age of Europeans is now just over 40; this will be 48 by 2060. The average age for Britons is 39 and will be 42 in 2060 - the lowest age in Europe with the exception of Luxembourg.

The EU's population now stands at 495 million and is projected to rise to more than 520 million by 2035, before falling to 505 million by 2060.

The strongly Roman Catholic countries of Europe are having fewer babies. The Italian population will stay the same over the next 50 years, while Poland's and Lithuania's will shrink considerably. Spain's population is forecast to increase by 6 million. Life expectancy is also rising. In Ireland, women will live to 89 and men to 85. Almost one in three Europeans will be of pensionable age if 65 remains the threshold.

Eurozone Economy Contracts For The First Time

The eurozone economy has contracted for the first time since the launch of the euro a decade ago.

Gross domestic product in the 15-country region fell by 0.2% in the second quarter, reported Eurostat, the European Union’s statistical office. That marked a sharp turnaround from the first three months of the year, when GDP expanded by 0.7%.

Eurozone inflation hit a record 4 % in July, which is holding back the ECB from cutting nterest rates.

Germany’s economy – Europe’s largest – contracted by 0.5% in the three months ended June.

Michael Glos, Germany's economics minister, said a weaker second quarter had been expected but Germany had improved “by a good measure” its international competitiveness and resistance to global shocks. Berlin stood by its forecast for overall German growth of 1.7 % this year, down from 2.5% in 2007.

France reported a significantly worse-than-expected 0.3% cent fall in second quarter GDP, after a 0.4% rise in the first three months of the year.

Christine Lagarde, the French finance minister, down played the possibility of a recession. There is “no question of a recession” with the fundamentals of the country’s economy remaining healthy, she said..

Spain saw a sharp deceleration in economic activity – although GDP growth remained positive, at 0.1% in the first quarter.

As in the United States, housing has been at the forefront of economic problems in Europe.