Bond Outlook June 1st

Last week we supposed the protest votes in Europe were about being pushed around by bureaucrats, with the issue of social protection versus free-markets being very divisive within the EU. The French view is receiving the most attention at present. The French have plumped for the social protection route; Chirac has appointed a prime minister who thinks the French socio-economic model is just fine. There will be no one in France to stand up to public sector union power, no reforms to allow greater labour mobility and, consequently, no hope of reducing unemployment. If a status quo far into the future is now on the cards, no wonder the euro has weakened. Its weakness is due less to constitutional impasse than to Chirac's immediate cave-in.

But there is another vision for Europe, closest to being realised in the UK, that of a free-market economy with a modicum of social protection, not all the way to the US system, but more American than French. We were tempted to write "more American than Continental", but that would be to suppose that the Continent, or at least the euro zone, has a uniform distaste for the "Anglo-Saxon" route.