Bond Outlook June 15th
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Bond Outlook June 15th

To tensions of US deficit financing must be added the most important political debate Europe has faced since the beginning of the "European project". Blair New Europe vs. Chirac Old!

Bond Outlook [by bridport & cie, June 15th 2005]

"When everything is weak, we're heading for a blow up" - an elegant summary from discussions inside our company. For the two major world currencies, it is a question of which is the weaker, the dollar because of the US deficits, or the euro because of the growing political row. At present it is the euro, but the search for other havens is continuing, as spelt out last week. There is even a case for gold to strengthen, with gold-producing countries' currencies benefiting.


The stubbornness of European politicians in their deafness to the popular swell of anti-EU feeling is remarkable. The more they attempt to push ahead with referenda, the more the voters will revolt. Even Luxembourg might vote "no"! The entire European project is now ready for a re-orientation: less centralisation, more democracy, retained responsibility at national level, freedom of choice on the mix of social vs. free-market economy. It is obvious which opposing sides Blair and Chirac are on, but the wind is clearly in favour of the Blair vision.


It is artful of Chirac to divert attention from an EU rethink to a "let's gang up on the UK over its rebate", but he faces a powerful adversary.

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