Bond Outlook June 22nd

As we mentioned earlier, at least we have something to distract our attention from US politico-economic mismanagement - now we have European politico-economic mismanagement! Nevertheless, the huge difference between the two is striking:

• In the USA the general mood and certainly that of the Administration is that all is well and no change is needed. Only pessimistic, and unheeded, commentators say otherwise (although we surmise that Greenspan silently agrees with the commentators - see below).

• In Europe there is real debate about which way the EU should head. The debate is both among member states and within them. Blair vs. Chirac is but the most visible manifestation.

History will probably say that the "no" votes, seen as so harmful at the time, were the best thing ever to have happened to the European project. We are confident that the Blairite vision of more choice and decentralisation, and less agricultural protectionism, will win over the Old Guard's (read the French Government's) preference for control from Brussels and massive protectionism.