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City AM – Hollande’s Victory

May 9, 2012

Mark was asked by City AM to comment on the impact of Francois Hollande’s election as French President on the City of London. His views were published in today’s paper:

Francois Hollande’s victory at the weekend by a majority only slightly larger than Boris Johnson’s over Ken Livingstone scarcely provides him with a convincing mandate for radical change.

Constrained by a lack of executive experience and the watchful eye of the international markets, I suspect Hollande will follow in the footsteps of his Socialist predecessor, Francois Mitterand, who was elected on a radical platform which he was soon forced to water down through his ‘tournant de la rigueur’ ( austerity turn).

Therein lies the danger for the City. With former French finance minister, Christine Lagarde, at the IMF, and Angela Merkel unswerving, Hollande will struggle to overturn the broad thrust of the austerity programme. To detract from his inability to make progress, he may well be drawn to totemic diversions such as a financial transactions tax or a land grab by the Paris-based European Securities and Markets Authority, which may start sabre-rattling when it comes to the question of which financial entities and products pose systemic risk.

So while the markets may not yet have cause to take fright at Hollande’s election and his tax and spend rhetoric, the Treasury must be on its guard as a constrained President searches desperately for external enemies. As ever, the City of London’s pre-eminence as the only global financial centre in the European timezone is under envious threat from across the Channel.