from Zero Hedge:
Last month we laid out the reasons why France was On The Brink Of A Secondary Depression – in short, due to a deadly collision of French politics with Frankensteinian monetary union. Unfortunately, subsequent data confirms the bleak trajectory. Even Francois Hollande is beginning to wake up to just how destructive and anti-business the French agenda is. France will enter a recession at a time when spending and debt levels are quite high and Hollande’s recent attempts to assist entrepreneurs are too little, too late. France has been slower to cut taxes than other EU members and a secondary depression will push the French budget deficit to new dangerous heights as the government’s ‘forecast’ of the primary balance is farcical. Even if borrowing costs remain low, debt ratios will still explode. Knowing this, why then are French rates so low? The usual explanations (purchases by the Swiss National Bank and Mrs. Watanabe buying) have some merit, but other factors may also be at play. In any case, in a bond market, one should look at two things: the return ON capital and the return OF capital. The return ON capital is pitiful and the return OF capital is far from certain. Sell the financials in Europe – and in France especially. Really, the euro is on its last legs. France is in play.
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