special reports

Ségolène Royal

Nicolas Sarkozy

               Euro Positive Short Term / Bearish Long Term

·          Respects the ECB’s independence – only wants to see the ECB to focus more on economic growth, employment and social progress, instead of just inflation

·          Has Expressed No Opinion on Euro Strength

·          Policies Focused on Improving Labor Market and Raising Wages

               Euro Bearish Short Term / Bullish Long Term

·          Blames ECB for Lack of Growth, Wants to See them Weaken Euro

·          Calls to Withdraw ECB Independence

·          Protectionist Leanings

·          Wants to Clamp down on Immigration

Details:

Ms. Royal’s respect for the ECB’s independence suggests that she will not stop the central bank from doing what they think is best for the Eurozone economy.  Compared to Sarkozy’s harsh criticism of the ECB, her win should be taken as Euro positive in the short term.  However while she has outlined lofty goals to achieve as France’s first female President, she has done little to describe exactly how her socialist policies will be paid for. Even though her proposed reforms are aimed at helping to boost spending, they are also unfriendly to businesses.

Details:

Even though Mr. Sarkozy is considered the business friendly candidate, his protectionist leanings and vocal criticism of the ECB could make an initial win by him Euro negative.  He has accused the ECB of focusing too much on inflation and not enough on growth, to the detriment of France.  Has also suggested that the ECB should work to lower the value of the euro, since the currency appreciated nearly 30% in the past 5 years, in order to increase competitiveness.  However as the market realizes that his words have more bark than bite and that the ECB will not be succumb to pressure by politicians so easily, the focus will return to his generous tax breaks for both the private and corporate sector. 

Background

·          Member of the Socialist Party, 53

·          Currently a regional premier of Poitou-Charentes

·          Outlined 100 goals to accomplish if elected France's first female President.

·          Criticized for having little government experience and for perceived foreign policy gaffes.

Background

·          Leader of the center-right UMP, 52

·          Has acted as both the Interior Minister and Finance Minister under current President Jacques Chirac.

·          Considered the ‘business friendly’ candidate.

·          Received Chirac’s endorsement.

·          Involved in politics since the age of 22.

How Do they Currently Stand? - Opinion Polling Ratings

First Round   (April 22)                     Second Round (May 6)

·          CSA            25%                    CSA            48%

·          Ipsos           24%                   Ipsos         46.5%

·          BVA            24%                     BVA            45%

How Do they Currently Stand? - Opinion Polling Ratings

First Round   (April 22)                       Second Round (May 6)

·          CSA            27%                         CSA           52%

·          Ipsos           29.5%                     Ipsos          53.5%

·          BVA             28%                         BVA            55%

Key EU Goals

·          Wants a referendum on EU treaty that takes the original text and adds a protocol emphasizing Europe's social ambitions.

·          Create a Euro-zone government that promotes economic growth and common tax levels.

·          Wants to pursue a new EU-led Middle East peace initiative.

Key EU Goals

·          Seeks to cull illegal immigration and in turn integrate skilled foreign workers into French society.

·          Has shown a penchant for protectionism when he used state funds to bail out French-firm Alstrom.

·          Mr. Sarkozy has been quoted as saying that EU members that have lower tax rates than the old European nations should not be eligible for EU subsidies.

Domestic Policies

Pro Business

·          Wants to Increase Tax on Corporate Dividends and Capital Gains Basing it on Reinvested versus Paid out Profits

·          No Increase in General Taxes for the Population

Anti Business

·          Raise Minimum Wage

·          Companies to Provide Severance of 90% of Salary for 1 year after Job Cuts

·          Extend 35 Hour Work Week to All Sectors

Domestic Policies

Pro Business

·          Aims to Reduce Personal Tax Rate from 60 to 50 Percent

·          No Unemployment Benefits for People Rejecting Job Offers

·          Tax Breaks for Corporations

·          Right to Work More than 35 Hours a Week – Any Hours Worked Past 35 Hour Mark will be Free of Income Tax and Payroll Changes

Anti Business

·          Workers Retire When they Want

·          Wants to Integrate More Skilled Workers into French Society

·          In 2004, He Pushed Supermarket Chains to Lower Prices to Boost Spending