French President Hollande’s firing of industry minister Arnaud Montebourg for publicly criticizing austerity measures underscores the political crisis confronting the President as he tries to strike a balance between demands at home to revive a struggling economy and pressure from the EU to reduce deficits. Hollande’s approval rating is just 17% and unemployment is at a record high of 10.1%. It is under this backdrop that Hollande’s pledged EUR 50 billion in spending cuts over 3 years has been met with resistance. Montebourg’s critique of austerity referred Hollande’s measures as “slavish” and “dogmatic.”
Montebourg also took aim at Germany, which has been at the center of calls for fiscal responsibility. He stated at a news conference yesterday that “the politics of austerity, of higher taxes, decided by governments, have lengthened the economic crisis.” This is a view shared by Nobel laureate Joseph Stiglitz who has referred to the policies as a “dismal failure” that is evidenced by stalling economic growth. These view are a stark contrast to those of German Chancellor Merkel who wished Hollande “every kind of success with his reform agenda” and stated that the measure were “bold.”
• U.S. home prices rose by 8.1% Y/Y as measured by the S&P/Case-Shiller index, the slowest pace of increase since January 2013.
• U.S. durable goods orders surged 22.6%, the most on record, driven in large part by aircraft orders and revisions to prior months.
• U.S. consumer confidence unexpectedly rose to a near 7 year high in August, bolstering the expectation for increased growth in the second half of 2014.
• Hungary’s central bank kept rates on hold at a record low of 2.1% after 24 consecutive months of easing.
• New Zealand’s trade balance was significantly worse than expected, due to a decline in exports. The NZD however is trading more or less unchanged from yesterday.
08/27 EUR: German Retail Sales (July)
08/27 USD: MBA Mortgage Market Index
08/28 EUR: Economic, Consumer, Industrial, Services Confidence Reports (Aug.)
08/28 USD: 2Q GDP Report, 2nd Revision
08/29 EUR: CPI (Aug.); Unemployment Rate (July)
08/29 CAD: GDP (Q2)
09/01 JPY: Capital Spending (Q2 Y/Y)
09/01 GBP: Money Supply (July)
09/02 EUR: Producer Price Index (July)
09/02 USD: Construction Spending (July)
2 Year 0.496
3 Year 0.963
5 Year 1.650
10 Year 2.371
30 Year 3.124
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