Hollande will not seek re-election in France — All Eyes on Italy’s Referendum: PM Renzi says there is ‘extraordinary desire for change’ — May resign if referendum fails — What if the eurozone broke apart?

BBC News

France presidency: Francois Hollande decides not to run again

French president Francois Hollande

Mr Hollande said he could not accept seeing the Socialist party falling apart

In a surprise move Francois Hollande has announced he will not seek a second term as president of France.

“I’ve decided not to be a candidate to renew my mandate,” the Socialist leader said in a live televised address.

The 62-year-old, faced with very low popularity ratings, has become the first sitting president in modern French history not to seek re-election.

Conservative Republicans party candidate Francois Fillon is seen as a favourite in next year’s election.

Recent opinion polls suggest far-right contender Marine Le Pen from the National Front could be Mr Fillon’s closest challenger.

‘Aware of risks’

“In the months to come, my only duty will be to continue to lead my country,” Mr Hollande said on Thursday.

“The world, Europe, France have faced particularly serious challenges during my mandate. In these particularly challenging circumstances I wanted to maintain national cohesion,” he said.

He was referring to deadly terrorist attacks in Nice last July and Paris in November 2015, as well as the shootings at the satirical magazine Charlie Hebdo several months before that.

Mr Hollande added that he was aware of the risks of running and warned of the threat from the National Front.

One of the first reactions came from a former economy minister, Emmanuel Macron, who said the president had made a “courageous decision”. He is himself standing for president as an independent centrist, having resigned from the government a few months ago.

French Prime Minister Manuel Valls (L) speaking to French President Francois Hollande before he delivers a speech during a meeting of French mayors in Paris, 18 November

Mr Valls (left) hailed President Hollande’s decision not to run. AFP

But Mr Hollande’s decision not to stand now opens up the Socialist party contest in January. Prime Minister Manuel Valls is likely to be favourite to win the candidacy, having said last weekend he was ready to run.

Mr Valls described Mr Hollande’s decision not to run as “the choice of a statesman”.

Last weekend, more than four million French voters chose Mr Fillon, a former prime minister, to represent the Republicans in the two-stage presidential election in April and May next year.

Marine Le Pen. Photo: 30 November 2016

Marine Le Pen is seen as a serious contender in the 2017 election. AFP/GETTY IMAGES

Opinion polls suggest he would win the first round in April, ahead of Marine Le Pen. If Mr Valls were the Socialist candidate he would be placed third. Mr Fillon would then go on to win the run-off.

During his term in office, he devoted all his energy to cutting unemployment, and it had begun to fall but far later than he had hoped.

Since January 2015, Mr Hollande’s presidency has been overshadowed by jihadist terror attacks. France has been under a state of emergency amid fears of further attack.
Indispensible no more Analysis by BBC’s Hugh Schofield in Paris

Francois Hollande’s decision not to stand again comes as a huge relief to the Socialist Party, and probably to himself as well.

He – no doubt – mulled it hard and long. It is, after all, something of a humiliation to be the first president under the Fifth Republic to decide he’s not good enough to run for a second term.

And yet how much more of a humiliation would it have been to stand in the presidentials and be wiped out by Marine Le Pen in round one?

Or worse, to be eliminated in the Socialists’ own primary in January?

Because the truth is Francois Hollande had lost touch not only with the country – but also with his own camp.

He was always the indispensible compromise candidate who saved the Socialist party from pulling itself in two.

But now both left and right in the party have had enough.

Read more from Hugh
Mr Hollande came to power promising a period of normality, after the turbulent centre-right presidency of Nicolas Sarkozy.

But he struggled to introduce reform and faced rebellion from the left wing of his Socialist party.

His judgement was called into question in October, when a book of damaging revelations was published, entitled A President Shouldn’t Say That.

He suggested the justice system was full of “cowards” and labelled his left-wing opponents a “crowd of idiots”.

French media stunned by Hollande “bombshell”

Several French media outlets point out that this is the first time in modern French history that a sitting president has decided not to seek a second term in office.

After the suspense that attended the run-up to Mr Hollande’s announcement, his decision is seen by many papers – such as Le Parisien – as “a bombshell”.

The Catholic paper La Croix calls his decision “unprecedented”, adding that “although, of course, in theory it was conceivable that an outgoing president might not stand again, it was not that likely”.

L’Observateur notes that the only other president who failed to seek a second mandate was Georges Pompidou, but that was on account of his death.

“Hollande, on the other hand, must resign himself to a political death,” the newspaper concludes.

By BBC Monitoring

http://www.bbc.com/news/world-europe-38173350

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If the eurozone economy goes into another slump brought on by a fresh financial panic it will damage growth in the UK by depressing exports and hitting domestic UK business investment

The UK is watching Italy carefully

By Ben Chu Economics Editor
The Independent

Italy will hold a referendum on Sunday on whether or not to change the country’s constitution.

The country’s centre-left Prime Minister, Matteo Renzi, has promised to resign if the electorate rejects his proposals. But the vote hangs in the balance.

Financial market traders are showing signs of nerves, with some analysts even suggesting that a “no” vote could ultimately lead to the destruction of the entire eurozone.

Italy referendum: Renzi says there is ‘extraordinary desire for change’

What is at stake? Why should the rest of us care? And what is the worst that could happen?

Below we answer the big questions.

What is this referendum about?

Matteo Renzi, who came to power two years ago aged just 39, wants to streamline Italy’s political system so he can push through a major economic reform package. He wants to reduce the number of senators and limit the senate’s power relative to the lower house of parliament.

He also wants to reduce the political power of Italy’s regions.

Few dispute that economic reforms are necessary: the Italian economy has essentially gone nowhere for 16 years and unemployment is high at 11.5 per cent. With the exception of Greece, Italy has had the worst performance of any eurozone country since the 2008 financial crisis.

Going nowhere

italy.jpg

But any political reforms in Italy that have the effect of concentrating political power have, by law, to be put to a popular referendum.

This is a legacy of the country’s painful history of a fascist takeover by Mussolini in the wake of the First World War.

How is the referendum likely to go?

Before the official blackout on polls on 18 Novermber, there was a projected 53.5 per cent to 46.5 per cent lead for the “No” camp”.

There is some hope that the 20 per cent people who haven’t made up their mind will ultimately swing behind “Yes”.

But this has been a of year of massive protest votes – in the form of Brexit and Donald Trump’s US Presidential victory.

And the “No” vote is being championed by the populist Five Star movement, led by the comedian Beppe Grillo, an admirer of Mr Trump.

In short, the outlook for Mr Renzi is not particularly good.

So what happens if Mr Renzi resigns?

The government falls. But the real question is what happens after that.

It’s possible that the Italian president, Sergio Mattarella, could appoint another prime minister and a “technocratic” government could keep the show on the road for a while.

But if new elections are called for early 2017 it’s conceivable that the Five Star movement could come to power.

The party is currently on around 28 per cent in the polls, not far behind Mr Renzi’s Democratic party, which has a 32 per cent share.

An emphatic referendum victory might give Five Star the momentum it needs to get into pole position.

Sick man of Europe

eurozone.jpg

Why is that dangerous?

The simple answer is that Five Star has said it would hold a referendum to decide whether Italy should leave the eurozone.

Italy is so large and economically important that many think the single currency itself would break up entirely if its people did vote to depart.

But there’s a way to go before we get to that point isn’t there?

True. Under the Italian constitution, holding a referendum on the euro would itself require a referendum first. And polls suggest that around 67 per cent of Italians are in favour of remaining in the euro.

But the problem is that financial markets always try to get ahead of events.

They went into a selling frenzy in 2012 when it looked as if Italy and Spain would be unable to roll over their national debts and could, as a result, be forced to quit the single currency bloc in order to carry on paying salaries to public servants.

That panic could re-start if the referendum is lost on Sunday and traders assume the country is on a slippery slope to leaving the eurozone.

Why would the markets be so scared of that?

Because there would be colossal global economic and financial upheaval if the eurozone broke apart.

Investors who had lent in euros to a country would suddenly find themselves paid back in a new currency – a new Italian lira, or Spanish peseta, or French franc for example – and that currency may well be worth considerably less.

Domestic savers would face a similar devaluation risk to their wealth.

This threat creates a massive incentive for people, investors and companies to pull their money out of the more vulnerable eurozone countries and put it into stronger ones, like Germany.

This is what we saw in Greece in 2015, when capital controls had to be imposed to stop money haemorrhageing out of the country and destroying the economy.

The same kind of mass financial run could happen –  but on a far larger scale, and across the eurozone – if the Italian domino looks about to fall.

So what should we expect from the markets if the referendum is lost?

The biggest short-term pressure point is the Italian banks, which are understood to be carrying around €350bn of bad loans and many of which are seen as undercapitalised.

Analysts warn of a renewed and heavy sell-off of their stock if the referendum is lost.

The other major indicator to watch out for is Italian government bond prices.

There could be major selling of these on Monday, driving up the Italian government’s effective borrowing costs, although this may be offset by an emergency buying spree from the European Central Bank in order to maintain financial stability.

Italian bond yields, which move in the opposite direction to prices, have already been rising since the summer and are now back above 2 per cent.

Pressure point

italybond-0.jpg

Why does this matter to Britain?

We may have voted to leave the EU on 23 June, but our economic and financial fortunes are still intimately tied to those of the Continent.

If the eurozone economy goes into another slump brought on by a fresh financial panic it will damage growth in the UK by depressing exports and domestic UK business investment.

This is precisely what we saw in previous outbreaks of the eurozone crisis.

Unemployment would rise and living standards would fall.

The pound may well gain against the euro – which would be good for holidaymakers heading to the Continent – but the overall economic impact of a return of the eurozone crisis for Britons would almost certainly be negative.

A new financial crisis may also make it harder for Britain to get the rest of the EU to focus on the Brexit divorce proceedings, which are due to begin next March.

http://www.independent.co.uk/news/business/news/italy-referendum-what-is-it-about-what-happens-no-vote-uk-eurozone-a7447591.html

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Related:

Obama was also against the UK leaving the EU:

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With Populist Anger Rising, Italy May Be Next Domino to Fall

TURIN, Italy — Italy’s prime minister, Matteo Renzi, only 41, once seemed to have solved the riddle of how to survive Europe’s populist, anti-establishment tempest. But with a critical national referendum on Sunday, the populist wave is now threatening to crush him and plunge Italy into a political crisis when the European Union is already reeling.

From Washington to Brussels to Berlin, fears are rising that Italy may be stumbling into its own “Brexit” moment. What should be an inward-looking referendum on whether to overhaul Italy’s ossified political and electoral system has taken on much broader import. Financial analysts warn of a potential banking crisis, and pro-Europe supporters fear that a “no” vote in the referendum could accelerate the populist movement across the European bloc.

Italy is potentially the next domino to fall, partly because of the disillusionment of young voters. They have been swept up by many of the same forces that led peers in Spain and Greece to vote for upstart parties, the British to vote to leave the European Union, and Americans to elect Donald J. Trump. In France, President François Hollande announced on Thursday that he would not seek re-election — another establishment figure succumbing to the political moment.

Read it all: http://www.nytimes.com/2016/12/02/world/europe/italy-referendum-matteo-renzi.html?ref=world&_r=0

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