Emmanuel Macron’s France now poses a threat to the eurozone, claims Bob Lyddon (Image: GETTY)
Emmanuel Macron, still reeling after his party’s drubbing in this weekend’s European elections, has been warned France’s ongoing economic problems are now so serious they represent a threat to the very fabric of the euro itself.
However, UK-based tax consultant Bob Lyddon, who has regularly highlighted the flaws he believes are inherent in the single European currency, says the French President and his colleagues are failing to grasp the seriousness of the situation which they are now in.
France’s national debt is officially listed as just over 110 percent last year, according to the Trading Economics website. The UK’s figure was 97.6 percent.
However, Mr Lyddon, the founder of Lyddon Consulting Services, told Express.co.uk this figure failed to take into account the debts for France’s “public sector entities” and its responsibility for the debts and other liabilities of “various EU-level entities”. As result, he argued the figure was closer to 180 percent.
Mr Lyddon said: “As if the terrible European parliament elections were not bad enough for France and for the EU’s vision of an ever closer union, France’s economic problems have destroyed the financial structure behind the euro.
Police move past burning trash during an ‘antifascist rally’ following the European election results (Image: AFP via Getty Images)
“But typically, like headless chickens, senior political figures continue to posture as if nothing has happened.”
In the wake of the European Parliamentary election results, which saw the far-right National Rally take 31.5 percent of the vote and Renaissance, Mr Macron’s party, slump to 15 percent, the 43-year-old surprisingly opted to dissolve the French Parliament, with significant unrest on the country’s streets this week.
Mr Lyddon continued: “Macron has called a general election in order to outflank Marine Le Pen and her National Rally, and conveniently that does not involve him standing for re-election himself. All his party’s MPs can go under the bus while Macron remains inviolate.
“This is one better than Sunak’s approach of handing Tory MPs their P45s seven months early, while he can swan off to a fat salary from a hedge fund in California, not that he needs the money anyway.”
However, Mr Lyddon continued: “More in the shadows and correspondingly more difficult to finesse away with vacuous political legerdemain is France’s financial situation, and its knock-on effects on the euro and the EU.”
Referring to his 180 percent figure, he said: “Thanks to Brexit and to not having joined the euro we are at least spared that extra level of liabilities beyond what our own fiscally incontinent domestic politicians have landed us with.”
National Rally’s Marine Le Pen (Image: Getty)
France was a large economy which, up to now, had enjoyed a high public credit rating, the he backing of the EU itself, the European Investment Bank, the European Investment Fund, the European Financial Stability Facility and the European Stability Mechanism, Mr Lyddon pointed out, with only Germany being more important in a continental context.
He said: “Now Germany is pretty much on its own. France has just lost its vital AA public credit rating from the Standard and Poor’s agency.
“Not only does this make France’s interest payments rise, but it damages the creditworthiness of the very EU institutions that are relying on France to pick up the tab if they make a mess of things themselves.”
Such institutions also have public credit ratings, on which they were dependent for borrowing large amounts of money at very low rates of interest.
The so-called European Stability Mechanism or ESM, which represents the main bailout fund for the 19 nations which have adopted the euro as their currency, is able to call up extra capital from members when required.
Mr Lyddon said: “The capital has already been committed so it should just be a question of rubber-stamping a request and the money comes in…up to now.
Emmanuel Macron has called a snap general election (Image: Getty)
“With France downgraded to AA-, the ESM can no longer claim that it has the resources both to repay with ease all the money it has already borrowed in order to bail out Cyprus and Greece and the like, and also to be in a position to mount further bailout programmes should other EAMS need them.
“If an EAMS’ rating falls below AA, its uncalled capital has to be backed out of the ESM’s calculation of its ‘firepower’.”
With France’s capital having to now be eliminated, this “firepower” had fallen below £168.6 billion (€200 billion), where Italy’s national debt was £2440.46 billion (€2,895 billion), Spain’s #1326.03 (€1,573 billion) and of France itself £2613.28 (€3,100 billion).
Mr Lyddon warned: “Measured against those numbers the ESM’s ‘firepower’ is a tiny drop in a very large bucket.
“The ESM as well as the EFSF, EU and EIB should now all be downgraded on the back of France’s downgrade: we really are looking at a house of cards.
In total 19 countries are members of the eurozone (Image: Express)
“But it is not even that good. The ESM is the Eurozone Financial Safety Net: that does not now exist.
“There is no credible safety net behind the euro, in the way the Bank of England and the ‘full faith and credit’ of all UK taxpaying entities stand behind the pound sterling and the UK government’s debts.”
A collapse, Mr Lyddon pointed out, would have consequences far beyond the eurozone.
He added: “If one part of the financial system went underwater it would not be an isolated incident. Other parts would also be affected to the extent of not being able to come good on their IOUs.
“Crucially no cash or real assets were put down: it is all empty promises. No Global Financial Safety Net exists and we are back where we were in 2008.”