Sarkozy's impossible dream!

As Wall Street was about to close last evening, Societe Generale's Frédéric Oudéa, its Chairman and CEO, was interviewed on CNBC, read here (with video link). Minutes later the Dow closed down 521 points for a loss of 4.6%.

Responding well to technical questions on his bank's exposure to Greek debt and Basel III capital requirements, Mr Oudéa, appeared to me less sure in his remarks on France and his shareholder Groupama. On the latter, the capitalisation of his shareholders is indeed not his concern, but were they experiencing difficulties in raising cash against their reported shareholding of 4% in SG itself, as the question appeared to imply, that would indeed be cause of concern for other shareholders and the share prices.

Worse still on the situation of France itself, Monsieur Oudéa's remarks seemed very wide of what could have been expected. Given the conflicting objectives and intents over recent months as stated by President Sarkozy, the Societe Generale Chairman's assertion below beggars my belief!

"We're in good hands," he said of French President Nikolas Sarkozy's government"

The French President, speaking of himself and the German Chancellor, Angela Merkel, has recently gone on record as saying that there was nothing they would not do to save the Euro currency and thereby their EU project. Re-inforced by this more recent declaration.

Subsequent actions undertaken by the ECB, to undermine market forces in the Italian and Spanish bond markets, which will ultimately have to be funded by enormous financial commitments from the German and French Treasuries will inevitably impact the Sovereign credit ratings of both states.

Short of the political establishments intervening in the mad commitments now being undertaken by their elected Heads of State, matters cannot be resolved until General Elections have been completed in both France and Germany, by which time the damage will most probably be well beyond even extremely painful repair.

That is the cause of the panic in world markets and the dizzying heights being reached by gold. The French authorities will not have to look far for the source of such market concerns, as threatened by Mr Oudéa. If a nation's Head of State has expressed a willingness to sacrifice all, for an unattainable concept, the fate of his country's second largest bank is presumably of comparatively little importance! (Although, until now, I had apparently mistakenly believed that sacrificing all else to save their banks had previously been the prime objective acrsoo the West.)

The following great words for a song come to mind for where we now seem headed, but a lousy way to run your country's economy: “Dream the impossible dream, Fight the unbeatable foe, Strive with your last once of courage To reach the unreachable star.”