Bond Outlook July 6th

"A social Europe cannot be built without a liberal Europe". That sounds like a typical soundbite from Tony Blair in his struggle with Chirac, de Villepin and Schröder over the future direction of the European Union. In fact, it is from Laurence Parisot, the new head of the French Employers' Association ("Medef") in her introductory speech after election to take over from Seillière who is beating the same drum in Brussels. Parisot has declared her intention to persuade the French populace to love business. She wants to be less confrontational than her predecessor, but she will have a hard task. At least her election comforts us in our hope that the French will liberalise from within, allowing the Blair vision of the EU to prevail.

In our Weekly of 25^th May we appealed to the European Parliament to introduce some control over the European Central Bank, which is so independent that it sets its own inflation target and decides to focus solely on fighting inflation regardless of growth or unemployment. To our pleasant surprise, they have actually done so, basically rejecting Trichet's report to them, which was aimed at justifying the status quo.