You have undoubtedly noticed from the sudden flurry on social networks in recent days that elections are approaching…

Indeed, on May 25 we will vote to elect our regional, provincial, and European representatives. Yesterday, in France, the first round of municipal elections (mayoral choice) took place, leading to a profound disapproval of the policy conducted by the socialist president François Hollande.

With 46.54% of the votes in favor of the UMP-UDI coalition, the right is the big winner of this first round. However, two other lessons are challenging for democrats. Firstly, the abstention rate, which broke a historical record at 35.87%, and the breakthrough of Frontist candidates with a triumph in the first round by Steeve Briois in Henin-Beaumont, a town of nearly 25,000 inhabitants, so close to us…

Can we already draw lessons from this election regarding the reasons for the inexorable rise of far-right ideas over the past 20 years, and can we find similarities in Belgium?

In the municipal elections in France, voters will have to deal with tripartites

Earthquake this morning in Matignon and at the Elysée Palace: the socialist party, which holds the presidency, the National Assembly, the Senate, and the municipalities, receives a terrible blow: 37.74% of the votes compared to 46.54% of the votes given to the UMP-UDI coalition. It is evident that this result is a punishment vote against the policy conducted by French president François Hollande.

It must be said that the missteps and scandals that undermined the first two years of François Hollande’s five-year term were not lacking. No one will forget the Cahuzac affair, as well as the recent wiretapping scandal involving Thierry Herzog, Nicolas Sarkozy’s lawyer, not to mention the incredible imbroglios that exist within the presidential majority between the PS and the greens over certain campaign promises of the president that will not be kept (the Notre-Dame-Des-Landes airport, the closure of the Fessenheim nuclear power plant to name just two).

However, what worries the French citizen, but also the European citizen, is the inexorable rise of Frontist candidates to the point that for the second round of the municipal elections next week, the voter will have to deal with numerous tripartites since the Frontist candidates qualify for the second round.

The republican pact, a historical error in France and Europe

For nearly 20 years, the National Front has been gaining votes in France and its weight and importance have been strengthening from election to election. For nearly 20 years, the leaders of traditional parties have not heard the message from the polls.

French voters are tired of the solutions proposed by traditional parties, and they express this in two complementary ways: by abstaining from voting and by voting for the extremes. Make no mistake: not voting is the democratic expression of a very clear choice, and this choice is to tell politicians: “You disappoint us! You do not meet our needs.”

The entire French political class is responsible for this result. It must be said that we have rarely seen such a flood of mediocrity in the political life of France. We no longer count the scandals, the absurdities, and the low blows exchanged by the leaders of the PS and the UMP. The French voter is right to feel disillusioned in the face of such a torrent of pathetic behavior. When a minister in charge of the budget and the repression of tax fraud is prosecuted by the Justice for not declaring the existence of bank accounts in Switzerland and Ireland, and when an incumbent president is caught riding a scooter, one must accept that the voter reacts.

For 20 years, the PS and the UMP have formed a republican front to block the National Front. This, in our opinion, is a historical error that will be perpetuated in the second round of the municipal elections in France. Traditional parties do not admit that the National Front is a republican party and that voters can freely choose to embrace the political program of this party. By demonizing the National Front and excluding it from any political responsibility, traditional parties only exacerbate the resentment of FN voters. How, indeed, can we accept that a political party that collects nearly 20% of the votes in the presidential elections has only two representatives in the National Assembly (Marion Maréchal and Gilbert Collard)?

The French left, in the great tradition of left-wing policies, does not understand this and loudly proclaims, on the evening of this first round, that it will form the republican front by urging its voters to vote for a UMP or UDI candidate in the event of a tripartite. This is a historical error! Indeed, there is no need to infantilize voters who can very well decide on their own for whom to vote. Moreover, it denies FN voters the content and responsibility of their choice. Yes, some voters are seduced by the demagogic and dangerous theses of the FN, and traditional parties would do much better to improve their governance and results on the ground rather than forming an anti-democratic republican barrier.

However, the UMP, through its former president, marked a right turn by breaking the republican pact and instituting the “neither-nor” policy. Neither socialist nor frontist. By doing so, the French right accepts the choice of the voter and takes the risk of leaving power to the Frontist candidates, which is the least mark of respect in democracy.

In Belgium, the PS is no more visionary than the French PS

In Belgium, we cannot speak of a republican front but rather of a particratic coalition. Our traditional parties agree to form what they call (not without a disdainful concupiscence), the “sanitary cordon“, nothing less, excuse the term!

Yesterday at the PS congress in Ixelles…Mr. Elio di Rupo already stated that the PS would never govern with the N-VA, that is, with a separatist party. In doing so, the Belgian PS makes exactly the same mistake as its cousin from across the Quiévrain.

How can one not understand that this irresponsible statement by a prime minister will only exacerbate the sympathizers of the N-VA?

Whether Mr. di Rupo likes it or not, he will one day be forced to govern with the N-VA, which, as long as it does not access responsibilities, will inexorably strengthen until it takes power.

But how can democracy be conceived in a country that has 60% Flemish voters, 40% of whom vote N-VA, and is governed by a PS prime minister who relegates them to the rank of pariahs of democracy?

In our opinion, the definition of democracy is to call to responsibility the parties that have been favored by the votes so that the voters can first have the satisfaction of seeing their choices respected (which is the least one can do if one wants to fight abstention) and then measure the quality of the policy implemented by the favored party.

The financial crisis erupted in Europe in the course of 2010. It took on alarming proportions in 2011 and now threatens to implode the European economic space. The origin of the financial crisis lies in the worrying evolution of public deficits and especially in the European governments’ desire to curb this alarming trend.

The first findings

Fourteen EU member states had a public debt exceeding 60% of GDP in 2010. These are Greece (124.9%), Italy (118.2%), Belgium (99%), Portugal (85.8%), France (83.6%), the United Kingdom (79%), Hungary (78.9%), Germany (78.8%), Ireland (77.3%), Malta (71.5%), Austria (70.2%), the Netherlands (66.3%), Spain (64.9%), and Cyprus (62.3%).

This observation has led to a first consequence: international rating agencies are starting to focus on the ability of member states to honor their sovereign obligations. Thus, France and Belgium have recently lost their famous triple A, and the long-term prospects are mostly negative for many member countries. This means that interest rates for member states could rise and increase the burden on states to finance themselves on the market and complicate the financing of the deficit between national revenues and expenses.

Who is responsible?

The responsibility of banks in this evolution is significant. Indeed, many renowned banking institutions (BNP Paribas, BelFius, Crédit Agricole, etc.) have bought sovereign debt from heavily indebted states. These institutions speculated on the high-interest rates offered by these countries while minimizing the risk of bankruptcy. However, it turns out that some countries may not be able to honor their obligations (like Greece) and drag their creditors, i.e., the lending banks, into their downfall.

The reactions of the member states’ governments have been threefold: refinancing banks on the brink of bankruptcy. This refinancing was coupled with a near-majority stake by states in the banks under their control (nationalization) and, of course, increased state control of banking activities. These necessary interventions unfortunately have harmful effects on the real economy, notably a redefinition of credit policies.

The impact on credit

As early as the first quarter of 2012, the negative effects on economic activity were evident: a reduction in mortgage loans in France by 47%, a decrease in European car sales by nearly 27%, and an increase in the number of bankruptcies in Belgium by 26%. In this area, it appears that some companies going bankrupt still have well-filled order books but can no longer access the credit market because banking institutions now apply strict and cautious policies.

In this situation, independent credit brokers, such as Crédit Populaire Européen, may well play a fundamental role in the continuity of the real economy. Indeed, Crédit Populaire Européen works with banks specialized in credit (Elantis, Krefima, Record, etc.). Some of these banks do not even offer traditional services (bank branches, savings accounts, current accounts). They are only specialized in granting credit and, since they do not receive savings, they do not speculate either. In other words, the financial crisis has not changed their approach to credit.

At Crédit Populaire Européen, we believe that credit brokers are now able to offer easier access to credit than ordinary traditional institutions.

We have been experiencing a significant financial crisis since 2008. What is its actual impact on the mortgage loan market? The year 2012 saw a contraction of the mortgage market by about 30%, but the causes of this slowdown are not always what one might imagine. Here is a quick overview of this important issue.

Mortgage loan results in 2012

While in 2010, some 275,899 mortgage loans were taken out, and even 325,454 in 2011, last year saw a significant decline in this market: according to data published at the end of January by the Professional Credit Union, 220,124 loans were taken out in 2012, a drop of over 30%.

This decline “is largely attributable to the abolition, since the end of 2011, of a series of incentives for the renovation market, such as the tax deduction for a large number of energy-saving investments, as well as the end of the green credit measure with interest subsidy,” explain credit professionals. “The uncertainties generated by the socio-economic context and the decline in consumer confidence are also not unrelated to this development.”

A breakdown confirms this analysis since the decline (between 2011 and 2012) reached 60% for “renovation loans” and 36% for “construction loans” while loans for purchases only decreased by about 10%.

At the end of 2012, this last category represented an average amount of 138,157 euros. In total, more than 21 billion euros were loaned by the various market players in 2012, bringing the total outstanding mortgage loans to about 180 billion euros at the end of December.

Fixed rate or variable rate?

Fixed rates also confirmed their comeback: variable-rate money rents attracted only two out of ten clients in 2012, and three in 2011. In 2009 and 2010, more than half of the mortgage loans were at variable rates. This return to greater security is mainly due to the reduction in the gap between fixed and variable rates over the past two years, making the former more attractive in terms of balancing risk and gain.

Typical client profile?

The primary player in the mortgage market is the “young” who have a capital of 50,000 euros “in hand” when they approach the bank to negotiate a mortgage loan. About 30% of these young people are under thirty years old and borrow an average of 154,570 euros to buy a home. The average monthly repayment amount was 751 euros in 2012 (714 euros in 2011).

Banks have understood this trend well and have recently developed products targeting seniors and self-employed individuals.

Trend?

Interest rates will remain low in 2013 and will confer the primacy of fixed rates. Moreover, banks are broadening the scope of their clients by trying to reach seniors and the self-employed.

The duration of loans tends to lengthen: 25 years is no longer an exception.

The mortgage loan is also becoming a product used by borrowers in difficulty or self-employed individuals who have no other guarantees to offer to access the credit market. Stay informed!

Every day in the news, in the media, we hear about the credit crisis and austerity measures to boost growth.

You didn’t jump on the bandwagon and honestly, you don’t understand anything anymore.

Here’s a quick overview to get you up to speed.

The financial crisis in Europe

The findings are undeniable: unemployment in Europe today reaches nearly 11% of the active population, a record. Every month, at the current rate of job losses, nearly 200,000 more unemployed are added. In France, for example, about 1,500 people lose their jobs every day…

Coupled with this, it should be added that many European countries as well as the entire Europe are in recession, meaning that growth has been negative for at least two consecutive quarters. Greece, for example, has been in recession for more than 5 years…

Origin of the crisis

There are three origins to this major financial crisis that began in 2008:

• Poor management of public finances: indeed, the sovereign debts of the member countries of Europe increase every year. For many countries, this public debt reaches nearly 100% of GDP. Some countries like Italy and Greece have public deficits of more than 120% of GDP. The origin of these deficits lies in the weakness of public revenues compared to the operating costs of the states. In summary, European countries spend too much. They live beyond their means.
• Collapse of real estate markets and the poor financial health of some banks: the credit crisis mainly comes from the United States but also from Spain. These two countries have in common having speculated on the limitless increase of real estate markets. Thus, US and Spanish banks have lent a lot of money to borrowers who could not afford to acquire real estate at the proposed value. These banks thus speculated on the increase of real estate markets to compensate for the financial risk in case of default. Unfortunately, the real estate markets collapsed. Borrowers could no longer repay their loans and some banks had to record financial losses, putting them on the brink of bankruptcy.
• Financial speculation by banks: many banks – and virtually all banks – speculated with the poor financial health of the southern member states of the economic union. They massively bought bonds from countries in difficulty whose securities offered significant returns, notably Greek debt securities. Unfortunately, these banks never imagined that a country could go bankrupt and default. However, this is what happened to Greece and to save this country, it was necessary to grant it gigantic reductions on its public debts. In other words, holders of Greek bonds saw their claims reduced by nearly 70%, which once again pushed banks, holding these securities, to the brink of bankruptcy. This is exactly what happened to Cyprus, which massively held Greek paper.

Consequences

There are essentially two consequences to this delicate situation.

• Public deficits must be reduced in European countries. In summary, European countries should try to generate revenues higher than their costs, which is not currently the case.
• The refinancing of banks in great financial difficulty must be carried out. Indeed, banks being the engine of the economy, if these banks no longer have liquidity, they can no longer lend money to the real economy and it is then the entire production-consumption chain that is affected. Currently, this is the case and this explains the recession situation.

Austerity or recovery?

To stem this situation, two policies face each other:

• Austerity policies that essentially consist of reducing state spending and increasing public revenues through new tax levies and the reduction of social benefits.
• Policies to boost economic activity that would consist of favoring production tools to restart economic activity, reduce unemployment and generate new tax revenues.

What future for what Europe?

Europe has gone too far in its social policy and the social model it boasts so much about kills its competitiveness compared to other regions of the world. Under these conditions, the temptation for industrialists to relocate their production is great and this leads to the factory and company closures we know.

To become competitive again, Europe will have to adapt to the realities of other regions of the world, otherwise it is doomed to become an industrial and social cemetery.

Making this economic, social and political shift in Europe could take at least 15 years – especially because of the power of unions and the complexity of our labor codes – enough to probably put a generation of workers in difficulty.