Blain’s Morning Porridge – October 14^th, 2026: Revolting France threatens Europe with Irrelevancy.

“All the world’s a stage – and the French like to think they are at the centre of it.”

French political instability and it’s looming fiscal crisis will distract and delay the European project of a shift towards “strategic unity” in the face of a) the immediate security threats from Russia, and b) the long-term geopolitical shift towards China at the end of the Transatlantic American age. How Europe responds to the growing French threat could determine its economic outlook for decades.

LINK TO PODCAST 

Key takeaways:

• Europe must address its future and shift as the USA is exposed as an unreliable partner. It has to swiftly establish “collective independence” across defence, energy, trade and supply chains.
• The ECB and EU will face substantial problems dealing with the likely French bond crisis – constrained by the French Government’s inability to agree on credible, deliverable fiscal measures, and the limited scale of stability mechanisms to address bond contagion.
• The French crisis shows how limited the concept of European unity is – debates over conditions and burden sharing will dominate in coming months, rather than facing up to strategic imperatives.
• The risk that Europe lapses into future economic irrelevancy is rising. The threat posed by European right-wing populist political parties, (often with obscure funding that might be Moscow-tainted), and their Anti-EU rhetoric highlights the risks Europe will fracture rather than become a stronger economic polity.
• The response of EU institutions to the rising crisis will be critical if Europe is to move forward.

I’ll probably pop into one of my favourite London Bookshops (Daunts or Foyles) later this morning to pick up a copy of Unreliable Boyfriend – the new book by Canada’s former deputy prime minister, Chrystia Freeland, about coping with the new USA. I am hoping it will give me some insights on how Europe might evolve to meet the end of the Transatlantic Era, and face up to the challenges of a new Global Order where the newly emerged nations of Asia, Africa and South America won’t be minded paying much attention to the decaying Old World of Yoorp…

I better read it swiftly… another European crisis is barrelling down the rail-tracks towards us. As the UK’s intelligence service warns of increasing Russian risks and sabotage, and the UK’s Hard Right leader, Nigel Farage, calls the prime minister a liar for suggesting Russia interfered in the Brexit vote… well… you can see where this is going. Destabilisation and denial are undermining the foundations of states across Europe.

It is not just the looming bond crisis around the possibility/probability of a contagious French bond meltdown (we warned you it was coming weeks ago), but something even more fundamental… Does the changing Geopolitical world mean Europe is more likely to sink into irrelevance as a new, post-US, global economy dominated by China emerges?

That’s a big, big question.

And the only way to answer it is to be brutally honest: Since the end of the Second World War, and through the subsequent Cold War, Europe’s war-exhausted nations were content to be Spear Carriers aligned behind America’s leadership on the global stage. Britain and France might have swaggered with imagined importance as they brandished their tiny nuclear arsenals, but while we all remember Julius Caeser – who remembers his generals?

The nails in the Transatlantic Economy were hammered in last week by Trump when he sold out Ukraine for 30 barrels of Russian Diesel.

Time for Yoorp to move on. Europe has to wake up swiftly to what the end of the Transatlantic economy means in terms of its future place in the global economy, its trading relationships and sustainability in terms of energy, materials and markets to ensure the prosperity of its people. When it comes to the next 120 years, the past is not a guide to the future.

Today, the UK, France, Germany, and let’s add Poland and associate European State, Canada to the mix is little more than rounding errors in Global terms – with limited individual influence. As the western economy burns, and Trump fiddles, the centre of global economic gravity is shifting to Asia and Latin America… Europe’s influence has declined.

One way forward may be how Mark Carney is carving out a new niche for Canada as the instigator and leader of groupings of aligned nations prepared to take on both sides. His offer to align with Europe, as UK premier Andy Burnham seeks to do, is an acknowledgement that small nations have to band together to be relevant in the Economic future which will be dominated by Mega-states like China and India. The alternative is to be buried by authoritarian states – as Trump has sought to do.

The immediate problem for Europe looks set to be a French debt crisis. As schools burn and fan bond yields higher, and French banks start to wobble, then contagion to other European states becomes inevitable. France is longer a financially sovereign nation, (its Central Bank is the ECB in Frankfurt, which controls the Euro), thus a French debt problem immediately becomes an ECB crisis.

While the institutions of the European Union may be able to help resolve an immediate French debt wobble in the short-term – by the ECB intervening to buy bonds through the Transmission Protection Instrument (TPI) – the French debt problem is long-term. The EU will struggle to garner support for France unless Paris can present a credible timetable to resolve its current fiscal inconsistencies – which given the ongoing paralysis of the Macron regime is unlikley.

An effective bailout plan for France is unlikely to be agreed given that the French government lacks the political control to deliver on the commitments it would need to give the EU to correct its excessive state deficit. That means short-term fixes instead. To avoid a French crisis causing European contagion, it would be in the ECB’s interest to show it’s a uniquely French event, but to be prepared by strengthening potential banking and bond backstops under the (pathetically small €500 bln) European Stability Mechanism.

It’s likely to be a rolling and highly distracting crisis, spiced with rising rates, noise around a further French Downgrade, and the Left and Right making demands Macron tells Brussels where to stuff its demands. A French Bond crisis will consume enormous amounts of time and political capital – and further delay any real prospect of European unity.

And, in terms of European relevance – European unity is the nub of the problem. France is the issue. For Europe to emerge as a polity the old divisions of Europe – essentially between France and the German States – need to be overcome. France is a key-stone nation of the European project, but the current unrest and political gridlock show its essentially ungovernable. (Which some might argue has been the case in France since 1815!)

French political instability is not going to improve under Macron. His government will be unable to balance government spending versus rising social unrest ahead of elections next year which will likely result in hardline, anti-EU government – probability markets say Marine Le Pen with a 44% likelihood of taking the Presidency, but also a significant chance even conservative Frenchmen would vote for Left-Wing Jean-Luc Mélenchon to keep her out! Frying pan or fire?

Whatever happens, the distraction in France hides the reality of where Europe finds itself as the USA and China duke it out for global Hegemonic dominance. As global economic power and dominance shifts towards China, Europe risks irrelevancy. It’s economically and demographically weak – emerged economies elsewhere are surging past Europe’s somnambulant economic growth, under-employment, limited access to raw-materials, commodities and energy. Europe, as a whole, lacks any real ability to project strategic power, and its traditional economic strengths in machine tools, autos, and chip lithography are being supplanted by China. It retains a limited economic dominance in civil aviation, through Airbus.

China is unlikely to grant trading privileges to small irrelevant nations. But it may look more favourably on a new post Transatlantic-Age relationship with the whole of Europe.

Europe’s biggest handicap is it is not, and never has been, a polity. The continent’s history is millennia of regional hegemonic struggle for dominance between European States. The USA only became a reluctant part of that post 1945. The primary European policy goal of Britain for nearly 500 years was to ensure no European power ever achieved regional dominance – hence it was the UK money that funded the multiple coalitions, alliances, and confederations to counter Spain and France dominance.

Europe’s post war attempts to reach a consensus on unity, through free-trade agreements morphing into the European Union have failed to achieve political union. Instead, the EU is perceived as a glorified regulatory talking shop. It may share monetary union through the Euro, but political union, and fiscal alignment of 27 very different EU economies remains out of reach.

The risk is not so much that a French government debt crisis will spread – contagion risk – but how a French bailout and subsequent political blame-games will undermine the whole European project and thus impact its future place in the global economy in a new geopolitical age.

Watch this space… as they say…

Out of time, and back to the day job…

Bill Blain

Author of the Morning Porridge
CEO Windshift Capital
Advisor – Spitfire Strategic Capital

Meanwhile, don’t forget about my new book: The Battle for Hamble

You can read a review on the Society of Professional Economist’s website here.