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Government Attitude

All politics is local, and a government's stability and attitude are essential to a currency's strength. Some leaders are antimarket and do things that may damage the country's standing in the international markets—although the moves may be popular in their own country. This can include defaulting on international loans, implementing expensive social policy, or erecting barriers to free trade.

The French are famous, or infamous, for their chauvinism. In a Europe where countries are supposed to set aside nationalism for the good of continental unity, chauvinism can be seen as a sign that economic reforms are being derailed. In 2004, the French drug company Aventis was in trouble and sought a merger partner. When Swiss pharmacy company Novartis showed interest, the French government intervened. In no uncertain terms, the Swiss company was told to back off. In the end, another French company merged with Aventis, creating, as government representatives gushed, a “national champion.” The French finance minister, Nicolas Sarkozy, was unapologetic.


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