'The End Of The Line For The Euro'

Originally published on August 15, 2011 5:02 pm

Here in America when we go to the beach, we read romance novels or mysteries.

France is different sort of place. Over the past few weeks, the French have been obsessed with an economic thriller called Terminus pour L'Euro — The End of the Line for the Euro. It was published in Le Monde, one of the biggest newspapers in France.

The series is fiction. But for a while this week, as rumors about the French financial system spread through markets and French bank stocks plunged, the line between fact and fiction began to blur.

Terminus pour L'Euro takes place in 2012. Germany announces that its courts have declared participation in the euro unconstitutional, and it wants out of the currency union. Here's a quick, translated excerpt, to give you the flavor:

Financial stability is important, but the sovereignty and interests of the people come before that. Maybe we've forgotten about that. Better to look at a crisis now, than to weaken our financial institutions for years to come.

Sure, the idea that the Germans would exit the euro is hard to believe. But this has been a weird summer in Europe. Some investors have been wondering if the euro can survive with so many of its members deeply in debt.

Other parts of the fictional series played perfectly into this paranoia. The story used real names — not only of national leaders, but of big banks. Another excerpt:

We must put ourselves in position, buy back shares, for the right to know what's going on, and prepare the next move: the rescue of Crédit Agricole itself and its dismantling.

So, the French this summer are reading this fake scary story of banks panicking and going under, et voila: This week, rumors start spreading that real banks are in trouble.

On Wednesday, amid these rumors, stock in Societe General dropped 15 percent — the largest fall since the 2008 financial crisis.

The bank went looking for the source of these rumors, and the trail led back to London. Last Sunday, the British paper the Mail on Sunday published an article questioning whether Societe General was still solvent.

And many people in France assumed the Mail on Sunday had read Le Monde's fictional series and mistaken it for fact.

"For the last few days, we all believed that the Daily Mail had misread Le Monde," Jean Marc Illouz, a French television journalist, says.

The Mail on Sunday says, no, they didn't steal from the fictional story in Le Monde. But they did retract their story about Societe General's problems.

Meanwhile, French regulators today moved to protect Societe General, Credit Agricole and several other banks from the rumors swirling in the market. They temporarily banned on short selling of the banks' stocks.

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MICHELE NORRIS, Host:

Well, Zoe Chace and Caitlin Kenney of our Planet Money team have traced the rumors back to one possible source. It's a work of fiction in a French newspaper.

ZOE CHACE: It was called Terminus pour L'euro, or the end of the line for the euro. It was published in Le Monde.

CAITLIN KENNEY: Before we explain how this fictional series came to be blamed for France's problems this week, we're going to give you a flavor of what the French like to read on their vacation.

CHACE: The end of the line for the euro takes place in 2012. Germany announces that its courts have declared participation in the euro unconstitutional. It wants out of the currency union.

KENNEY: Here's a fictional phone call between a German politician and a reporter. The reporter speaks first.

UNIDENTIFIED READER: This decision is like a clap of thunder. The markets are falling. The eurozone is tumbling in the worst crisis since 2009.

READER: The markets will end up understanding. Financial stability is important, but the sovereignty and interests of the people come before that. Maybe we've forgotten about that. Better to look at the crisis now than to weaken our financial institutions for years to come.

CHACE: Call the idea that the Germans would exit the euro incredible, but this has been a weird summer in Europe. Some investors have been wondering if the euro can survive with so many of its members deeply in debt. Other parts of the series played perfectly into this paranoia.

KENNEY: This is fiction, remember, but the series used real names like French President Sarkozy and German Chancellor Merkel. But what might have shaken the markets is that the series also uses fake quotes about the downfall of very real banks.

READER: We must put ourselves in position, buy back shares for the right to know what's going on and prepare the next move: the rescue of the Credit Agricole and its dismantling.

KENNEY: So the French this summer are all reading this fake scary story of banks panicking and going under and then, voila, all of a sudden, rumors start spreading that real banks are in trouble.

CHACE: This Wednesday, stock in Societe General dropped 15 percent, the largest fall since the 2008 financial crisis, and the French bank went on a witch hunt to figure out who started these rumors.

KENNEY: They tracked it back to London. Last week, the British paper, The Mail, on Sunday published an article calling the solvency of the bank into question.

CHACE: And the French, like they often do, assumed that the British were just being stupid. People thought The Mail had read Le Monde's fictional series and thought it was true. Jean Marc Illouz is a journalist on French television.

JEAN MARC ILLOUZ: Now, for the last few days, we all believe that The Daily Mail had misread Le Monde's story.

CHACE: So is Le Monde to blame? Jean-Baptiste Jacquin, one of the paper's chief editors, says no.

MARC ILLOUZ: It's a fiction and we never mentioned the word of bankrupt at Societe General.

KENNEY: It turned out that, like most rumors, it's impossible to know where this started. The Mail on Sunday says they aren't idiots. They didn't steal from a fake story, but they did apologize for their piece about the banks' problems.

CHACE: Societe General seems to have vanquished the rumors for the moment. Their stock recovered, but just in case a piece of fiction again causes very factual problems for the banks, politicians in France are taking steps to protect financial stocks.

KENNEY: They've banned a speculative trade known as short selling for the next 15 days. Caitlin Kenney.

CHACE: Zoe Chace, NPR News.

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