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AI view: the question of EU survival looms larger

In AsianInvestor's fourth prediction for the Year of the Rooster, we give our view on whether more countries will vote to leave the European Union.
AI view: the question of EU survival looms larger

First Britain's vote to leave the European Union in June, then Donald Trump's November success in the US presidential election. The two big shock results of last year have led many arguing that many to argue that surprise victories for populist candidates in France and the Netherlands are more likely than the polls suggest.

And if far-right and anti-EU presidential candidate Marine Le Pen did become French president, the widely held view is that this would mean curtains for the EU. Hence the question posed today has far-reaching global implications.

Scroll to the bottom for links to the other forecasts that AsianInvestor has made so far for the Year of the Rooster. 

Will more countries vote to leave the European Union?
Answer: No

One of the great economic uncertainties of the coming years is whether the European project will survive. 2017 will mark a big initial test.

There are some alarming signs. The resounding ‘No’ vote that the Italian people handed prime minister Matteo Renzi over his constitutional reform referendum in December underlines how effectively populist, anti-EU parties are tapping into resentment in Europe with the political establishment.

These forces will play a major role in coming elections of the Netherlands and France. The former will hold a general election on March 15, and the far-right Party for Freedom seems set to gain the most seats. That said, the country’s multi-party format means it probably couldn’t form a government.

In France, Front National leader Marine Le Pen (pictured left) looks likely to reach the country’s presidential runoff on May 7. But most political observers believe she will then lose to independent Emmanuel Macron, as centrist and left-leaning voters combine to keep Le Pen out.

The ongoing issue of Britain's vote to leave the EU is also set to linger over the landscape. UK prime minister Theresa May appears set to lead the country into a hard Brexit by March 2019, and EU leaders are keen to force harsh terms on the errant nation in order to discourage other would-be splitters.

Of course, disaffected populations have proved willing to ignore warnings and threats of the political classes. So core EU nations such as Germany may also cater to some of the complaints of poorer members. Some non-EU citizen immigrant control could end up being possible within the Schengen area. While that could test the monetary unity of the EU, it’s unlikely to cause further fragmentation in the coming year.

For investors, that could offer selective investments in European companies positioned to benefit from accommodative government policies or improved competitiveness as the dollar keeps rising.

The EU experiment should survive the Year of the Rooster. But it’s more fragile than anybody imagined 18 months ago.

Other Year of the Rooster predictions:

 

¬ Haymarket Media Limited. All rights reserved.
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