September 25, 2017

The Eurozone strikes back

Management comment

Following the election victories of Emmanuel Macron and Angela Merkel, Europe is slowly but methodically erasing the scars left behind by the deepest economic, social and institutional crisis in its history. As the birthplace of democracy, Europe has so far refused to yield to the siren calls from extreme populist and nationalist political movements. Despite criticism from the mainstream financial press focusing on highlighting the sins committed by a kaleidoscope Europe, rather than discerning the rise in domestic extremist movements, the euro zone has demonstrated its strength and restored a degree of pride and dignity. Both of these qualities are required to envisage and forge a new project together which aims to offer future generations the benefits of freedom and wellbeing by guaranteeing protection to past generations who have fought for democracy.

In spite of Europe being considered by some as a utopian fantasy, a worn-out ideal or a pipedream, it is nonetheless currently attracting more investors than it is deterring, after recording a tenth week of capital inflow into European equities out of the past eleven (USD 1.8bn). On the corporate front, driven by momentum from France which is finally coming to terms with much-needed reforms, a number of major groups are planning tie-ups, including BNP Paribas/Commerzbank, Alstom/Siemens and STX/Fincantieri. Europe is of course no bed of roses and Angela Merkel, the political oddity, “die Unerwartete” (the unexpected) or simply “Mutti” (mum) for the Germans, has her own critics and faults. She has not been spared the rise of populism either, as the nationalist AfD party has secured its first seats in the Bundestag. A significant proportion of the European population is still affected by unemployment and poverty and immigration remains hard to control. However, the eurozone has not imploded and the Brexit/Trump episodes give rise to reflexion.

The last vestiges of the crisis are also starting to fade in terms of monetary policy. Now that the Fed has announced a forthcoming reduction in its balance sheet, the ECB is also expected to send a positive signal to the financial markets by tapering its asset purchase programme.

Igor de Maack, Fund manager and spokesperson at DNCA. This article was finalised in September 25th, 2017.

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Following the election victories of Emmanuel Macron and Angela Merkel, Europe is slowly but methodically erasing the scars left behind by the deepest economic, social and institutional crisis in its history. As the birthplace of democracy, Europe has so far refused to yield to the siren calls from extreme populist and nationalist political...
2017-09-25