The European Union may be facing an unsettled year. As the year goes on there will be several important elections happening across Europe. Britain is aiming to trigger Article 50 by the end of March. There are also European countries which are suffering from financial difficulties, so will the Euro cope under all the pressure?
The European Union in trouble?
As we have discussed in recent blogs, the UK Government is aiming to start the formal process of leaving the EU this year. This comes at a crucial time due to the numerous European elections set to take place this year. The more important elections will take place in France, Germany and the Netherlands. This is due to the fact that all three countries are founding members of the European Union. France will be voting for its next president, The Netherlands voting for its next prime minister and Germany will be voting for their next Chancellor meaning Angela Merkel will be fighting for her job. It has been reported that Anti-EU parties are gaining popularity in each of the countries. There is a possibility the future of the European Union could be in trouble.
Marine Le Pen is currently causing a stir in France. She is the leader of the French National Front party and she is running for president of France. Le Pen is catching up to current favourite Emmanuel Macron. If she is to be elected as French president then all hell might break loose for the EU. The French elections are to take place on 7th May 2017. If Le Pen wins the elections there is the possibility she will pull France out of the EU. There have even been talks to reintroduce the Franc. As France is one of the founding members of the EU and one of its largest economies, leaving would cause further devastation.
Another one of the founding states which will be going through their own general elections is the Netherlands. Their general election will take place on 15th March 2017. The latest polls suggest that Geert Wilders is gaining popularity. However, Wilders is the leader of the Freedom party and his immigration and Anti-EU comments have landed him in trouble. The media are even calling him the Dutch Donald Trump. However, his popularity might spell trouble for the EU. Wilders has stated his first job as Prime Minister will be to hold an EU referendum of their own. The Netherlands is known for having coalition governments. Wilders will have to look for partners.
A further major election which is happening this year is the German Federal Election. This is to be held on 24th September 2017. The current German Chancellor is Angela Merkel and it looks like she may have to fight to remain as Chancellor. If she wins, this will be her fourth consecutive term however she has lost a lot of popularity recently. Her reputation took a hit after her open door asylum policy. Due to this, since the policy was introduced there has been a growing interest in the far right party Alternative for Germany. The Social Democratic Party or SPD is also gaining popularity with candidate Martin Schulz even surpassing Merkel in the latest polls. However there are still 7 months to the election so it can go anyone’s way.
The EU is currently struggling to deal with Greece. After years of living beyond their means and amassing such a substantial debt, the country turned to the EU for bailouts. The country is currently on its third bailout since 2010. However, the International Monetary Fund has warned that Greece needs to rethink its spending or the country could possibly be forced out of the Eurozone. The EU is currently struggling to maintain the Greek debt crisis. However in order to receive a bailout, Greece will have to adhere to the terms and conditions set out by the European Union officials.
Yet another country causing pressure for the EU is Italy. They are currently looking for a bailout to rescue their struggling banks however they wish to bypass European rules and want to use state funding for the bailout. In December 2016 Italy voted whether or not to change the country’s 1948 constitution. During the campaign, political party populist Five-Star Movement (M5S) gained popularity. The party led by Beppe Grillo has fast become one of the more popular parties and have gained their popularity due to their anti-austerity views. Many Italians believe the Euro is the reason for the decline in the economy since its launch in 1999. The Euro has taken a lot of criticism recently from various European countries, if they all start pulling away from the Euro this could cause disaster for the Eurozone.
What does this mean for the Euro?
With the mounting pressure from the Greek debt crisis, the Italian debts and the numerous European elections, the Euro has come under pressure. 2017 will be a tense year. As the Pound depreciated when Britain voted to leave the EU, it will be interesting to see the effect the elections have on the Euro. The formal process of triggering Article 50 may also offer an insight into what will happen if other countries wish to leave the EU. It has been predicted that Anti-EU parties will do well in the upcoming European elections.
We all saw the value of the Pound drop when Britain voted leave in the EU referendum. Investors are pulling away from the Euro due to uncertainty over its future. The Euro will be under a lot of pressure if the elections go in favour of Anti-EU parties especially if Marine Le Pen wins the French presidency election. She has expressed her wishes to bring back the Franc and many Italians wants to bring back the Lira. Recently there have even been talks of Germany bringing back the Deutsche Mark. Britain Germany, France, and Italy are amongst the largest economies in the Eurozone.
What does this mean for gold prices?
In 2017, there is a lot happening politically. It is common knowledge that political uncertainty drives up the gold price. After the EU referendum in Britain, we saw gold prices rise and we may be expecting to see a repeat performance once Article 50 is triggered. There are also many Anti-EU parties which are currently gaining popularity. If they win the elections we may see other countries attempting to leave the EU. The former head of the US Federal Reserve, Alan Greenspan, has even expressed his concerns over the future of the Euro. The future of the Euro is currently looking bleak. As doubts have been cast over the future of the Euro, investors are pulling away and rushing to buy gold.
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