Thursday 6 June 2019

Euroland updates

One interesting side-effect of Brexit has been the sharp drop in interest in the actual runnings of the EU. Now that the #FBPE crowd are all around, there can be no criticism of 'the project' to do so is to undermine everything.


And on the Brexiteers side, having sort of won the vote, the focus on just how rubbish aspects of the EU are has fallen away - sadly in favour of infighting and mass navel gazing.


Two current issues demand some attention. The first is economic, as we approach the top of the cycle (sadly for much of Europe as EU members have stagnated for over a decade, shame), members need to get their act together. Italy is the key concern - it has a debt to GDP ration of 130% and increasing. The new populist Government is trying tax cuts to remedy the austerity which has not worked for them for 10 years. The jury is out as to whether it will work, but abandoning the policy chosen by the Bundesbank EU Central bank is not going down well. There are real threats of fines as well as much hand-wringing. Longer-term, France owns a third of Italy's debt - should Italy go the way of Greece we will have 2011 Euro run part two, run harder!


Then there is the result of the EU elections - without going into the huge detail here is an excellent article on Politico.


My main takeaways from that are the EU is entirely made up of smoke-filled rooms and driven by the whimsy of Merkel and Macron - but only at a distance. The likely EU President of Guy Verhofstadt should be enough to even make Remainers take a sharp breath - the guy is a maniacal integrationst zealot. The democratic will of the EU - increasing the share of anti-EU parties in Parliament only to see the most pro-integration President ever get elected in the back room deals - seems to be a winding river indeed.


Remaining will be such fun!

5 comments:

Lord Blagger said...

Repeat after me. Debt to GDP of 130% is fake.

Borrowing to GDP of 130% is correct.

There are vast other debts that dwarf the borrowing and its those debts that are the issue.

Inflation linked and owed to the voter.

Lord Blagger said...

France's debts?

40 trillion Euros just for pensions. Inflation linked again, and you cannot inflate your way out of inflation linked debts.

The far more interesting event is the bankruptcy of Deutsche Bank

CityUnslicker said...

LB - The pension one is a very slow burn though as they are projections of liabilities. Who knows if they will be drawn etc over 40 years.

Debt to GDP is real, it is moneyed owed today already than can demand repayment forthwith in the most part and/or result in huge interest rate hikes to calm the bond markets.

andrew said...

CU +1

The uk (and I think holland?) is in a much better (relative) position than the continent as we have a large funded private sector.
And a relatively small state sector.

it is a cashflow thing
it creeps up on you

If things go wrong in this area it wont be for another 20-40 years.

As always, the USA leads us, there are some municipalities where a very large amount of the tax income goes to pension payments - not roads or schools. In that case, at the extreme, they 're-negotiate'.




E-K said...

Well. Ask any Remainer.

What interests them about the running of the EU ? Tell us about the councils and the parties...

Not a clue.

I'm far more concerned about our own EU fanatics at home. You must read this:

https://www.express.co.uk/comment/columnists/frederick-forsyth/1137454/eu-european-union-nato-military-deals