DIY Investor Magazine
| Oct 2017
14
EUROPEAN EQUITIES: BACK TO SCHOOL
As those in the Northern Hemisphere head back for the
beginning of the new school year, this year there seems
to be a large amount on the ‘curriculum’ – writes Tim
Stevenson of Henderson EuroTrust.
Starting with Brexit, the temperature is rising as
negotiations progress, given that the UK’s starting
position of having cake and eating it (an analogy
expressed by Boris Johnson, the UK Foreign Minister)
is incompatible with a sharing community. Anyone who
has had experience with a manufacturing business
understands that supply chains are complex and highly
integrated.
In the 15 months since the vote, most of the pro-Leave
camp have retreated from a ‘hard Brexit’ position on the
simple realisation that it will be very damaging to the UK
economy and its citizens. The sunlit uplands promised
by the Vote Leave campaign do not actually exist and
the Conservative party looks ill-equipped to sort out the
mess easily. But more important is whether the UK, as a
united nation, will be able to. This will dominate the UK’s
‘return to school’.
HAS EUROPE LEARNED ITS LESSON?
The German Federal Election on 24th September to
elect the members of the 19th Bundestag is likely to
see Chancellor Merkel’s coalition return in some form or
other.
With elections in France, Hungary and the Netherlands
earlier this year seeing a broad rejection of the alt-right
anti-EU movement that has dominated recent media
coverage, Europe’s leaders should – at last – have some
breathing space.
Much of the criticism levelled at the EU in the lead-up to
the UK’s Brexit vote was, in our view, justified, and some
of these issues are now being openly discussed.
‘THE SUNLIT UPLANDS PROMISED BY THE VOTE LEAVE
CAMPAIGN DO NOT ACTUALLY EXIST’
‘AS USUAL IN FRANCE, THERE WILL BE HOWLS OF
PROTEST, BUT THIS TIME THERE IS A FEELING THAT
REFORMS ARE OVERDUE’
Turkey, for example, came up in the live televised
German election debate between Merkel and her Social
Democrat rival Martin Schulz, with Merkel taking the
unexpected step of promising that she would try to end
discussions over Turkey’s EU accession.
There are plenty of other matters on the agenda, and it
will be important to see how France and Germany can
work more closely together in future.
In France, President Macron has pushed forward with
extensive reforms designed to make the labour market
more flexible, and thereby spur economic growth.
As usual in France, there will be howls of protest, but
this time there is a feeling that reforms are overdue.
Macron’s policy of fast-tracking regulatory change
through parliament is controversial, but with a gruelling
schedule of meetings designed to build in concessions
for the major stakeholders (unions and business leaders)
without creating obstacles, he seems likely to overcome
any protests.
Italy has been quiet and will probably be the next
political hurdle at some stage over the next few months.
However, the direction of travel is much clearer today
than it was a year ago. Europe is not unravelling as
wanted by the likes of Nigel Farage in the UK, Geert
Wilders in the Netherlands, or US President Donald
Trump (a vocal supporter of Brexit).
