Euro Zone

I don’t know if many have been watching what is going on in Europe but it is anything but boring. We have had two votes in the last few days: one in Austria for the Presidency, , largely symbolic,  and one in Italy , a referendum on legislative reform .

The one in Austria saw the status quo candidate win 51% to 49% over the more anti establishment , anti immigrant candidate. However the margin was small and there is obviously a very large minority who do not like what is going on in their country.

In Italy, the third largest economy in the EU , the results were more dramatic and significant. The Prime Minister said he would resign if the package of legislative reforms he was proposing were defeated in the referendum. And sure enough almost 60% said no to his proposals and he has announced his resignation. Of course, one could say this is nothing new for Italian politics and that is largely true. But now being in the EU anything that Italy does or doesn’t do that is negative will have an impact on the the larger EURO area. The EURO fell yesterday evening as a result and the European Bank will likely have to provide more cash ( print more money, some day this will have to be paid back) to Italy as a result given their largest banks are under great strain from bad loans etc and one was looking to recapitalize. The upstart 5 star party which is skeptical of the EU has gained support and hence poses serious problems .

Of course, this is why the European Union project is so questionable. Many member countries just can’t get their act together and here is another exhibit A. And even in stable Austria we see all is not well.

Later next year other votes are to occur in other EU member countries , like Netherlands and France , where anti European parties have been making gains.

So the great dream of a united Europe remains just that and any notion that they are a significant challenge to the US or China economically is always hampered by the mosaic of cultures and languages that make up the EU. Trying to fit a square peg in a round hole————?

 

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