While it’s certainly tempting to focus squarely on the political upheaval that’s sweeping the United States in the wake of President Trump’s institution of a de facto Muslim ban and the appointment of known bigot Steve Bannon to the National Security Council, investors shouldn’t forget that Europe faces its own political trial by fire this year.
Elections in the Netherlands, France, and Germany will serve as litmus tests for the extent to which voters are prepared to embrace the same populist fever that landed Trump in the White House and catalyzed the UK’s decision to exit the European Union.
Needless to say, nationalistic sentiment is running high in Europe following high profile terrorist attacks on Paris and Brussels. Angela Merkel – once known as the “Iron Chancellor” – has been widely maligned for her decision to open Germany’s doors to millions of refugees fleeing war and persecution in the Mid-East. The rise of the far-right AfD and its firebrand leader Frauke Petry represents a rather uncomfortable return to the Germany of yesteryear and in France, Marine Le Pen threatens to up the “euroskeptic” ante by pushing the bloc to the brink of dissolution.
Below, find a handy table from Barclays that outlines the basics along with the bank’s base line. Additionally, for those inclined to take a position in vol, there’s a timeline that includes expiries.
Via Barclays
The Orange julius experience here will have a big effect on those elections. If the Trumpsterfire blows up in his face the Merkel led ProEuro coalition can hold the line, abet weakened and bloody. Would that be enough to hold the EU together?? However, if Mr. Trump can keep the pressure on without it blowing up in his face I would say all bets are off. The coalitions to come out of this will almost have to be more protectionist leaning, the question is how much damage will be done to the EU. We will see, this is far from over even after these elections the EU just might be on borrowed time.