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Market Commentary

Unsettling Trends

By June 9, 2015No Comments

The EU is the world’s biggest economic block, so their problems are our problems in the UK – even if the UK leaves the EU.  Here we explore some unsettling political trends from the last few months.

Politics is a funny thing.  In polite company we shouldn’t bring up the subject.  But politics in Europe is history unfolding before our eyes.  We need to pay attention, as the EU is the world’s biggest economic block, so impacts on us all.

Older people are much more likely to vote than younger people, though younger people clearly have more skin in the game.  (An ugly expression, apparently coined by multi billionaire investor Warren Buffet).

We hate uncertainty, so mostly we vote for someone today so they will give us tomorrow what we had yesterday.  Or at least, in the hope it won’t get any worse than yesterday!

What actually happens is we vote for someone making promises today, about problems yesterday, which they’ll break tomorrow.

Mostly we let them get away with this charade until one of two things happens.

Either we get bored, so after 2-3 political cycles vote in someone else.  (Or as someone once said of some countries’ political elite: politicians and nappies should be changed frequently, and for the same reason).

Or we get angry, which is when it gets really exciting.

Some people got angry in the recent UK elections.  The Scots came out of that best by a wide margin.  In a “fairer” system, I am told that UKIP would have received 80 seats, and the Green Party 20.

But we need enough people to get angry to really make a difference (assuming a “fair” electoral system, so that excludes the UK and Russia).  Which leads me to Europe.

Back in 2010 we said something like “the powers that be in Europe have bought time to reform the eurozone.  If they don’t, the voters will take control”.

In Greece youth unemployment is 60%.  That’s a lot of angry young people.  To quote from The Guardian:

“From outside, Greece looks like a giant negative: but what lies beneath the rise of the radical left is the emergence of positive new values – among a layer of young people much wider than Syriza’s natural support base. These are the classic values of the networked generation: self-reliance, creativity, the willingness to treat life as a social experiment, a global outlook.”

But Greek voters are just the first to break ranks.

Youth unemployment in Poland is 20.5% – not good, but far better than France and certainly better than Spain.  Yet in the May Presidential elections “the country’s restless, anti-establishment youth” rejected the ruling party and voted for the candidate of the nationalist eurosceptic party, Andrzej Duda.  General elections are in October.

In Spain youth unemployment is 50%.  In recent regional elections (no prizes for guessing) “two upstart movements made dramatic gains at the expense of the countries established parties”.  One of them, Podemos, is already threatening to leave the euro if they come top in general elections later this year.

In Italy the overall unemployment rate is more than twice that of the UK.  In recent regional elections the anti–euro, anti-immigrant, Northern League made big inroads towards Rome from its natural power base in the north.  In addition, the anti-euro Five Star Movement took 15-20% of the vote.  The party of the young and handsome Matteo Renzi, elected as Prime Minister in 2014 as a new broom, is already being rejected by some.  Even the party of the disgraced Silvio Berlusconi made progress!

Back in March, the National Front made further progress in local French elections with Marine Le Pen announcing “This vote shows that the French want their freedom”.

This is happening when Europe is supposed to be on the road to recovery – imgaine what will happen in a downturn!

But those voters across Europe still need to engage brain.  As Plato put it:

“Those who are too smart to engage in politics are punished by being governed by those who are dumber.”

Right now we mus turn our eyes back to Greece.  As this is being written the democratically expressed will of the Greek voters, enshrined in their new Prime Minister Alexis Tsipras, is in a battle over how Greece should be run – not with fellow Greeks, but with those who have no vote in Greece.

Democracy. Bureaucracy.  It’s all Greek.  Well, actually bureaucracy is half French (bureau=office).  Ah.  Perhaps we now begin to see the confused heart of the problem.

Dennehy Wealth