This week’s vote is a seismic moment for the UK, no doubt. But it’s far more than that. It’s foremost an urgently needed wake up call for the so called EU elites in Brussels, Paris or Berlin.
Front and center of the slap in the face of the EU from the British Island are arrogant political figures like EU Commission President Jean Claude Juncker (“A British exit from the EU would have unforeseeable consequences”) and EU Parliament President Martin Schulz (“A Brexit would be an act of irrationality”) who both tried to influence British voters ahead of the referendum. Therefore they should follow British Prime Minister David Cameron’s example and step down (however, don’t expect these EU-bureaucrats to move).
In my view, the verdict of the British people is very mature. They swallowed a short-term economic turmoil in their country – and the Pound Sterling’s downfall is gonna make their summer vacation at the beaches of the Mediterranean much pricier – for the long-term goal to reclaim political sovereignty. Democracy has won the day, proving that the people still have some power!
And I bet, Britain will overcome the economic challenges pretty soon, for instance through much more liberal economic, trade or fiscal policies and new global free trade agreements ‘swiss style’ – something not possible so far under the roof of bureaucracy-infested EU.
By the way, the Brexit vote shattered the London Stock Market on day 1 much less than markets in Spain, Italy or France, where stocks lost at least twice as much as in London.
Today, the term I heard in conversations more than ever is ‘copycat’, describing the potential of other EU countries to follow Britain’s example and sending the EU – as we know it, as well as the monetary union called Eurozone – to the graveyard of history. This expectation is the main reason why EUR-markets in Paris, Milan or Madrid lost much more in value than London.
Within the next 15 months, a series of votes or referendums in Europe will take place: If the EU wants to survive, these votes pose both a threat and a chance.
If – and only then – the Brexit is used by EU proponents in Brussels, Paris, Rome or Berlin to acknowledge that:
- Eurozone is a disaster
- EU stands for economic stagnation
- EU failed to generate economic growth and new jobs
- EU is unable to solve important issues (refugees),
- EU is profoundly undemocratic
- EU can’t give the European’s a worthy perspective
and tackle these issues swiftly and profoundly, then the EU would be in a much better shape and acknowledged by voters. And the day of the Brexit-decision would ultimately become a good day for the EU and Europe.
However, and this is more likely, if the bureaucrats in Brussels remain stubborn and continue with their ‘elite’ behavior, ignoring the issues people and voters bother, here is the time-table of the EU’s coming demise:
This weekend, Spain will have a – unprecedented – repeat election aimed at ending a deadlock that has left the country with a caretaker after an inconclusive vote in December.
In October, Hungary plans a referendum on rejecting refugee quotas being imposed from Brussels.
In the same month Matteo Renzi, the Italian prime minister who is struggling to push forward an agenda of change and revive Italy’s stagnant economy, holds a referendum on reforms that would trigger his resignation if rejected. The recent local elections with the setbacks in Rome and Turin – where Italy’s anti-establishment and anti- EU ‘5-Star’-Movement scored resounding victories – come at a delicate time for Renzi. Virginia Raggi, the movement’s 37-year-old candidate, who was elected as Rome’s mayor promised: “We will restore legality and transparency to the city’s institutions after 20 years of poor governance.”
In November, outside EU but nonetheless important: with Donald Trump (“People want to take their country and their borders back”) another anti-establishment figure could become US-President.
Then in 2017, in March, the Netherlands will hold its own parliamentary elections and Geert Wilders – reviled by much of his own country’s political establishment – will most probably get a mandate for his party into government. He currently leads in the polls and just today called for a Dutch referendum on EU membership. “We want be in charge of our own country, our own money, our own borders, and our own immigration policy,” he said. Nedxit ahead?
In April and May, France will vote, and the EU-friendly establishment in Paris is going to have a tough fight to keep Marine Le Pen’s anti-EU party ‘Front National’ at bay.
Finally, in September, Germany will have the ‘Bundestagswahl’ and Angela Merkel’s center-left government will most likely pay the price for the largely failed immigration policy. In Germany, the anti-EU party is called AFD (Alternative für Deutschland), a movement that has already won many seats in important regional elections and with the Brexit-push could spark a serious discussion about the EU even in Germany.
We are living in interesting times, but how is ‘Brexit’ affecting investors? As this site already outlined several times, uncertainty creates chances in ‘safe’ investments (for instance gold) or ‘defensive’ stocks from the food-sector outside EU (as for instance Nestle) or tobacco (as for instance Marlboro-producer Altria).
But the best advice remains:
Avoid any overreaction, after all, the worst investment mistakes usually originate from an overreaction to the unknown. It has always been a wise philosophy that slow and steady wins the day.
The Brexit is a defining moment for the EU. To survive, there is no alternative than really tackle political and financial issues and generate economic growth and perspectives for its citizens.