A crucial weekend for Europe lies ahead…

by | Dec 2, 2016

Does the fate of the Eurozone rest on this weekend’s events?

Though 2016 as a whole has already proven to be yet another year full of political and economic strife for the member states of the European Union, this weekend is quite another kettle of fish.
First up, Italy’s Prime Minister Matteo Renzi will be praying for a ‘yes’ vote in Sunday’s referendum which is all about constitutional reform in the country’s Parliament. Sadly for Mr Renzi, polls (which have been less than stellar at predicting events this year) are indicating a ‘No’ from the public, which could be bad for Italy and Europe for several reasons.
Firstly, Renzi has said that he will stand down as PM if he loses, which could pave the way for a populist anti-EU party named ‘Five Star Movement’ to take centre stage. Similarly to anti-establishment and anti-globalist movements gaining traction in France (Marine La Pen) and the Netherlands (Geert Wilders) the group seeks to disrupt the status quo and potentially call for a referendum on Italy’s membership of the EU and the single currency (though, interestingly, statistics indicate that Italians are divided on remaining part of the Euro or not, despite data like this which shows they haven’t gained from Eurozone membership like other EU economies):

What does all of this in the Eurozone mean for you?

European stocks have already dropped ahead of the outcome, but some are saying the referendum is being over-hyped. We will have to wait and see. In Italy generally, bank shares slumped over last month on renewed concerns of bailouts being given to the countries lenders which are facing serious hardship as they are saddled with billions of euros in NPL’s (non-performing loans), the oldest bank in the world (Monte Dei Paschi di Siena) included. Though Italy is of course the central player in this, what also matters is the long term outlook for the strength of the European Union as a whole.
Politicians in the Eurozone and elsewhere are looking at Italy and wondering whether it may be the next ‘domino’ to fall, after Brexit defied the pollsters in June, while some comments are more doom-laden, saying that the Eurozone could crumble as a result of the outcome.
Uncertainty in the financial markets is likely if Renzi loses and steps down, especially because if he goes, his proposed bank bailout may be scrapped at least for the time being. Then, if Italy should face a full blown banking crisis, due to the interconnectedness of the global banking system, the rest of the European banking system might be hit as well, whilst many lenders on the continent are already struggling, in the case of Portugal’s biggest bank Caixa Geral de Depositos for example. This could prompt fresh uncertainty and worry for investors. It would be prudent to expect volatility in the Euro as well as European equities off the back of this upcoming result and the fallout.
Not only this, next comes Austria. Two men, Alexander van der Bellen, a Green candidate and son of Estonian refugees, the other Norbert Hofer, a right-wing populist who would like to dissolve the Parliament that oversaw 2015’s migrant crisis, will be the central players when Austrian’s head to the polls on Sunday.

The latter (on the right) would be the countries first right wing leader (if elected) since the Second World War. This potential outcome would put yet another spanner in the works of the EU project and would be sure to upset the European commission, because he has said he would back a referendum on Austria’s EU membership if the bloc becomes more centralized or if Turkey joins.
So both of these developments in key EU countries have ruffled the feathers of those with a strong interest in keeping the idea of European political and monetary union alive. Recently, the controversial EU President Jean Claude Juncker mentioned in an interview with Euronews, that ‘Regarding referenda on EU membership, I think it is not wise to organise this kind of debate, not only because I might be concerned about the final result but because this will pile more controversy onto the huge number already present at the heart of the EU’.
Whatever the results, the European Union has a lot to take into consideration, and the effect on the markets is likely to be considerable.

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ALL RIGHTS RESERVED © INVSTR LTD. 2018

Risk Disclosure:

Invstr is a technology platform, not a registered broker-dealer or investment adviser. Invstr does not offer its own recommendations of any security or provide its own research to any user regarding any security transaction or order.

Please note, investing involves risk and investments may lose value. Past performance does not guarantee future results.

Brokerage services of US-traded securities, including fractional trading, are provided to Invstr users by DriveWealth, LLC a registered broker-dealer and member of FINRA/SIPC. DriveWealth may not establish investment accounts to residents of certain jurisdictions. 

DriveWealth provides no tax, legal, or investment advice of any kind, nor does DriveWealth give advice or offer opinions with respect to the nature, potential value, or suitability of any securities transaction or investment strategy. DriveWealth acts as the clearing firm for securities transactions entered on the Invstr mobile platform. DriveWealth is not affiliated with Invstr. Invstr does not participate in DriveWealth’s decision-making.

There is no minimum initial deposit required to open an investing account with DriveWealth. Expenses and Fees associated with the DriveWealth platform in conjunction with Beanstox includes either a monthly membership fee of $4.99 with a commission charge of $0.01 per share* or, in the event the membership fee is not paid, a commission charge of $0.0125 per share applies, subject to a minimum of $2.99 per transaction. There are no monthly minimum fees, or required ongoing minimum account balance. For non-resident aliens, there is a one-time tax verification fee of $5.00 (representing Form W-8BEN pass-through processing cost). View a full list of our fees at http://bit.ly/DWFees

The monthly subscription charge is four dollars and ninety-nine cents (US$4.99) per month plus one cent (US$0.01) per share traded (as examples, for a Transaction of 0.90 shares, the per share traded charge is one cent (US$0.01), and for a Transaction of 1.6 shares, the per share traded charge would be two cents ($0.02), and the quarterly subscription charge is fourteen dollars and ninety-nine cents (US$14.97) every 3 months plus one cent (US$0.01) per share traded. The monthly and quarterly subscription charges may be greater or less depending on additional services offered by a DriveWealth partners as part of the subscription model offering, or based on any subsidies provided by a DriveWealth partner as part of the subscription model offering. For non-resident aliens, there is a one-time tax verification fee of $5.00 (representing Form W-8BEN pass-through processing cost).View a full list of our fees at http://bit.ly/DWFees

This communication is not an offer or solicitation to purchase or sell securities. Investing in securities carries risk, including the loss of principal. Past performance is not indicative of future returns, which may vary. Online trading has inherent risk due to system response and access times that may be affected by various factors, including but not limited to market conditions and system performance. An investor should understand such facts before trading. The risks associated with investing in international securities, including US-listed ADRs and ETFs that contain non-US securities include, among others, country/political risk relating to the government in the home country; exchange rate risk if the country's currency is devalued; and inflationary/purchasing power risks if the currency of the home country becomes less valuable as the general level of prices for goods and services rises. Before investing in an ETF, an investor should consider the investment objectives, risks, charges, and expense of the investment company carefully. ETF prospectuses are accessible within the mobile application via a link under each company’s “Description.”

A fractional share is a share of equity ownership that is less than one full share. Fractional share investing has certain limitations and restrictions that investors should understand prior to purchasing fractional shares: ownership of less than one full share does not give the fractional share owner the right to vote on company matters; fractional shares are non-transferrable, meaning they cannot be transferred to another brokerage firm; and fractional share orders will be accepted as market orders only. For more information and details on fractional shares, and any associated limitations or restrictions please visit: https://drivewealth.com/fractional-shares-disclosure

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