Italy votes for populism while Germany votes for the status quo

by | 5 Mar, 2018

SPD leader Martin Schulz talks with CDU head and Chancellor Angela Merkel

Events over the weekend revealed divisions in Europe, as a German coalition came together and the Italian public embraced a populist revolt against the status quo. After months of tense negotiations where a positive outcome seemed doubtful, Germany’s Social Democratic Party under Martin Schulz voted in favor of a grand coalition with Angela Merkel’s Christian Democratic Union.

The move means Mrs Merkel will carry on in charge, on top of the 12 years she has already served. In contrast, Italy faces a prolonged period of instability after voters delivered a hung parliament in yesterday’s national elections, in which the anti-establishment Eurosceptic Five Star Movement won 31 percent of the vote, with a major defeat for the ruling centre-left coalition on 23 percent.

The outcome of national elections in Italy are another blow to the European Union, especially given that Silvio Berlusconi’s Forza Italia in coalition with anti-migrant parties including the Northern League claimed a whopping 37 percent of the vote. Berlusconi is seen with contempt by many European bureaucrats over his warm relationship with Vladimir Putin.

It is an outcome which lawmakers in Brussels will want to sweep under the carpet and ignore in the face of rising Euroscepticism across the continent. As we have detailed on previous occasions, anti-EU sentiment is growing not only in Italy but in Austria, Poland, Spain and even within Germany itself, where the AfD (Alternative für Deutschland) has boosted its ranks in the Bundestag, after it became the third-largest party in Germany after last year’s federal election.

In 2017 it seemed to many that the rising tide of populism had been blunted, after 2 eurosceptic right-wing politicians in Europe – Marine Le Pen in France and Geert Wilders in the Netherlands lost to left-leaning opponents in national elections. However, the continent is still reaping the impact of the migrant crisis which began in 2015, and the connection between this problem and the rise in right-wing sentiment is too closely related to be ignored.

Angela Merkel faced huge backlash for allowing over 1 million undocumented migrants to enter Germany in the space of a single year, which directly led to the AfD’s ascension into the mainstream. Heads of state in Europe have seemingly underestimated the massive problems they caused with overty liberal migration policies and the social cohesion issues this brought to the fore for regular citizens. It is clearly for this reason that so many people are voting to the right.

In the past 7 years, more than 750,000 migrants have crossed the Mediterannean to the Italian island of Sicily, though this increased rapidly in 2017 with up to 10,000 arrivals taking place in some 3-day periods throughout the year.

Berlusconi pledged to deport 600,000 illegal immigrants from Italy if his centre-right coalition enters government, and has said that immigration was a “social bomb ready to explode in Italy”. Policies such as this would be anaethema to politicians elsewhere in Europe like the U.K. but the clear public support for his plans in Italy reveals the very real extent of the problem and the changing sentiment of European citizens towards migration.

In response to the action over the weekend, German markets got a boost, while Italian stocks fell at the open and the Euro made losses against the Dollar and Pound this Monday.

Today’s market action in Europe: Germany gains, Italy loses (though reaction is more tepid than expected), Euro dips.

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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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