Anyone who read my article last week was treated to some thoughts about globalisation. As a bonus to readers I also shared some investment insight adequate for these turbulent times. I promised to continue the article this week.

The euro and the European Union or vice versa

It is the difficult to separate the two. The euro without the EU would definitely not exist, but neither would the Union reach its objectives without its flagship achievement; the euro.

It is ironic that until a few years ago everyone seemed to want to get into the Union. Now everyone seems to want to get out. What has changed? Probably the EU has expanded beyond what was feasible under its current framework.

The EU was built under ideals that reflected the goals and achievements of the founder members. The initial economic success that following German reunification meant that the EU was able to export its political ideology and culture.

In this regard, the EU was possibly too successful and too enthusiastic. Europe was winning a land war at the expense of Russia without firing a shot. Everyone wanted to be European and share the liberty and riches that the region promised.

Then the financial crisis and all that followed happened. In short, governments were suddenly unable to match budget requirements, the wheel suddenly skidded to an abrupt halt. Europe was unprepared for the Arab revolution, mass immigration, and the re-emergence of the far right. Then the EU halfheartedly stumbled into another Russian possession; Ukraine.

The other eastern territories were the legacy from the defeat in the Cold War, but for Putin and Russia, Mother Ukraine was a step too far. Strengthened by a budget inflated by years of high oil prices, and a population with a DNA for siege warfare, Russia launched a war against the West on multiple fronts.

Crimea, East Ukraine, Syria; Russia showed it was ready to flex its military. Brexit and Trump, Marine le Pen, Alternative for Germany all have a tint of Russian involvement. The Baltic states have to deal with Russian incursions on a daily basis, and Eastern Europeans are steadily electing far right pro-Russian governments. This time Europe’s culture is being eroded from within.

Europe will not survive in its current form. Decision making will stall to a halt as a common ideology won’t be found. The countries that Europe embraced now have veto power on the EUs values.

The current state of affairs will make Europe fertile ground for the ‘barbarians’ picking at the borders. Slowly Europe will experience culture dilution, and the current crop of leaders are unprepared for a European Strategy; preferring to focus on winning the next election.

Unless Europe is able to find the necessary will and leadership, the EU will be heading toward fewer members and a euro that is more Deutsche mark and less peripheral Europe.

In the meantime

Dax vs Stoxx 50, Germany vs peripherals

Prefer German equities as opposed to other European benchmarks including Italian and Spanish assets. The Italian referendum will determine a specific path for ailing southern economies. In addition, possible accommodation for Russia will support German exporters.


Maintain an allocation to the dollar as doubts on the survival of theeuro re-emerge following the Italian referendum result.

Disclaimer: This article was issued by Antoine Briffa, Investment Manager at Calamatta Cuschieri. For more information visit, . The information, view and opinions provided in this article is being provided solely for educational and informational purposes and should not be construed as investment advice, advice concerning particular investments or investment decisions, or tax or legal advice. Calamatta Cuschieri Investment Services Ltd has not verified and consequently neither warrants the accuracy nor the veracity of any information, views or opinions appearing on this website.



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