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EU Crisis Is Existential – Importance of Tomorrow’s Vote

by Mark O’Byrne, Gold Core:

The leader of the National Front in France, Marine Le Pen, has hailed Britain’s decision to leave the EU – and has called for France to hold a similar referendum

The EU is facing an existential crisis and does not look like it will survive the massive political and financial challenges it is faced with. This has ramifications for investors in the EU itself and globally as the collapse of one of the world’s largest trading blocs will badly impact already fragile global economic growth and increasingly “frothy” looking financial markets – particularly stock and bond markets.

The existential crisis facing the EU, the Dutch elections tomorrow and the coming elections in France and Germany and the risks increasingly likely EU contagion poses to Asian economies and the global economy is considered by True Wealth’s Kim Iskyan today:


omorrow, parliamentary elections in the Netherlands mark the first of several important votes in EU member countries that will dictate the future of the continent.

After the Netherlands, France has a presidential election late next month (and likely in a run-off election in early May). Germany follows with presidential elections in September, followed by general elections in Italy in early 2018. All four countries are founding members of the EU. And in each case, there is a chance that an anti-EU party takes power, with potentially enormous consequences for the future of the EU.

Emboldened by the Brexit referendum and the election of U.S. President Donald Trump, right-wing parties have surged in popularity all across the continent. After years of déjà-vu episodes of debt crises, now much of the EU is in the midst of a populist backlash over concerns about immigration, refugees and terrorism. The prospect that anti-EU parties will assume power in countries that are the historical bedrock of the EU is a serious threat to the 28-member political and economic union – and also globalisation itself.

A functioning EU is important to Asia’s economic prosperity

As we’ve written before, a less globalised world hurts Asia. Many of the biggest Asian markets have been empowered by greater global integration. And for countries like China, Japan, South Korea, Singapore and Malaysia, trade is critical to economic growth.

Asia is easily the EU’s largest regional partner in trade. China is the EU’s second-biggest trade partner after the U.S. (the EU is China’s largest trading partner.) And Japan, South Korea and India are currently the EU’s 7th, 8th and 9th largest trading partners.

Together, the 10 countries that make up the Association of Southeast Asian Nations (ASEAN) are the EU’s third-largest trading partner, while the EU is ASEAN’s second largest partner. The EU is also the largest foreign investor into ASEAN. It accounts for 22 percent of the Southeast Asian region’s foreign direct investment (FDI) inflows.

“Euroexits” would affect trade and financial flows

Any country that leaves the EU would have to establish new bilateral (that is, between two countries) or multilateral (involving three or more countries) trade agreements with other countries. The UK is now starting to lay the foundations for such trade pacts with non-EU nations. On the positive side, around 60 countries already have special trading agreements with the EU in place, including South Korea. So should France vote to leave, for instance, it should (theoretically) be able to quickly replicate existing trading arrangements with these 60 countries.

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