Invest
Future of euro cast in doubt
The biggest upcoming market event is not the imminent US election but the Italian referendum, with State Street Global Advisors casting serious doubts about the future of the EU’s currency.
Future of euro cast in doubt
The biggest upcoming market event is not the imminent US election but the Italian referendum, with State Street Global Advisors casting serious doubts about the future of the EU’s currency.
The Italian referendum to be held on 4 December would, if passed, reform the country’s government, reducing the power of the Senate and eliminating some overlapping areas of governance.
While proponents of the bill say the much-needed reform will enable the government to better deal with the ongoing national banking crisis which continues to threaten the stability of the EU, SSGA Investment Solutions Group head of strategy Thomas Poullaouec says a negative outcome could have dire consequences for the euro.
“We don’t think the US election is going to rock the boat, rather the thing that is on our agenda for the next few months is the Italian referendum. We think that the issue of European politics is of high significance and that it could really dominate markets if the referendum returns a ‘no’ result,” Mr Poullaouec told Nestegg.com.au
With Prime Minister Matteo Renzi promising to quit if the referendum fails, the scenario shares an uncanny resemblance to June’s Brexit which saw then-British prime minister David Cameron stepping down following a ‘yes’ result that surprised many.
Such events promise to sustain volatility in global markets, with Mr Poullaouec saying that the euro could soon be a failed experiment unless its politicians address some structural issues.
“In our minds, either the European countries will get together and fix it, or one day the euro will be gone because it’s not a sustainable solution anymore. Italy is already a postcard for that,” he said.
“Since the introduction of the euro, Italian GDP is down 10 per cent, in Greece it’s down 30 per cent, and that speaks to the fact that its introduction has eliminated one option they used to have when they had an economic problem which was to boost their economy through currency devaluation,” Mr Poullaouec explained.
“Now that’s gone, you can see how they don’t benefit that much from an economic standpoint from the euro.”
The rising support for the Italian Eurosceptic Five Star Movement, combined with other geopolitical factors, means European stability will continue to prove a risk factor for markets.
“That coupled with the refugee crisis and terrorist attacks are creating a sense of fear and uncertainty in the population in Europe. So you have weak economics, you have a sense of insecurity which means you have groups willing to vote for the populist parties, which are not prepared to make Europe better, but want to make their countries isolated,” Mr Poullaouec said.
If the referendum fails, it would likely strengthen populism both in Italy and in Europe.
“If Prime Minister Renzi resigns, they will have new elections and who is winning the polls? The Five Star Movement. If they come into power, they will have a referendum on whether Italy will stay in the EU,” Mr Poullaouec said.
He added that even if populist parties do not win, they pose a risk to the stability of the EU and its economy.
“So the third largest economy in the eurozone is likely to have this referendum [on whether to stay in the EU] in the years to come and they’re not the only ones. There will be elections in the Netherlands, in France and in Germany.
“[Populist parties] may not always win, but they are having an influence which is very negative for the European state.”
Property
Ace a rental application in 5 simple steps
In many areas across Australia, the rental market is becoming increasingly competitive, so how do you ensure your application will stand out? ...Read more
Property
Population falls could see Australia with 232,000 vacant dwellings
The shutdown of international borders could cut demand for Australian housing by as much as 232,000 dwellings over the next three years, according to research. ...Read more
Property
How will border closures impact the property market?
Despite falling migration levels, property prices might not be impacted as much as investors think, an industry expert has explained. ...Read more
Property
Sydney, Brisbane, Melbourne tipped to surge: Westpac
One of Australia’s largest banks is forecasting strong growth in the housing market as low interest rates and availability of credit pushes prices up, despite the country being in its first recessio...Read more
Property
Is now the right time to make a tree or sea change?
The experience of isolating in our homes and suburbs has made many people reconsider what they actually value in a home, writes David Hancock. ...Read more
Property
Hot Property: Biggest headlines this week
Victoria’s COVID-19 restrictions have begun to lift as the rest of the country watches on: Here are the biggest property stories from this week. ...Read more
Property
Post-pandemic hotspots revealed
With investors eyeing investment opportunities, which hotspots are set to benefit? ...Read more
Property
Houses fall by nearly $100bn
The COVID-19 pandemic has seen a correction in the housing market, with capital cities falling by $98 billion in total value, official figures have shown. ...Read more
Property
Ace a rental application in 5 simple steps
In many areas across Australia, the rental market is becoming increasingly competitive, so how do you ensure your application will stand out? ...Read more
Property
Population falls could see Australia with 232,000 vacant dwellings
The shutdown of international borders could cut demand for Australian housing by as much as 232,000 dwellings over the next three years, according to research. ...Read more
Property
How will border closures impact the property market?
Despite falling migration levels, property prices might not be impacted as much as investors think, an industry expert has explained. ...Read more
Property
Sydney, Brisbane, Melbourne tipped to surge: Westpac
One of Australia’s largest banks is forecasting strong growth in the housing market as low interest rates and availability of credit pushes prices up, despite the country being in its first recessio...Read more
Property
Is now the right time to make a tree or sea change?
The experience of isolating in our homes and suburbs has made many people reconsider what they actually value in a home, writes David Hancock. ...Read more
Property
Hot Property: Biggest headlines this week
Victoria’s COVID-19 restrictions have begun to lift as the rest of the country watches on: Here are the biggest property stories from this week. ...Read more
Property
Post-pandemic hotspots revealed
With investors eyeing investment opportunities, which hotspots are set to benefit? ...Read more
Property
Houses fall by nearly $100bn
The COVID-19 pandemic has seen a correction in the housing market, with capital cities falling by $98 billion in total value, official figures have shown. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
