WEEKLY COMMENT 20-04-2017
By Barry Edwards
2017 is the year that the people of Europe are deciding who will be their leaders; all the major countries are having important elections and the UK has joined the bandwagon. Admittedly, Italy has not confirmed it will have an election but most commentators expect there will be one later this year. The four main candidates in France are neck and neck although everyone expects Marine Le Pen to be in the May vote making it difficult to predict who will challenge her, we will find out on Monday but everybody expects her to lose.
The German election should not cause any major upsets as the current government is a coalition of the two parties and those leaders will be the main challengers. If Italy does have an election this year that is the only outcome that is still uncertain, this could cause a real problem for the EU. The UK election is expected to increase the majority of the Conservative party which would mean they are likely to stay in government for another 10 years.
The main point here is that populism does not seem to have maintained the momentum that many people were anticipating which will probably influence how the Five Star movement in Italy performs when they have their election. Therefore, it looks like the mainstream parties will hold onto control of governments around Europe although some of the populists will have some influence in some countries.
Now that the EU is growing again and unemployment is shrinking at a good pace the concerns people have had about the future of the EU are beginning to dissipate. It is clear from the reporting by the media in Europe that the message from the people has been taken on board and the federalist policy has been toned down substantially. Nation states’ working closely together is the framework that people wish to adhere to and the politicians are busy trying to find a method honouring that ideal with a structure to manage the currency. That will not be easy to do if you cannot merge the economies of all member countries as the federalist plan had proposed.
If the politicians get it right the EU will be a progressive union which could restore the influence Europe should have around the world and improve the trading prospects for businesses in the new growing markets that are developing quickly. We will find out over the next few years as the Brexit talks progress whether this will have an influence on the outcome if the EU manages to achieve that ambition.
I suppose we should all have been more aware that a general election would be called since Theresa May has been denying she will call for one every time she has been asked. The Labour party were not fooled and Jeremy Corbyn has been saying they have been preparing for one for many months. Nobody believes Labour has any chance to gain seats and it is likely they will lose a good number if the polls are anywhere near correct. That must mean that Corbyn will have to resign when the result is announced achieving something the Labour party faithful’s could not bring about. They should be very grateful to Mrs May for that blessing.
In my view, the main reason the Prime minister called the election was that the financial statistics on the economy are beginning to show a decline in growth which could continue downwards steadily as the effect of Brexit takes hold. The opinion polls would probably look very different in a couple of years as people realise they are worse off because of leaving the EU. As we discussed last week, the growth improvements around the world will help to keep the UK out of recession but with much lower growth than we have been used to.
The IMF has announced their forecasts for the next two years which are showing continued growth worldwide countering the steady decline we have seen since the financial crisis. Inevitably the UK will see some benefit from this expansion as most major trading nations are reporting increased manufacturing activity. According to the IMF the outlook is encouraging and should remain so for a few years yet.
That’s all for this week, more observations next week.