Page 7 - ISQ UK_October 2017

APRIL 2019

European Ensemble

As a bloc, the European Union is second only to the U.S. in its
share of global GDP output and currency circulation.

lending to local businesses and consumers. Currently an ability to
still undertake stimulus is a net positive. However on its own it is
not enough.
“Europe can be an attractive supplier of a broad range of
CHALLENGES AND OPPORTUNITIES goods and services for the global market, a view which is
at odds with the pessimism surrounding Europe’s
The biggest impact on much of northern Europe’s economic potential for innovation and productivity.”
growth rates in 2019 rests on broader concerns. A pragmatic
Brexit outcome would be a boost for all regional countries given
the high levels of trade between the European Union and the UK. of both the European Union and the United States have clashed
Ultimately, I consider this a likely outcome. The other exogenous more regularly in recent years, the United States-Mexico-Canada
issue (specifically for northern European countries such as Agreement (USMCA), and ongoing bilateral China/United States
Germany, Holland and Scandinavia) is avoiding a broader global trade discussions indicate that pragmatic outcomes are possible.
trade war (as has threatened to bubble over between the U.S. and In short, it would appear the bark of negotiating politicians is
China). Progress to date in bilateral trade discussions between worse than their bite.
China and the U.S. have helped buoy global markets, including
those across Europe. Part of the reason is that a material part of Even though outcomes surrounding the ECB, Brexit, and external
the region’s growth (especially in northern Europe) has come trade factors appear to offer more opportunity than threat, the
from exports, specifically to the emerging markets (especially average investor remains heavily underweight towards Europe.
China) and the United States. These exports have been boosted As such, investors are seemingly also concerned about the status
by the relatively cheap value of the euro over recent years. of the European political backdrop, as it appears cursed by the
However, this also indicates that Europe can be an attractive confluence of populism and debt.
supplier of a broad range of goods and services for the global
market, a view which is at odds with the pessimism surrounding POPULISM: NOT SO POPULAR?
Europe’s potential for innovation and productivity. If you had to pick the most important date in the European
political calendar for 2019, it actually would not be the finale of
Avoiding trade tensions is therefore crucial for the immediate
outlook for the European economy. Whilst the political leadership the Brexit process - it would be the European Parliamentary

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