The big event over the weekend proved to be the German national elections. To no one’s real surprise, Chancellor Angela Merkel emerged as the front-runner from the poll. To the surprise of some analysts, the Far Right AFD Party claimed nearly 13 percent of the vote. This showing was good enough to make them the first far-right party in the German Bundestag¬†parliament in 70 years (since the end of the Second World War). It is another troubling sign that potentially heralds problems for your investment and retirement portfolios.
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Rise of the German Far Right Offers Real Potential to Damage the European Economy
Love or hate the surging populist parties of Europe, they do have the potential for at least one big impact. Between them (and especially in Germany and France) they threaten to significantly damage the European-wide economy on a widespread scale. This is because both German Chancellor Angela Merkel and French President Emmanuel Macron have represented a united front pushing for liberalizing reforms in the Euro Zone. Meanwhile the populist movements in both countries (and half a dozen other EU stalwarts such as Italy, the Netherlands, Poland, and the Czech Republic) are staunchly anti-euro and anti-immigration.
Yet the weak at best win Merkel scored on Sunday presents grave difficulties for the German chancellor to push through sweeping policy changes such as these. Skeptics are already arguing that she may not even last her whole fourth term in office. At the moment there is no other popular figure besides her in the Christian Democrats party to hold the movement together after she is gone. This begs the important question who will hold off the stubbornly¬ unfailing advance of the German far right after Merkel is history?
In the midst of this recent electoral turmoil, the European Union is mired in efforts at reform which have a goal of nothing less than a controversial¬†expanded monetary and economic union as well as stronger mutual defense. It is the French President Macron who is spearheading these efforts, even as his popularity at home in France has reached all-time historic lows. Until the bruising showing this weekend, Merkel had been widely regarded as his main and most crucial partner in such endeavors.
As Chief Asia Economist Mark McFarland of Swiss private bank Union Bancaire Privee opined, the two leaders’ goals have suffered a humiliating blow this weekend thanks to Merkel’s far less than convincing win on Sunday:
“I think what you’ve got now as a result of the election is the likelihood [Merkel] doesn’t survive four years. She will find it more difficult to implement these policies as she is ultimately answering to a broader coalition of political opinion, and she has the opposition harking at her in the Bundestag on a regular basis. Ultimately, these factors would undermine Germany and France’s vision for the eurozone project.”
The Sunday election became best-known for its somewhat surprising surge in support among German voters for the Alternative for Germany party. This group virulently opposes both continued immigration and participating in the eurozone at all. The party gained fully 7.9 percentage points¬†over their last election back in 2013 to achieve 13.3 percent of the full total vote. It represented by far the biggest rise out of any German political party.
This would be bad enough news for the pro-European integration project all by itself, yet it was not the only body¬†blow for their forces over the weekend. In France, the centrist party of Macron took a significant hit in French Senate elections also on Sunday. The wins were dominated by the traditional French Republican party. Analysts have already declared his poor showing will derail at least part of the ambitions of the president for extensively and thoroughly reforming the eurozone.
Already, Germany and France were uneasily trying to paper over differences of opinion on how far such financial and monetary union should go, per Direct Fredrik Erixon of the European Centre for International Political Economy:
“We have not achieved the point of figuring out what type of events that France actually can stomach. Germany and France are at loggerheads in terms of how far they’re going to go.”
Now thanks to the weekend electoral results, neither leader may be strong enough to force unpopular sweeping integration policies for the eurozone member states and their vastly different economies.
Marine Le Pen Waiting in the Wings for French President Macron to Fail
Macron in particular must tread carefully. He has a rival who is targeting him in the next elections already. Marine Le Pen may not have succeeded in stopping his revolutionary bid for the Elysee Palace, yet she has managed to unify the protest and opposition vote together in a way that no one else has managed to in the post World War era in France.
Despite her somewhat-humiliating showing in the final round of the French presidential vote, analysts believe that the support for the far right in France and Europe has not peaked, regardless of their setbacks in Austria and the Netherlands. Unsurprisingly, Le Pen praised the rise of the AFD in Germany over the weekend, sensing a kindred spirit movement’s rise.
And Marine has been busy diluting some of her more unpopular policies that cost her the election in France. For starters, she has softened up dramatically on her anti-euro currency position. Her campaign team member Jerome Riviere recently lauded her willingness to make difficult adjustments with:
“A good party chief needs to be representative of what grassroots activists want.”
It has only taken a handful of months for French President Macron to watch helplessly as his popularity at home has plunged to new embarrassingly low levels. Haris Polls show that less than 37 percent of French voters approve of his job since being elected, way off of the 57 percent that followed his May election. He has been under intense pressure for his domestic agenda among labor unions and businesses alike.
Without a doubt, Macron erupted powerfully upon the world stage with his hosting of President Trump for the French independence day celebration in Paris. Yet his attempting to loosen up the cherished employment standards in France is cutting his standing at home to ribbons. The powerful unions are joining retirees and students in a joint effort to protest his unpopular proposed reforms.
Keep in mind that Macron’s electoral win at the presidential final round level was not nearly so large as it appeared on the surface. The turnout represented a post-Second World War low in France with more than a third of French voters not showing up to vote for either Macron or Le Pen. Many of the ones who did vote went for him while holding their nose all the while. Now the President of France shares something else in common with his counterpart President Trump in America— both of them have abysmally lower than 37 percent positive job approval ratings.
Trouble for the Eurozone Spells Trouble For Your Retirement Portfolio
In the end, you have to realize that problems with the Eurozone economy are problems for the global markets and also personally for your own retirement portfolio. This is why you have to get some gold to hedge your various other asset classes now. Before all else fails,¬†you need to think about how to invest in gold. When the proverbial chips are down¬ gold offers insurance and protection during market turbulence. It explains why you should own gold in times of financial crisis.