How EU elections will make Bill look boring
Last week, I asked whether you could vote your way out of a housing bust.
It certainly looks like you tried to.
Bill got banished in spectacular fashion. Australia’s election surprise even made it to the top of the news here in the UK.
But have you been paying attention to Europe’s elections in return? They finish today. And this picture might help you sit up and listen.
It shows a pensioner covered in milkshake after voting and polling for the Brexit Party.
That’s how democracy functions in the UK these days. The elections are milkshake wars.
The victim of the latest attack doesn’t look bothered though.
‘He just told me to watch out for the milkshake on the floor so my children didn’t slip,’ wrote one person at the scene.
After 22 years in the armed forces, I suppose he’s used to people dying for democracy, as he sees it.
The milkshake wars begin
Milkshakes have become the political weapon of choice here in Britain. Uncomfortable enough to intimidate the opposition. Soft enough to ridicule anyone who complains or takes legal action.
Some fast food shops now advertise their milkshakes using political stunts on Twitter. Others ban selling them near political rallies.
The media reported Brexit Party leader Nigel Farage had to hide on his bus when three milkshake-wielding troublemakers were spotted in the vicinity of his event. He claims he was just busy doing interviews on the bus.
While the news focuses on the milkshake wars, politics has taken a back seat. Heck, the UK government hasn’t even bothered campaigning.
The Guardian tried to find out what the Conservatives are up to and concluded they’ve been conducting an ‘invisible campaign’:
‘…as it happens, there has not been a single high-profile Conservative event for these elections…
‘Put simply, the Tory effort for next Thursday’s contest has been the invisible campaign.’
Prime Minister Theresa May went one step further from not campaigning. Apparently, she barricaded herself in her office recently and refused to see Cabinet colleagues. She lives in fear of them serving her with resignation demands.
But it’s no surprise the election isn’t the top news story. Even in the UK, where Brexit has made the EU a hot topic, election turnouts for the EU are low. Despite the fact that the EU controls the UK.
But does the drama unfolding matter to you? Not the milkshake bit — the election?
It certainly could…
You’re not out of the democratic woods yet
Italy’s financial position is downright dangerous. In 2018, it wreaked havoc on global financial markets. We’re talking about the biggest default in history. Bond yields haven’t returned to pre-2018 crisis levels.
The only thing propping up European bond markets is the EU autocracy at the ECB and EU Commission. They managed to calm markets late last year. But the EU elections have an influence on both. So I think you need to pay attention.
Any change at the top of the EU could trigger a quick and severe debt crisis. Most of the mainstream media agree with that. The question is the probability of the various outcomes.
But the tug of war in Europe isn’t in two opposing directions. Even the Eurosceptic camp are at odds with each other in all sorts of different ways.
So the selection of scenarios is an utter mess, making it hard to predict what’ll happen.
But let’s look at some of those scenarios.
By the time you read this, we may know more about what the EU Parliament will look like. And you’ll know what that means.
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Understanding the EU standoff
The first possibility is an EU election that delivers the status quo. The only trouble is, Europeans have rejected this at the national level elections. Eurosceptics are in government in a few countries, and opposition in others.
An EU that is at odds with national governments will be nasty. It could mean more exits and more rejections of EU policy. More belligerence, which puts the EU’s credibility into question.
If you’re picturing more Brexits, you haven’t quite grasped it. British PM Theresa May was never a Brexiteer. She never tried to leave the EU. She never asked for a trade deal, as they say here in the UK.
Her deal with the EU was for a pick and mix of EU membership. Which is why it failed — nobody wanted that compromise. And it was never on offer.
An unchanged EU would mean more financial battles over national budgets, more EU rule-breaking and more national governments simply ignoring the EU. As they did over borders during the migrant crisis, and budgets more recently.
This leads to a standoff where the EU must decide whether to back the belligerent nation with a bailout or not. Any rescue from the European Central Bank is conditional to the EU’s approval these days.
It’s a bit like parents deciding whether they’re on the hook for their children’s financial mistakes. Everyone knows it’s only a matter of time before the backing ends. And when it does, lenders won’t like what they see from the likes of Italy.
The second option is decent performance by Eurosceptic populists at the EU election. This is the most likely outcome. But it’s also the most bizarre.
The EU is run by two large centrist parties in an effective coalition. But under this election scenario, they lose their combined majority. Which means they have to go looking for a third party to form a majority with.
The trouble is, that party is highly likely to be ALDE (Alliance of Liberals and Democrats for Europe) — a left-wing party led by Eurosceptics’ favourite pariah, Guy Verhofstadt.
Consider what’s happened under this scenario. Europe’s electorate has shifted right wing, nationalist and Eurosceptic. But the new alliance ruling the EU would shift the opposite way…
The division within the EU would be severe, leading to a bigger backlash at national elections in coming years. Markets price in the future, so a troubled EU would show up in financial markets very quickly.
Would an increasingly left-wing EU bail out an increasingly right-wing Italy?
The last scenario is a big win for Eurosceptics. Enough to have an influence on how the EU is governed.
This is the ultimate nightmare for the current European leaders. Imagine the populists in control of their project, backed by the legitimacy and power of the EU.
The EU institutions would be used to monetise debt, bail out struggling economies and rob the northern nations.
The EU would become a political and economic warzone, unable to decide anything.
A political union of nations trying to steal from each other.
It would lose legitimacy with those voters currently backing it. And without their backing, the premise falls apart.
The euro would be toast, triggering a major financial crisis.
The wealthy nations can see it coming. It is how all of Europe’s monetary and political unions ended in the past, after all.
The confusing part is that this means northern European Eurosceptics have a very different flavour to southern ones. One Dutch Eurosceptic is polling at the same level as the Dutch Prime Minister. Here’s what he told a TV debate audience:
‘You have to unbundle the entire Eurozone
‘We want a Nexit [Netherlands exit] through a referendum. A number of referenda actually. You could do it all at once. A king of Europe a la carte.
‘What is happening in Britain now clearly shows how treacherous the deep state is. If May had taken Trump’s help, it would have been successful by now.’
What you in Australia still see as fringe views and an impossible future is becoming mainstream in Europe.
You need to wake up fast. And prepare for the implications.
Until next time,