Eurozone Future in Serious Doubt

A series of political elections will be held in 2017, with many to be fought on lines of ‘for’ and ‘against’ membership of the euro. For the first time since its inception in 1957, the European Union cannot afford to take its future for granted, moneyweek.com reported.

France – 23 April: The far-right Front National Party is the second favorite to win the presidential election, and is avowedly anti-EU. Even if they don’t win, they are still pulling France in an increasingly anti-EU direction.

Germany – by October 2017: Angela Merkel’s CDU party has been losing seats to the anti-EU AFD. A Merkel defeat would be the biggest possible blow to the EU’s future. Germany is the continent’s biggest economy.

Italy – by April 2018: General election after pro-EU Prime Minister Matteo Renzi was comprehensively defeated on 4th December 2016 in a constitutional referendum. Italy’s three opposition parties are in favor of leaving the euro, which they believe is preventing the country’s economy from growing.

The countries listed above are the three biggest economies in the eurozone. If one of them voted to leave the euro or the EU, it would almost certainly precipitate the end of the European Union.

But the potential dangers do not end with them. Other eurozone members holding elections soon include:

Netherlands – March 2018: Geert Wilders has vowed to withdraw the Netherlands from the EU should his surging far-right Party for Freedom win.

Hungary – by Spring 2018: The popular current Prime Minister Viktor Orban has incurred the wrath of the EU by erecting wire borders around the country—in defiance of the EU, which he openly disparages.

If just one of these countries left the EU the financial markets would become volatile and anxious yet again. Right now it looks increasingly probable that the European Union will come under genuine threat.

Banking Crisis

What is beyond doubt is that the political and economic trends are not working in the eurozone’s favor. It has never been in greater danger than it is now. In particular, it is suffering from a profound and potentially epic banking crisis.

The biggest threat to Europe is in Germany, right in the heart of it all. In fact Germany’s largest lender–Deutsche Bank is facing a $4.6 billion capital shortfall.

Then there’s France. France’s biggest (BNP Paribas) and third biggest (Credit Agricole SA) banks–which make up two of Europe’s ‘big six’–have been found to have vast ‘capital gaps’–money set aside to protect the banks in the event of a financial crisis…

And worst of all, Italy–where one of its largest banks has already been nationalized. And more require a government bailout.

Betrayals

A eurozone collapse will have a damaging effect on UK markets and public's core investments.

In December 2015, the Bank of England ran its annual stress test on British banks. This tests how a bank could survive in a crisis. It’s intended to reassure British savers that their money is safe… They all passed. Governor of the Bank of England Mark Carney went so far as to declare an end to the financial sector’s “post crisis period”.

As with the rest of Europe, it’s highly likely that Britain’s banks are not as safe as one is being led to believe.

In January last year, Italy’s Monte dei Paschi–the oldest bank in the world–admitted that its customers had started withdrawing their savings. The bank saw its share price drop 60% in the first three weeks of 2016.

In Germany, people are so dismayed by low interest rates that they’re taking their money out of banks and keeping it in safes at home. Sales at one safe manufacturer were up 25% in the first half of 2016 compared with 2015.

All it takes is the spark of fear… for one major bank to face a major crisis. If everyone started withdrawing their money… the banks could face an overnight bank run. And make no mistake, fuelled by fear, bank runs accelerate quickly.

The same was seen in Greece and Cyprus just a few years ago.