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War comes to Western Europe

Published Monday, November 16th, 2015

A very difficult week for the markets ended with terrorist attacks on Paris as potentially significant as 9/11. The French President has described the events as an act of war against France by Daesh with serious implications for the Nato alliance and its involvement in Syria and elsewhere in the Middle East. As far as the European Union is concerned it strikes at the heart of the key principle of free movement under the Schengen agreement. The days of a borderless union with no checks already under pressure from migration are under serious threat. Stretching the union to 28 countries has endangered the dream.

For the eurozone and the EU as a whole Black Friday followed 4 days of discouraging news. The week saw; huge divisions on migration policy; the Greeks hold their first 24 hour strike since Syriza came to power; the interim government in Portugal lose a vote of confidence; Berlin’s Council of Economic experts (aka the ‘five wise men’) calling on the ECB to announce a “timely end to monetary policy accommodation” to avoid dangerous imbalances building up; the 3Q eurozone growth number come in below expectations at +0.3% and inflation continue to remain elusive and well below the ECB’s 2% target. The eurozone is not in a fit economic state to take the big hit to its service sector that might result from the Paris bombings.

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Posted by David Hufton