QUESTION: Hi Marty,
I’m based here in South of England, within the commuter belt into London. The ECM forecasts an economic downturn 18.01.2020, and Europe looks to be at the epicentre. My own research tells me the job cuts in the auto sector in Germany are quite severe.
How does all this play out after January? We have already witnessed companies collapsing, Thomas Cook, and many teetering on the very of edge of collapse. How bad is this going to be, and how does this compare to 2008?
Of course, the next 3 months of 2019 are going to be very volatile, what I’m trying to understand is how does all this look like to the average city worker within finance, law or professional services.
Within my own peer group most are clueless on what is going on and perhaps they should be thinking of income protection rather than going out and buying £60k Range Rovers. The apathy never ceases to amaze me.
I welcome your insight. Thanks for your great work which keeps us mere mortals informed.
ANSWER: The answer is very bad. The structure of the Eurozone is an absolute disaster. It is promoted as a single country, but it lacks everything that stands behind a currency. Just look at the tariffs starting between the USA and the EU. It is IMPOSSIBLE to negotiate a trade deal with Europe because each country can veto any deal, proving this is not a single country, and thus there is no substance behind the single currency. This is why I say Brexit is the only way for Britain to survive. It cannot negotiate any trade deals with the USA, China, Canada, or whoever because any other state can veto it. They surrendered their sovereignty and it is undermining the European economy.
If the US had to seek the approval of all 50 states before it could do any national policy, nothing would ever get done. The French can block trade deals and the US will look at the EU as a single entity because that is the structure on the surface. So the US could impose tariffs on German cars because of something France refuses to yield on. It is a giant political mess.
The only way for Europe to survive is for the Eurozone to actually collapse. Then each country could negotiate for itself without a veto from another over something irrelevant to their economy.
If the Eurozone were to survive, each country must surrender all autonomy to Brussels on everything retaining only local culture and laws. Brussels is trying hard to make it the United States of Europe, but the first thing that must go is the refusal to consolidate the debts and end the bail-in policy. Anything shy of that is playing with fire.
While the ECM is turning in January 2020, that appears to be impacting more externally to Europe. Europe may see economic turmoil into 2021.