The latest opinion polls conducted in the EU show that more and more European citizens show distrust in the EU and the eurozone. The biggest decline was seen in the EU’s 6 biggest countries. In particular, in Spain , the distrust increased up to 72%. For comparison sake, it used to be just 23% 5 years ago.
As for the UK, Germany and France, the distrust increased up to 69%, 59% and 565 correspondingly. The stats look even more alarming if to consider the fact that these nations are usually for the European Union. Moreover, they account for nearly 70% of the EU population.
As far as investors are concerned, all these issues are important as they raise concerns and undermine the image of the EU and the eurozone.
Let’s try to have a closer look at the situation…
The skepticism concerning the EU and the eurozone is obviously growing. If those opinion polls are not enough for you, we can take a look at some other factors. For example, Germany has always been considered the strongest economy in the EU and the eurozone. However, not so long ago there emerged an entire party of euro-skeptics called “Alternative for Germany”. The “5 stars” movement in Italy, which promotes the idea of abandoning the Euro, is also getting increasingly popular among local people.
What are the factors behind the trust decline?
Obviously, some of the major reasons are prolonged financial, currency and debt crises throughout the area. Apparently, all EU members liked it when they get money from the EU authorities but it is time to pay off their debts. Yet, nobody seems to like it, which is natural since this requires painful austerity measures, including tax hikes along with benefit and spending cuts amid higher unemployment and overall economic weakness.
There are multiple financial and economic discrepancies within the EU, not to mention the absence of a solid base for fundamental structural reforms.
Moreover, there is no regulation and tax unity within the EU and the eurozone. That is why EU members managed to conceal the real state of affairs in their domestic economies until it was too late to prevent the crisis. Take Greece, for example.
At the same time, any attempts to supervise local spending instantly results in demarches and protests.
Furthermore, the EU and the eurozone can be considered as a mixture of ill-matched nations, with different economies, cultures, ideas, capacities etc. Even Angela Merkel recently had to admit that there are major disagreements between Southern and Northern members of the eurozone.
On top of that, Germany as the biggest locomotive of the entire pan-European economy has multiple problems as well. Some experts are afraid that Germany may soon exhaust its financial facilities.
And finally, European members do not want to share their sovereignty with Brussels. They do not mind sharing some of their economic powers but are not in a hurry to share their political powers.
Fake Union?
Apparently, the recent and current crises phenomena in Europe helped separatist movements to consolidate their position in the union. We have already seen a lot of nationwide anti-EU protests in Greece, Spain , Italy… even the UK seems to be fed up with paying 13 billion dollars a year just to support Baltic states, Greece, Romania and other weak economies. The only thing that still keeps the UK inside the EU is the fact that the union accounts for some 50% of the British export.
What about the common currency?
The EU and the eurozone are closely connected. Therefore, the bigger the problems within the area are, the more pressure the common currency feels. Apparently, the continued eurozone crisis presents real danger to the destiny of the common currency.
The chart below, courtesy of Masterforex-V Academy, reflects the current state of affairs in the market of EURUSD:
It seems like the eurozone needs to turn from a currency union into a political union on top of that (like some kind of a federation) in order to late the authorities stay in control of the situation. Otherwise, the currency union may eventually break up since all those multiple problems will aggravate and turn into unsolvable ones.
